“A full 70 percent of that goes immediately into a new title,” said Raines. “The rest of it goes into a new title later, or in some cases some customers will take cash and keep it and spend it on some sort of an accessory later on. But all of that trade credit money goes right back into the new gaming. And then if you add up all those trade credits that are spent, a full 17 percent of new software sales at GameStop are funded by trade credit. One way to think about is the new software business is 17 percent bigger thanks to the pre-owned games that are being traded.”
When it comes to the topic of used games, one of the most vocal complaints in the past has been on cannibalization of new games sales. Raines said only four percent of used game sales are titles released within the last 90 days. He said the pre-owned business is an opening price point business. The average price of a pre-owned game at GameStop is $19.
“In terms of the scale, we’re handling over 15 million software units through this facility,” said Bruce Kulp, senior vice president of supply chain and refurbishment for GameStop. “We run two shifts, so we’re basically running in production about 16 hours a day, five days a week for most of the year. But we will go up to 6 or 7 days a week in peak season periods.”
In the used games business, that peak period actually occurs after January 1st, when many games and consoles have been turned in and people are looking for something new. Other peak times are after new tablet or hardware launches. Before this facility opened, GameStop operated out of its distribution center through a series of interlocking mezzanines spread out over multiple floors on top of a warehouse.
With the amount of product that comes into the Texas facility, only 3.5 percent of these games need to be destroyed. Although all products are checked at the retail store before being shipped to Grapevine, there are things that fall through the cracks.
“Sometimes they’re cracks that aren’t perceivable to the human eye, but we do it under magnification,” said Kulp. “We remove a poly carbonate layer from the disc, but we certainly never want to get close to data layer. Those are the discs that go through the destroy process. The consumer has already received value for these discs through credit or cash, and GameStop ultimately is destroying those discs that don’t meet our quality standards that we won’t put back out to the store to be resold to customers.”
The videos throughout this post show an inside look at what happens inside the Grapevine facility. It’s worth checking out these videos to see how large an operation it is. Many people think that when they trade in a game it right back on the store shelf. But there’s an intensive process and a lot of quality control checklists everything from an iPhone to a PlayStation 2 console goes through before it can be resold at retail.
