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Wii Shortages Costing Nintendo 'A Billion' In Sales
Posted by
Zonk
on Mon Dec 17, 2007 12:11 PM
from the less-than-a-hojillion-but-still-frustrating dept.
from the less-than-a-hojillion-but-still-frustrating dept.
A New York Times article from this past Friday highlights the 'problem' that Nintendo is facing: more people want to give them money than they can handle. Analysts quoted in the story discussing Nintendo's unique Wii shortage problem indicate that the company could be selling twice the 1.8 million consoles a month it ships. All told, these same individuals believe the company could be leaving as much as $1 billion on the table this holiday season. "'We don't feel like we've made any mistakes,' said George Harrison, senior vice president for marketing at Nintendo of America. He said there was a shortage because the company must plan its production schedule five months ahead, and projecting future demand is difficult. He added that there had been a worldwide shortage of disk drives that had hurt Nintendo as well as makers of many other devices. 'It's a good problem to have,' Mr. Harrison said of the demand, but he acknowledged that there could be a downside. 'We do worry about not satisfying consumers and that they will drift to a competitor's system.'"
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Nintendo Already Anticipating Holiday Wii Shortages 246 comments
As we approach the holiday season, Nintendo has already said that they don't expect to keep up with demand for the Wii console. In an interview with the LA Times, Nintendo president Reggie Fils-Aime said they're ramping up production by 33% already, with further increases planned. They're hoping to avoid the scarcity of Wii's that occurred last year, which cost them a great deal of money in potential sales. "We're now producing 2.4 million units a month worldwide. Last year, we made 1.6 million a month. So we've made a 33% increase. One of our competitors projects they will sell 10 million consoles worldwide this year. For us, that's three months of production. We're producing an unprecedented level of hardware to try to meet demand."
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Let's use the music argument... (Score:5, Insightful)
Wouldn't the same kind of logic hold here? How can Nintendo lose money on nonexistent consoles if they're already at full production?
Re:Let's use the music argument... (Score:5, Interesting)
Parent
Food for thought (Score:4, Interesting)
When it comes down to it, for me the choice was pretty clear. Since I don't like Metroid that much and I've already completed Twilight Princess on wii, I could have a $300 mario machine with shitty 3rd party games or pay the same amount and get a PS2 with a pile of accessories and games. Is it fair to compare the mature PS2 library to the wii's? Not entirely, but the Gamecube's at end of life wasn't anything like the PS2's is now either. I don't have high hopes for seeing a wide variety of good games on the wii, aside from Nintendo published games
Parent
Re: (Score:3, Insightful)
Re:Food for thought (Score:5, Insightful)
And this is why your entire argument falls flat. You're a gamer, and you assume that everyone else looking for a Wii views it the same way that you do. Hardcore gamers have already made up their mind about whether they want a Wii and bought one if they wanted it. Now, the vast majority of people looking to buy a Wii are either new gamers, or parents of new gamers. These are people who have no clue what "cross-platform gameplay" means and if they wanted to buy a PS2 then they would have done so long ago, since the PS2 has been a mature and available system for years.
The real driving force behind Wii is not that it is a "must-have-one-too" Christmas toy, but rather that the Wii is a social system. People play with their friends and/or family members' system, and decide that it is fun enough that they want one of their own. I may only have anecdotal evidence of the Wii's "viral" appeal, but I have seen it happen so many times I'm thinking about keeping a tally on the side of my Wii to record the number of friends and family who have gone and bought their own after playing with mine.
Sure, there will be some people who don't buy a Wii after Christmas due to budget constraints, but the vast majority will simply wait and sustain the demand well into next year. However, they won't spend that waiting time "evaluating other options," because for these customers, there is no other option.
Parent
Re: (Score:3, Insightful)
For these non-gamers, other options are HDTV's, furniture, jewelry, or just about anything. I agree with you that these people are unlikely to evaluate other gaming systems. However, they still may loose their enthusiasm for the Wii, and spend the money someplace else. Sure, they might wait and buy a Wii when they are easier to find. Or, something else could catch their interest,
Re:Let's use the music argument... (Score:4, Insightful)
Parent
Re: (Score:3, Interesting)
Wii (Score:3, Insightful)
I don't understand this. The guy next to me at work was all, "I want a wii, they don't have it
on target.com, its sold out blah blah blah". I called ghetto ass gamestop and they had a pile of them
for the regular old price. Of course, the next day he "decided not to get it just yet". Anyway,
Where is the shortage? The day before xmas? News flash, they are also
out of the good barbies, transformers, and anything else interesting until they res
Re: (Score:3, Funny)
I'm on my way there NOW to post pics on slashdot....
