Resalers eyeing hefty profits from consoles, Black Friday deals
November 27, 2013 12:01 AM
Pam Panchak / Post-Gazette
Justin Work of Allison Park plays games while waiting in line to purchase an Xbox One at the GameStop store on McKnight Road.
Customers wait in line to purchase an Xbox One at the GameStop store on McKnight Road.
By Deborah M. Todd / Pittsburgh Post-Gazette
Settled in a line of 50 people waiting to buy PlayStation 4 video game consoles outside of a North Hills GameStop store two weeks ago, Mike Kowaleski began the first phase of a plan to fund a very merry Christmas.
Never mind the mist that was freezing to frost that damp Thursday evening, or the line of enthusiastic gamers waiting to rip open newly released game consoles.
For Mr. Kowaleski, the end game was finding a buyer willing to pay a premium for his spot in line that day or going ahead with the purchase only to wait until closer to Christmas when desperate parents would scramble to pay hundreds of dollars more than the retail value once the inventory is sold out.
"I'll put it on Craigslist, get some high-end yuppies who are scared to stand in line all night to buy it," he said, rousing a chuckle from his fellow line mates.
Although Mr. Kowaleski stood out as the only reseller willing to speak out in that particular line, he is far from alone.
When hordes of shoppers pass up Thanksgiving turkey and stuffing to grab the ever earlier door-buster deals this year, more than a few will be lining up with intentions of putting newly released consoles and other electronics up for sale the instant they're purchased.
While there aren't statistics tracking the prevalence of the under-the-table sales, the practice is common knowledge in the resale community, according to Durrell Waters, owner of Downtown-based Trader Electronics.
"People overbuy sometimes and we get brand new items in that they want to sell. They'll buy four TVs when they only needed two," said Mr. Waters, who noted his Smithfield Street store had already bought two Xbox One gaming consoles and two PlayStation 4s from anxious resellers. Both systems came out in the past two weeks.
Nik Raman, chief operating officer of New York-based electronics resale site uSell.com, agreed that Black Friday sparks a season of sales, both of newer products and those that are being replaced.
"The entire holiday season is a high volume time for us, with people trying to trade in old devices to try to get new ones," said Mr. Raman.
Buying in hopes of resell is always a risk, Mr. Waters said, considering the fact that sellers are trusting strangers who answer their classified advertisements not to rob them of merchandise that grows more valuable by the day. While sellers who use eBay or another online service can see guaranteed funds through PayPal, those who sell over Craigslist are often making face-to-face cash transactions to seal the deal. Sellers who fail to report the under-the-table transactions for tax purposes are also taking a legal risk.
But under the usual worst-case scenario, resellers who don't cash in on deals return their unopened consoles or electronics to the original store for a full or partial refund. In the best case, resellers can see more than twice the retail value of a game console or can pit anxious buyers against each other to sell to the highest bidder.
The key to a market is limited quantity, of course. Based on analysts' predictions of low stock of the gaming systems for the holiday season and on the early sales results, those who bought the systems with intentions to resell made a solid bet.
GameStop announced last week that at least 2.3 million customers are waiting to buy PlayStation 4 through back orders for the retail price of $399. Xbox One is also sold out through GameStop at the $499 retail price tag.
For longtime resellers such as Mr. Kowaleski, who said he has made thousands of dollars through the practice going back as far as the 1985 launch of the first Nintendo Entertainment System, the race to sell that PlayStation 4 began at the stroke of midnight.
By Nov. 15, Craigslist Pittsburgh listed 31 PS4 consoles for sale, ranging from a $500 unopened system to $1,000 for a console that included blockbuster games "Madden 25" and "Battlefield 4."
By Nov. 22, one day after the Xbox One launch, Craigslist Pittsburgh saw 40 listings for that system, ranging from an asking price of $600 for a brand new system in its original package with receipt to $899 for a sealed, unopened version with a receipt.
Console sales popped up just as quickly on eBay, according to Todd Witkemper, lead manager, consumer communications for San Jose, Calif.-based eBay.
More than 11,000 PlayStation 4 consoles and more than 8,000 Xbox One consoles went up on eBay the Monday following their respective launches. The average PS4 offering was around $586, and the average Xbox One offering was $676.
In the Pittsburgh area, launch editions of both consoles were sold out at GameStop and Walmart with no certainty that there will be large quantities in before Christmas.
Customers determined to own a console regardless of price can buy the Xbox One Ultimate Edition -- featuring five games, a second controller, an Xbox Live subscription and more for $994.90 -- at GameStop. This week, a similarly bundled PS4 offered for $950 sold out online through GameStop.
The tight availability will be a boon for people such as Brandon Friel of Lawrenceville, who pre-ordered 13 Xbox One consoles from Amazon for a little more than $6,000 in hopes of making a 20 to 30 percent return on his investment. So far, he has sold units for $635 and $699, and he fully expects to make his money back before the holiday season is over.
"My plan was to preorder early and sell late, closer to Christmas, if I don't sell them all when they're first released," he said.
For Josh Petrella of Hopewell, who made $125 reselling a PlayStation 4 and $175 reselling an Xbox One, selling on the open market has added a new element to a Black Friday experience that has become tradition among his friends.
The group, which usually breaks out a grill to turn the Black Friday line wait into a tailgate, is planning to claim a spot in line early to possibly sell to an impatient shopper.
"If they're going to spend $200 on a flat screen and they're getting a $100 discount, they may as well pay $50 to get to the front of the line to get it sooner," Mr. Petrella said.
It's a plan that even Mr. Kowaleski, who bristled at the idea of shopping on Black Friday, can get behind. He said a buyer who paid for his spot in line during the PlayStation 2 launch in 2010 gave him enough to fund his entire holiday season.
"Anytime there's an opportunity to make an extra dollar, I'll try," he said. "It's a win-win situation."
Deborah M. Todd: email@example.com or 412-263-1652.
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