Walmart (WMT) is set to start buying and selling used video games, a move that promises to send shock waves across the gaming industry.
The move could cut costs for consumers, as prices climb ever higher for new titles. But the retail giant's entry into the business poses a serious competitive threat to leading used games vendor GameStop (GME), along with many mom-and-pop game shops around the U.S. Big video-game publishers are also likely grumble about more lost dollars to the second-hand market.
Walmart said early Tuesday that it will begin dealing in used video games on March 26, initially focusing on titles for the PlayStation, Xbox and Wii systems. The company says the used video-game market is worth $2 billion. It could be even more lucrative if people would sell more the 880 million old video games they have sitting around the house.
For those customers who don't normally get into a GameStop, Walmart is offering an option for those games collecting dust at home. The company says it will pay more for used games -- in the form of store credit -- and sell them for less money than competitors. Used games will sell for an average of $35.
Investors will likely be looking closely at whether GameStop, the biggest video-game seller in the country, can survive the move. The company's stock rose 2 percent Monday to close at $39.75.
The company is already threatened by a broad industry move to online and disk-less gaming, though it does offer exclusive digital content with major game releases. You don't need to visit GameStop to play "Candy Crush Saga," for example.
Meanwhile, used games are where GameStop rakes in the cash, with a margin of nearly 50 percent, reports analysts at Trefis. GameStop is trying to diversify by also selling used tablets and smartphones.
Overall, used video-game sales make up a fraction of the industry. Last month, about 56 percent of all U.S. video game spending went to new game products. Another 35 percent went to online and mobile downloads, The NPD Group reports. Only about 9 percent went to used game sales and rentals.
How will Walmart change those numbers? And how many price-conscious customers will now leave the retailer's video-game aisles with a used disk rather than a new one? Certainly, Walmart has the power to significantly drive sales of pre-owned games, sales that to this point have been a mostly niche business.