In his latest note to investors, Sterne Agee & Leach analyst Arvind Bhatia says Best Buy's recent announcement that it would be testing used game sales
in select Canadian outlets should have "minimal impact" on GameStop, following hurdles the company faced when attempting the same in the U.S.
Best Buy recently said the trials would start in six of the company’s Future Shop stores in Canada and eventually move to other stores and online, and reportedly is expected to double Future Shop’s overall video games sales and margins in the next three to five years.
However, Bhatia argues that the company is "facing many of the same hurdles in Canada that it faced in the US while attempting to enter the used video game sales business a few years ago."
Bhatia says at the time Best Buy was met with problems of "inventory availability, lack of pricing expertise, lack of refurbishment (10% to 15% of GME’s used product volume comes from refurbished product) capabilities and perception issues, among others."
Even with the relatively small size of the Canadian used game market -- some $130M to $150M, compared to $2-$2.3 billion in the U.S., according to the analyst -- GameStop should continue its dominance, which Bhatia says generates in the range of $90M to $120M from used sales, some 70% to 80% market share.