Video game prices highest at Target, Toys R
Us-analystWed June 29, 2005 06:19 PM ET
SAN FRANCISCO, June 29 (Reuters) - Average prices for
video games at Target Corp., Toys R Us Inc. and
Wal-Mart Stores Inc. were 5 percent to 10 percent
higher than online retailer
Amazon.com (AMZN.O:
Quote, Profile, Research) , whose prices before
shipping were the lowest among the top eight video
game retailers, an analyst said on Wednesday.
Best Buy Co. Inc. (BBY.N: Quote, Profile, Research)
had the lowest prices among major bricks-and-mortar
retailers, said PiperJaffray analyst Anthony Gikas,
who looked at the eight biggest retailers as part of a
semi-annual pricing survey.
Target's average prices were 9.5 percent higher than
Amazon's, excluding shipping. Toys R Us (TOY.N: Quote,
Profile, Research) sold games at a 9 percent premium
to Amazon and Wal-Mart's premium was 6.2 percent,
while Circuit City (CC.N: Quote, Profile, Research)
prices ran 5.4 percent higher, Gikas said.
Margins on video game software are only 20 percent for
Wal-Mart (WMT.N: Quote, Profile, Research) and
Target (TGT.N: Quote, Profile, Research) , he added.
Such margins are below overall corporate margins for
both retailers, so they would likely want to protect
them by avoiding big price cuts in the future.
Wal-Mart is currently the No. 1 seller of new video
games, with about 23 percent market share.
That reign is expected to last until the completion of
the merger between game retailers GameStop Corp.
(GME.N: Quote, Profile, Research) and Electronics
Boutique Holdings Corp. (ELBO.O: Quote, Profile,
Research) later this year.
The combined companies will take top spot with around
25 percent share of new U.S. video game sales --
which were $7.3 billion in 2004. The new company also
will continue to sell used games.
Best Buy's mark-up was 2.7 percent from Amazon's
prices before shipping.
GameStop and Electronics Boutique, respectively had
mark ups versus Amazon, of 3.2 percent and 3.6
percent.
Gikas said that when he included shipping costs,
Amazon's prices came in behind Best Buy, GameStop and
Electronics Boutique.
Gikas does not hold shares in the companies mentioned
in the report. PiperJaffray, which has an investment
banking arm, makes a market in several video game
stocks. The firm has received securities-related
compensation from game companies Electronic Arts Inc.
(ERTS.O: Quote, Profile, Research) and Navarre Corp.
(NAVR.O: Quote, Profile, Research)
