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, whose prices before shipping were the lowest among the top eight video game retailers, an analyst said Wednesday.
Best Buy Co. Inc. 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 sold games at a 9 percent premium to Amazon and Wal-Mart's premium was 6.2 percent, while Circuit City prices ran 5.4 percent higher, Gikas said.
Margins on video game software are only 20 percent for Wal-Mart and Target, 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. and Electronics Boutique Holdings Corp. 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. and Navarre Corp.
