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Nintendo Businesses The Almighty Buck Wii

Wii Shortages Costing Nintendo 'A Billion' In Sales 290

Posted by Zonk
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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Wii Shortages Costing Nintendo 'A Billion' In Sales

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  • by Gothic_Walrus (692125) on Monday December 17, 2007 @01:15PM (#21726638) Journal
    When people try to justify downloading music, they say it's okay because they wouldn't have bought the album in the first place, which means that no money was lost in the process.

    Wouldn't the same kind of logic hold here? How can Nintendo lose money on nonexistent consoles if they're already at full production?
  • Aftershocks (Score:5, Insightful)

    by Fozzyuw (950608) on Monday December 17, 2007 @01:21PM (#21726744)

    All told, these same individuals believe the company could be leaving as much as $1 billion on the table this holiday season.

    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

  • by HockeyPuck (141947) on Monday December 17, 2007 @01:26PM (#21726802)
    If a $Billion is being left on the table, where are people spending it on? 360? PS3? Or how about this new fangled , environmentally friendly device called:

    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:Curious (Score:5, Insightful)

    by MobileTatsu-NJG (946591) on Monday December 17, 2007 @01:46PM (#21727162)
    "I just don't understand how they could not have for seen this shortage."

    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.

  • by xtracto (837672) on Monday December 17, 2007 @01:50PM (#21727240) Journal
    But grand parent has a point, people who is trying to buy the Wii is people who will NEVER ever buy a Xbox or Playstation 3 (grandpas, grandmas, Joe Average without 50 fingers, etc). The fact that they can not get the Wii at this time only means that they will wait until sometime next year or later to get it. Maybe their impulse will not be very strong after christmass, but once they play it again in their friends or relative's house, they *will* like it again.
  • by navygeek (1044768) on Monday December 17, 2007 @01:53PM (#21727266)
    First off, don't misunderstand the subject line - there is definitely a high demand for the Wii, artificially inflated or otherwise. This is due, in part, to two major factors: the novelty of fairly well done motion control and the accessibility of the console to a significantly wider user base than the typical 'hardcore gamers'.

    That said, Nintendo is not 'losing a billion in sales' - they are, in fact, creating 'a billion in sales'. Okay, so the knee-jerk reaction is 'huh, stores are always sold out, I can't get one, they're losing my money - how are they creating sales'. Ironically, the question is its own answer. By restricting sales to North America, keeping the influx of consoles at a relatively low number - compared to actual demand - Nintendo is creating a sense of scarcity. This perceived lack of Wii increases the immediate demand for the console, virtually ensuring that new product delivered to stores will sell out within a day or two - three or four at the outside.

    This has the effect of creating a stronger the secondary market on E-bay, Craigslist, or the classifieds. People are willing to snatch them up at ridiculous prices in order to get one NOW, rather than wait a week or two for the next shipment and try to get one then - bird in the hand. This leads to further 'gotta have it' frenzy.

    By keeping production where it's at - does anyone REALLY believe they couldn't kick it up a few notches? - they are ensuring that the initial sales life of the console continues for a good long time. During which time they can maintain the price for the console itself, the accessories, and the games. It's a cash cow, a print-your-own-money machine. But the instant they jack up production and flood the market to satisfy all the demand - real and hyped - the consoles start lingering on the shelf longer, it's no longer the console to own, the novelty wears off and sales slump. Why on Earth would they want that!
  • by Scrameustache (459504) on Monday December 17, 2007 @01:57PM (#21727358) Homepage Journal

    When people try to justify downloading music, they say it's okay because they wouldn't have bought the album in the first place, which means that no money was lost in the process.

    Wouldn't the same kind of logic hold here? How can Nintendo lose money on nonexistent consoles if they're already at full production?
    No, because no one is downloading magical Wiis and they WOULD give Nintendo that money if they could.
  • by CrashPoint (564165) on Monday December 17, 2007 @02:33PM (#21727904)

    All it costs you is the labor for getting more workers in over the holidays.
    Right, because those workers are magical elves who simply will new Wiis into existence. It's not as if you need to build factories for them to work in or components for them to assemble.
  • *sigh* (Score:5, Insightful)

    by bigattichouse (527527) on Monday December 17, 2007 @02:43PM (#21728030) Homepage
    Step 1: Read Peter Senge's Fifth discipline [wikipedia.org]
    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 ... they may even place orders at each store... when person X gets a wii, they cancel all other orders. So "10" orders really was 1 order.

    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]
  • by Skapare (16644) on Monday December 17, 2007 @03:14PM (#21728494) Homepage

    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).

  • by callistra.moonshadow (956717) on Monday December 17, 2007 @03:32PM (#21728878) Journal
    One thing to keep in mind is that some of the market for the Wii is the seniors. They are probably more willing to wait to get one than teens or twenty somethings. Another group are those with young children. I have a 3 year old and a 7 year old. When considering other consoles because of the Wii shortage, it became clear the other consoles would not suffice. The Wii is so young-kid friendly that we decided that if we couldn't get one for XMAS we'd wait until we could. I think that part the demographic for those that are in the line for the Wii will wait until they can get their hands on it. The seniors and young kids are what contributed to the shortage in the first place.

    My two cents.
  • by Turken (139591) on Monday December 17, 2007 @03:33PM (#21728906)

    When it comes down to it, for me the choice was pretty clear.


    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.
  • by Steve525 (236741) on Monday December 17, 2007 @03:42PM (#21729120)
    However, they won't spend that waiting time "evaluating other options," because for these customers, there is no other option.

    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, and they may not care about the Wii so much anymore.
  • by Leo Sasquatch (977162) on Monday December 17, 2007 @04:01PM (#21729614)
    There was an article ages ago about this, and the Nintendo guy said something I thought was very telling about their attitude to customers. He said they were ramping up production as far as they could, but to stretch the supply chains any further would mean dealing with component manufacturers and suppliers they neither knew nor trusted. Yes, the result would be a larger supply of Wiis, but a much higher percentage of defective machines; either as soon as the customer got it home, or soon after purchase. They didn't want that to be associated with their brand, and said they'd rather manufacture less consoles, and have them work properly, and hope people would be patient and understand.

    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.
  • by 7Prime (871679) on Monday December 17, 2007 @04:01PM (#21729618) Homepage Journal
    Yes, but this is the Wii's second holiday season, Tickle-Me-Elmo was simply a passing fad, after over a year, I think we call call the Wii whatever the iPod is... a total and utter success.
  • by Turken (139591) on Monday December 17, 2007 @04:05PM (#21729716)
    Even with outsourcing, complex products such as consumer electronics require many different parts from many different manufacturers. If any one part is in short supply, the whole product will be in short supply. And if you're sourcing parts that can be used for different end-products, then you also have to compete with other businesses for that resource.

    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 hope that those manufacturers can meet the demand. If Nintendo wants to instantly increase production, it may very well mean paying a premium for scare parts, which would cause them to lose a guaranteed amount on the increased manufacturing. So they get screwed either way, in which case it's better to stick with all the contracts that were negotiated months ago based on what they thought was a reasonable demand.

    Electronics don't just poof into existence. Whether company-owned or outsourced, factories must exist to make products and if those factories can't meet demand, the product won't meet demand.
  • Wii (Score:3, Insightful)

    by djdavetrouble (442175) on Monday December 17, 2007 @06:47PM (#21732286) Homepage
    The Wii has been effectively sold out for over 12 months straight now.
    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 restock....

    Everyone that I know that wanted a Wii went to the store and bought one already.

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