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GameStop's Woes

GameStop (NYSE:GME) has had difficulty in the past years as gaming enthusiasts have turned to mobile devices as well as direct download software, essentially cutting GameStop out of the loop. GameStop plans to close up to 500 stores in the 2013 year. One of the saving graces of GameStop is the ability to adapt by offering direct download games as well as their program that purchases used Apple (NASDAQ:AAPL) products and resells them.

Unfortunately in the past couple of months a startup has emerged that may threaten GameStop's resale of mobile electronics. That company is EcoATM.

EcoATM

EcoATM is an electronic recycling kiosk. EcoATM's business model is very similar to Coinstar (CSTR). You go to your local EcoATM, you place your device in a bin and the bin closes. The kiosk then checks various items on your device to verify what it is and makes you an offer and pays cash. If you accept the offer the kiosk keeps the device and pays out the cash like an ATM.

As of February EcoATM has 300 kiosks in 20 states and recently received financing to expand to an additional 600 kiosks by the end of 2013.

EcoATM will take old used and even broken devices as their business is to recycle the components of the device and not to resell them. EcoATM accepts phones; MP3's and tablets both Apple and Google (NASDAQ:GOOG) based.

As an experiment a friend placed his iPhone 4 in the EcoATM and he was offered $155.00. I called GameStop and asked what they would offer for the same phone. They would give $150.00 cash and $190.00 store credit. GameStop gives a better deal to those who wish to purchase items. However with EcoATM giving an extra $5.00 not to mention the simple convenience of selling your device, this kiosk has an advantage.

Bottom Line

Now do not get me wrong, EcoATM does not look like they are going to steam roll GameStop and their profitability. However, with GameStop reducing locations and EcoATM looking to expand by 200% in the next year GameStop has to deal with some stiff competition. With the success of Coinstar; GameStop may take a substantial hit due to the convenience of the EcoATM.

Source: The Start-Up That May Put A Dent In GameStop's Repurchase Program