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Wii The Almighty Buck

Retail Store Scalping Wii Consoles on eBay 236

Posted by Zonk
from the with-a-name-like-slackers-... dept.
C0rinthian writes "ArsTechnica reports that the games retailer Slackers has been keeping their stock of the Nintendo Wii off their store shelves, and is instead selling the system on eBay for $400-500. (A $150-$250 markup)" This follows their look at the other side of the coin: why some retailers insist on Wii Bundles.
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Retail Store Scalping Wii Consoles on eBay

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  • So what (Score:5, Interesting)

    by truesaer (135079) on Friday December 21, 2007 @10:04PM (#21787192) Homepage
    Are they not allowed to do to sell them on eBay? Legally it's fine. Nintendo doesn't want them to, but they have to be very careful about cutting off shipments or Nintendo could get busted for price fixing.
    • Re: (Score:3, Insightful)

      by Anonymous Coward
      Nintendo doesn't want them to, but they have to be very careful about cutting off shipments or Nintendo could get busted for price fixing.

      Ummm, price fixing is setting an artificially high price. If anything, Nintendo is dumping (selling below cost to gain market share).

      In this case, the MSRP is much lower than market price. So why not charge the market price? That's capitalism.
      • In this case, the MSRP is much lower than market price. So why not charge the market price? That's capitalism.
        They would then be accused of arrogance and lose market share ala Sony. It's a tough game.
      • Re:So what (Score:5, Insightful)

        by Maxo-Texas (864189) on Friday December 21, 2007 @11:04PM (#21787560)
        It's not dumping. It's well known that Nintendo makes a profit on every Wii sold at the MSRP.

        Raw capitalism yes-- but not friendly capitalism. Raw capitalism will maximize profits but might cost nintendo a lot of good will.

        For example- Sony pissed me off in 2001 and I have not bought another product from them since. So their short term gain resulted in probably $20,000 to $30,000 in lost sales.

        Nintendo has been managing their market for a looooong time.
        • Raw capitalism will maximize profits but might cost nintendo a lot of good will.
          Then it won't maximize profits, especially long-term profits. Difficulty seeing more than a quarter into the future has become disturbingly common among publicly held companies.
        • Re: (Score:3, Interesting)

          by sethawoolley (1005201)

          Sony pissed me off in 2001 and I have not bought another product from them since. So their short term gain resulted in probably $20,000 to $30,000 in lost sales.
          Er, what? You had tens of thousands of dollars to spend on wasted time that you would have spent if they didn't piss you off?

          Either you have a lot of unearned income, or... no you simply must have unearned income.
          • Re:So what (Score:5, Interesting)

            by Maxo-Texas (864189) on Saturday December 22, 2007 @11:59AM (#21791024)

            Between 2001 and 2007 I spent an average of $6000 a year on electronics including two big screen TV's and one regular TV given as a gift, three video cameras, four digital cameras, five mp3 players, six computers (I multi-box mmorgs), a large number of movies & television series (the sony one's I wanted, I waited and bought used for $5 instead of new for $19 to $50 dollars), two DVD recorders, and two or three VHS recorders. Previously a lot of that would have been sony products. I had a sony video camera, sony vcr, sony walkman, I think I had a panasonic TV. etc. going in to 2000.

            I was also able to sway the digital projector decision at my work away from Sony projectors at the tune of about $12,250.

            This all came from one rude customer service call over $50ish product. The customer service person was an ignorant idiot with no computer knowledge (basically a script head) and refused to accept the problem was with their product and their arrogant attitude and offer a refund or a fix and finally got rude and insulting. It might not have been a problem but we got the supervisor on the line and instead of being a good "this customer is pissed off and needs to be mollified" THEY got in my face as well. They were both very proud of sony products and probably shouldn't have been in customer service.

            Sony is the only company of any significant size that ever pissed me off. Tho a minor electronics store did once. I bought a DVD drive. It was broken. I went to swap it and they said I had to have the original paper invoice- even tho they KNEW me and I had bought easily $1500 in computer parts from them. I told them I would never shop there again-- they had a stack of DVD drives behind the counter and could have swapped easily.

            I'm not a hothead and I hold very few grudges but at this point, it would take a sony manager coming to my house and personally apologizing to get my teeth out of their neck.
      • by hedwards (940851)
        Nintendo isn't dumping, both MS and Sony are selling their systems below cost to gain market share. By your argument the entire industry ought to be sanction for antitrust behaviors against each other.

        You can set a maximum price for an item, and force retailers to abide by it, you just can't set a minimum price. It all depends upon the language of the contract under which the retailers sign up for Wiis.