Re: (Score:3, Insightful)
Re: (Score:2, Interesting)
Re: (Score:3, Informative)
Because I don't have 1000 Wiis, I'm losing money by not being able to sell them on eBay.
Does that help explain the flawed premise? It's money I never had. I have lost nothing, I'm just not achieving equilibrium on the supply/demand curve.
Nintendo's loss is solely in opportunity. It is not money which they once had, and now do not.
Re: (Score:2)
No.
"How can Nintendo lose money on nonexistent consoles if they're already at full production?"
They're not filling a billion dollars worth of demand.
no one's getting any (Score:4, Insightful)
Wouldn't the same kind of logic hold here? How can Nintendo lose money on nonexistent consoles if they're already at full production?
Parent
Re:Let's use the music argument... (Score:5, Funny)
Parent
Curious (Score:5, Interesting)
Re: (Score:2, Interesting)
This sounds true in theory, but is not true in practice. The majority of children don't realize that it's a hard to find item - they just know their parents tell them Santa might bring one, and he might not. Certainly they are aware that it's not readily available in the stores, but thinking back to my own childhood, there wasn't a single item (that I _remember_ at least) I wanted badly because it was hard to find. Supply and demand wasn't a
Re: (Score:2)
Re:Curious (Score:5, Informative)
They saw the shortage and they knew it was going to happen. The people running Nintendo's financial and business planning know what they're doing and probably have spreadsheets of predicted outcomes.
The problem is reaching the best profit margin. (Reminding of an old computer game in High School business class) Nintendo could build spend money on 100 new factories and pump out 100 million Wii's in one month to satisfy demand. But what happens when the month is over? Nintendo is left with 100 factories with 1000's of works sitting around picking their noses. Effectively, they'd start hemorrhaging money in keeping said factories with the only recourse to sell the factories.
Otherwise, they're now pumping out millions of of systems a month that no one is buying, because demand was just satisfied in one orgasmic explosion. All those systems are being pushed into storage, which costs money. Now, we look at something like the PS3 and all the design/model changes it had. If a design/model change happened to the Wii, it'd have to firesale it's entire stock to make way for the new stuff.
It's a balancing act and Nintendo has the benefit of pop-culture status with the Wii. The "OMG, there's a Wii on the Shelf" shock (thanks to customer experience and news media hype) practically guarantees an impulse purchase, if for no other reason to tell their friends they finally found a Wii (even if they just got a 360/PS3 as a gift).
Also, Nintendo increased output (that started 5 months ago) to *help* meet holiday demand but as there is with super popular things, there can only be a reasonable amount of product produced. Demand can come in spikes (holidays), but production simply cannot be spiked like that. It takes time to make a product, but takes an instant to create demand. And unlike the 360 or PS3, the Wii hasn't had time to stock up units for the holiday rush as it's been more-or-less sold out since it launched.
Cheers,
Fozzy
Parent
Re:Curious (Score:4, Interesting)
The problem I came across, is that even though I played it for the first week or 2 (this was about 6 months ago too), after that it lost its playing appeal when I was home alone and with the wife (who hates it because the controller is not exact enough and she cannot play with it without getting pissed off). These days, I only play it in party conditions and when we have friends over for dinner. Its a great social game console, but beyond that I find it no fun to play. Unlike my old xbox (non 360), which I can sit and play alone all the time.
Parent
It's region lock's fault (Score:3, Informative)
Re: (Score:3, Informative)
Re:Curious (Score:5, Informative)
I suspect that nobody believed that doubled capacity would continue to sell out during the year; they figured that they would build up a stock to carry them into Christmas season, like every other console ever.
