GameStop: Profit Margins Rise on Used Games as Economy Sinks

Without any major promotions, retailer GameStop has recently seen an increase in the amount of games being traded in, a feat it attributes to the sluggish US economy.

"Because of the economic condition, we did not have to be as promotional on the buy side of games, because it just seems like we were naturally getting consumers trading [games in]," COO Dan Matteo said today, according to Edge Online. "That's why our margins are slightly better than they were in the second quarter last year."

In exchange for used games, GameStop offers in-store credit that's generally around 30% of the title's worth, with the game then sold for about $5 less than a new copy. In other words, the retailer buys low and sells high.

The used game market has been an extremely lucrative source of profit for GameStop. Despite accounting for 26.1% of the company's total sales in Q2 2008, used games sales made up 49.7%, some $234M, of its quarterly profit.

High profit margins on used games have long represented a sore spot for some publisher and developers, as they do not see a kickback from used games.