business

By Dan GallagherBy Dan Gallagher

By the closing bell, shares of Grapevine, Texas-based GameStop (GME:gamestop corp new cl a
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Last: 23.46-3.84-14.07%

4:02pm 03/05/2009

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23.46, -3.84, -14.1%) were down more than 14% at $23.46. The stock previously has been on the rise, gaining 26% since the first of the year. Before the opening bell, Amazon (AMZN:Amazon.com Inc
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Last: 64.77-0.04-0.06%

4:00pm 03/05/2009

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64.77, -0.04, -0.1%) announced on its Game Room blog that it has launched a service to allow customers to trade in used games for credit that can go to the purchase of new titles. The service is being run through a company called NorAm International, one of Amazon's third-party merchants.
For GameStop, the move could threaten a key portion of its business. For the first 10 months of 2008, the retailer drew about 25% of its total revenue through the trade-in and sale of used games. The business also accounted for 49% of the GameStop's total gross profit for the same time period, according to the company's financial statements.
"We believe the primary risk to GameStop from Amazon's initiative is greater competition for inventory of used games, and the potential for trade-in values to increase," game analyst Colin Sebastian of Lazard Capital Markets wrote in a note Thursday. "Our survey of 10 games on both sites suggests that the Amazon merchant is offering a slight premium to GameStop for a number of trade-ins."
But analysts also said that Amazon faces the challenge of relying on a mail-order service, which has had limited success in the used-game market. GameStop itself tried such a tactic before, but discontinued the effort.

source:Marketwatch

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