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"Walmart Muscles Into the $12 Billion Collectibles Business

By David Marino-Nachison

Oct. 3, 2018

It’s possible that some investors will skim past Wednesday morning’s news that Walmart (WMT) plans to get into pop-culture collectibles in a big way.

But the announcement—not coincidentally timed, it might be noted, just before the Thursday opening of the New York Comic Con—might be worth a closer look.

The announcement includes a new collectibles section in 3,500 stores starting later this month; a deal to be the exclusive in-store seller of boxes from subscription “stuff” company Loot Crate; and some available-nowhere-but-Walmart products. (Example: six colored variants of a Funko [FNKO] Thanos doll.)

How much might this matter to Walmart? It could be useful to look at the retailer GameStop (GME), which, in the most recent fiscal year, reported $636 million in collectibles revenue and $208 million in gross profit. (its fiscal year closes around the end of January.)

That’s not so much in Walmart terms. But in a September conference call, GameStop’s interim CEO Shane Kim called the business a $12 billion opportunity in North America alone and said his company sought to grab market share in “a very fragmented market.” Walmart clearly feels the same way.

And so this may end up to be more bad news for GameStop, which is already looking to sell—even as the business itself has been good news for the company.

In recent years, collectibles have come to represent a growing share of its sales, posting gross margins close to the company’s average in the mid-30% range. (Walmart’s overall gross margins for its last full year were somewhat lower.)

Meanwhile, don’t overlook either the partnership with a new retail brand like Loot Crate—the kind of company Walmart might conceivably seek to buy, given some of its recent history—or the potential value of exclusive products to shoppers who could end up looking for a Thanos and leaving with baskets filled with other things while they’re there.

The announcement follows another, from August, in which Walmart highlighted toy demos and “roadshows” in stores during the run-up to, and into, the holiday shopping season.

While big retailers are increasingly rolling out more ways for people to buy, they’re also in search of new ways to get them in the door. This latest news fits neatly into that narrative."

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