Parent
Re: (Score:3, Insightful)
So no, Nintendo doesn't have their own factories where they make wiis from start to finish, but they do have to contract out all the appropriate parts and
Re: (Score:3, Informative)
The Wii is in uncharted waters: More than a year after its release, it's still selling twice as fast as any console in history. It's silly
Re: (Score:2)
Re:Curious (Score:5, Insightful)
In the space of a year, Nintendo sold 14 million consoles. That's more than the 360 sold in 2 years. Historically, consoles don't hit 10 mill in a year.
"It really makes me wonder about the rumors of intentional shorting."
The Wii was a surprise hit. The surprise wasn't that it's a hit, but that it was such a massive hit. Even the biggest Nintendo fanboy wouldn't have expected nearly this many sales the first year. The Playstation didn't even manage that and Nintendo's last couple of consoles didn't even come close.
Parent
Production is based on forcasts using on hand data (Score:3, Informative)
The issue is the Wii is selling better than any console in history. The Wii is selling faster than the PS2, the DS, or anything else that came before it. So Nintendo forcasted based on "Aggressive sales" and started with production of 1 million for launch, and 1 million a month, which they felt was a fair target (even optimistic, considerin
Aftershocks (Score:5, Insightful)
The question I have is, ok it's $1 billion this holiday season but what about the after affects of the holiday? How many people who are dying to get the Wii (but can't) will still go and buy it in Jan., Feb., Mar.? My guess? A lot. Considering they've been doing it since Nov. 2006.
It reminds of the pirated music idea. A person who pirates music(or movies) isn't necessarly going to be buying said music(or movies). Thus, one cannot say that pirating is a 1:1 effect on sales. Likewise, you cannot say that people who cannot buy a Wii as a gift for the holidays will not buy one after the holidays. Theoretically, if the Big N satisfied demand in December, they would then loose all those Q1 2008 sales. So, what's the point? The real question is, if those who want a Wii, but bought a 360/PS3, will still buy a Wii in the future?
Cheers,
Fozzy
Re: (Score:2)
If I'm planning on spending $X00.00 for my kids for Christmas and I had hoped to spend it on the Wii and Wii related products, then if it's sold out, I MIGHT give my kids an IOU for the wii and give it to them next month...but the remaining money I would have spent on extra controllers and games will now be spent on something else because I can't bear to give them temporarily useless pr
What are people buying instead? (Score:2, Insightful)
GO OUTSIDE AND PLAY!
Includes such games as Real World TENNIS (indoor and outdoor versions available)
Real World BOWLING (available at a bowling alley near you).
Both games come with a bonus titled called, GETTING FRESH AIR.
*please do not frame me if the Wii is you only source of activity b/c of age/disability/religion/sex/creed/political stance.
Re:What are people buying instead? (Score:5, Funny)
Parent
Re: (Score:2)
Re:What are people buying instead? (Score:5, Funny)
I'm not sure where you are, but up here in the Northern Hemisphere it's winter when Christmas time comes. Even as far south as Texas playing outdoor sports is not something most people, even athletic, think is a good idea.
As far as indoor, while it may be a helpful, I don't know many kids who are going to think "fitness club membership" is an awesome gift.
bowling alley... FRESH AIR.
You know in my word association, "fresh air" makes me think "bowling alley" just before I think "corner dive bar".
Parent
Re:What are people buying instead? (Score:5, Funny)
GO OUTSIDE AND PLAY!
Parent
Nothing new from Nintendo... (Score:2)
Production Ramp Up (Score:4, Informative)
Re:Production Ramp Up (Score:5, Insightful)
Compare and contrast Microsoft's attitude of denying the problem for ages, then setting aside billions to handle defective machines under extended warranty. My Wii's seen daily use since launch date - all I've ever had to do was change batteries in the Wiimote. If it does break down, I'm stuffed as far as getting another one is concerned, at least for a few more weeks.
Parent
*sigh* (Score:5, Insightful)
Step 2: Understand that the Wii is a perfect example of the Beer distribution game [wikipedia.org]
Step 3: Realize that demand is at least ONE ORDER of magnitude smaller than reported.
