PSPgo price cuts point to large retail markup

It didn’t take long after launch before retail outlets, both online and offline, began offering the PSPgo at reduced pricing. The earliest price cuts we saw were in the UK where several stores cut the price by about $10 (after currency translation). This week Fry’s Electronics was cutting the price of the Go by $50. Obviously there’s no competitive advantage to getting people to buy a Go from you, because they sure aren’t going to be picking up any software to go along with it. So why are retailers already willing to cut prices? They can’t already be impatient to move the things, can they?

My best guess is to appease retailers Sony allowed for a ton of markup to be had on the Go. Typically retailers don’t make more than a few bucks per console sold. The retailers hope that if you buy your console at that store that you’re also going to walk out with a few accessories and a couple of games. In the case of the Go, all the sales are done online (except for a handful of redemption cards, but it’s negligible), so retailers have no real reason to push the hardware unless they get a good cut of the sale price. With Fry’s offering the system at $50 off, it probably means that Sony set aside about that much for retailer markup. Since you’re not going to be buying games in the store, it’s highly doubtful that Fry’s is taking a loss on the system, so they’re probably selling it at near cost in hopes that you’ll put that “saved” $50 into other items in the store before leaving or that you’ll grow to like the place a bit more when you visit.

This is all just speculation on my part, but if retailers are getting a $50 cut of that price, then Sony must be counting on retailers to dig into that cut themselves to create de facto price drops on the system. $50 markup is incredibly high, and retailers know that if these things don’t move very quickly that they can have lots of freedom with sales or clearance prices. What will be interesting to see, however, is after the holiday season what sort of demand retailers show for stocking the systems.

The Go is great from a theoretical standpoint, but the fact that you can’t buy used games or play your current library of UMDs is still keeping me from jumping in. My guess is that ultimately the Go is a bit of a test to see how ready gamers are to accept the move to 100% digitally delivered content. Should gamers show a high tolerance for digital delivery, it will probably allow Sony to launch the real PSP successor (PSP 2, if you will) sooner than later. If people resist this transition, Sony will probably sit on this dual market philosophy for the PSP until it’s clear that people are more ready.

Ben Franklin

Great post. I agree, about Sony’s strange albeit half hearted strategy when it comes to the PSPGo. They have had a difficult bout with Nintendo over the portable market, and now they seem to want to split what marketshare they do have.

I think you’re right about retailers wanting to push the PSPGo, Giving them a healthy markup is the only logical reason why they would try and push it. Since most, like my Gamestop have lots of unsold, used UMD’s lining the PSP section.

I have an original PSP, and I also do a lot of digital downloading. You really can’t beat some of the prices. Like Prinny, for just $10.00. But I think the market isn’t quite ready for an all digital game system, yet.

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