Case in point: Person X goes to store 1 and asks for a wii, then proceeds to search through store(s) 1-10
If Nintendo attempts to fill the "Billion" in orders, they will greatly overshoot and end up with a flooded market that can't get rid of the damn things. Slow and steady wins this race, a few million in sales lost over the entire potential beats the crap out of overshooting with 100 million dollars worth of hardware sitting on shelves, or ending up in landfills [wikipedia.org]
Solving the holiday product crunch ... (Score:5, Interesting)
I have the solution to solving the holiday product crunch: spread the holidays out over the calendar. In the USA, divide the country up into 12 regions of about the same population and economics. Then assign each region a different month to have the gift giving holidays. Most people don't celebrate Christmas religiously, anymore, so this shouldn't be much of a problem.
The above does still leave a big crunch at stores and malls within a region. So maybe it's better to divide things up on a micro-scale instead of a macro-scale. So, how about celebrating the gift giving holiday based on (zipcode % 12), where you celebrate gift giving based on your zip code modulo 12 to choose the month.
This still means a big crunch for families and neighbors in the same zip code. So I have a better idea. Let's use the date of birth to determine when to celebrate the gift giving holiday, based on who the gift is for. And instead of having it all on one day of the month, let's spread it out further and use the actual date in the date of birth for everyone's own personalized gift giving holiday.
Ooops. I didn't take into account February 29. Never mind.
eBay suggests that Nintendo isn't losing that much (Score:3, Interesting)
New Wii units without a multi-controller/multi-game bundle are selling for a fifty to seventy-five dollar price premium over retail. Even if the 15 million units they've sold to date were sold for USD 50 more, Nintendo would only be making an additional 750,000,000 bucks, less than three-quarters of a billion. And that assumes that everyone willing to pay $250 for Wii is also willing to pay $300 for a Wii which I doubt. It seems to me that a large part of the Wii's popularity is its price.
But more importantly, the lack of a large premium on the Wii from resellers suggest that the present rate of production and price is very close to the market equilibrium. If demand were far outstripping supply, the premium from resellers on eBay would be far higher. If supply were far outstripping demand, we'd be seeing the boxes stack up on the shelves. But from first appearances, it would appear that Nintendo is very close to hitting the sweet spot with their present rate of production.
Re:eBay suggests that Nintendo isn't losing that m (Score:4, Interesting)
Not necessarily. This could instead indicate that the demand is elastic with respect to price. That would mean the demand for $250 Wiis is extremely high, while the demand for $400+ Wiis is very low. An item being in short supply relative to the demand does not automatically mean that the people who want the item would be willing to pay more for it. That usually only applies to what are more or less necessities, like gasoline or food staples.
This especially makes sense in the context of who the Wii's primary market is -- casual non-gamers. These are people who maybe saw a friend or relative's Wii, played it and had fun, and decided they want one despite not being into any previous game consoles. For them, $250 for a fun toy may seem like it's worth it. If the toy turns out to be hard to find, are they going to decide that they will instead pay $300, $400, or $500 for it? Or are they going to decide that they don't need it that bad, and can wait until more are available?
It's only the hard-core that are going to be willing to buy their chosen console no matter the price. But even then they're also the ones who'd be willing to call every store in town and show up before they open on shipment day. The latter is the category I fell into. Even I, long-time Nintendo fan boy, wasn't willing to pay scalper mark-ups on a Wii.
What this implies is that despite some theories to the contrary, the Wii's MSRP is in fact a major selling point.
Parent
George Harrison (Score:3, Funny)
Speculation (Score:4, Interesting)
I can find tons (right now I see 9000+) of Wiis on ebay at joke prices. Presumeably almost all of these will go back to the store within a week or two of Christmas.
Not Nintendo's fault, really.
Re: (Score:3, Funny)
Re:RIAA styled math (Score:5, Funny)
Parent
Re: (Score:3, Insightful)
Re: (Score:3, Insightful)
Yes, this can be a serious problem. If there is any level of shortage of a product (as many of the latest products coming into the holidays are), EBay will have the effect of making the shortage worse. And it's not the manufacturers that profit from it in this case (apparently); it's whoever has the connections to get those bulk deliveries redirected to them (possibly even stolen).
Raising Prices while adding value = no backlash... (Score:3)
They can't raise their prices without increasing the perceived value, or there will be a huge backlash. What they COULD do, is what retailers are doing and forcing bundles. Make the Wii available in 2 packages. 1 solo $250 package (what's offered now) that will get 30% of production, and 70% of