        Capitalism isn't the grand cure all panacea that people make it out to be, companies have the right by and
      • by StudMuffin (167171) on Saturday December 22, 2007 @10:12AM (#21790288) Homepage
        The Supreme Court of the US ruled earlier this year that a manufacturer can set pricing for their product, and enforce retailers to sell at that price. This ruling was primarily to protect 'high end' products from discounters, but goes both ways.

        The case was 'Leegin v. PSKS', and is summarized on the docket here:

        http://docket.medill.northwestern.edu/archives/004185.php [northwestern.edu]

        This ruling is intended to protect a manufacturers brand by keeping discounters from undercutting (and subsequently devaluing) the perception of the brand to the public. Think of Rolex - do you REALLY think it costs them $5,000 to make a Rolex? Of course not, but you aren't buying a Rolex, you are buying the name and the perceived social capital that comes with it.

        Let's assume that the manufacturing cost of a Rolex watch is $1250. This watch is sold at wholesale to a retailer for $2500, and has an MSRP of $5000. This is a pretty common pattern (although less so for hi-tech devices).

        Now, if Joe's Discount Watch Kiosk in the crappy mall at the other end of town started selling Rolex for $1279, the Rolex name gets diluted, the social prestige goes down, and when Joe's Discount Watch Kiosk closes, the long-term business who has invested in the community, the Rolex brand name, in employing people, and has built the business from the ground up can no longer sell the Rolex for $5000. They end up with reduced cash flow, have to cut their staff, dogs and cats start living together, and all hell breaks lose.

        OK, it's not THAT bad, but from the 'real world' (tm) department, I own a specialty toy store. No really, I do. I employ about 15 people, sell at or near MSRP, invest in my community, and build social equity.

        When a specialty brand that I have invested in sells to Amazon or Target, I can no longer sell the product, because they discount. So, I have to mark down to sell what I have already purchased. With my reduced margins, I cannot employ 15 people, I have to cut to 12 and make do. I am not selling $5000 watches, I am selling $25 dolls, $40 wooden blocks, etc. My net margins in a good year are about 12% after all expenses, which allows me to pay my mortgage and keep the kids fed and the lights on. When Target, for example, comes in, woos a brand, buys their product, and then discounts the crap out of it, I lose, the manufacturer loses, and the consumers win - for a few months. Then, the brand goes out of business, I have lost margin and as a small locally owned business have to lay off staff, and there is direct damage to the consumer because next year, Target has moved on, the brand is no longer in business, and I can't get it for my loyal customers.

        I am 100% in favor of competition, good pricing, fairness to customers, but consumers also have to realize the high cost of discounting overall. This is why the SCOTUS ruling is actually good for business, and good for consumers in the LONG TERM.

        Now, how does this apply to the Wii?

        Well, the SCOTUS ruling, as I understand it (IANAL) does not specify just minimum pricing, but that a manufacturer can set PRICING. So, if Nintendo says $249.99, it's $249.99 for the console.

        Whether or not the retailer is able to stay in business is between the retailer and Nintendo, but one would hope that Nintendo would eat some of the costs of the console to get it out to the public.

        Just my pre-coffee, pre-busiest toy shopping day of the year rant.
    • Re:So what (Score:5, Informative)

      by TooMuchToDo (882796) on Friday December 21, 2007 @10:09PM (#21787220)
      Lots of manufacturers have reseller policies that dictate how you can sell a product and the minimum price you can charge. Nintendo could simply decide they won't be selling anymore Wii consoles to any stores not following their policy.
      • Re: (Score:3, Informative)

        by truesaer (135079)
        Lots of manufacturers have reseller policies that dictate how you can sell a product and the minimum price you can charge. Nintendo could simply decide they won't be selling anymore Wii consoles to any stores not following their policy.

        No, they don't. There are techniques to maintain minimum prices but they aren't in the form of the manufacturer dictating to the retailer what price they can sell at. Apple's a good example...Apple products wholesale for just 1-2% below the MSRP and retailers aren't permitt

        • Re:So what (Score:5, Informative)

          by TooMuchToDo (882796) on Friday December 21, 2007 @10:22PM (#21787308)
          Oh, snap.

          July 03, 2007
          Supreme Court lets manufacturers set minimum prices
          Decision reverses 1911 ruling -- what does it mean for consumers?

          http://blogs.consumerreports.org/shopping/2007/07/supreme-court-l.html [consumerreports.org]

          • by truesaer (135079)
            Try reading the last line of my post. It still is usually illegal, just as I said. Unless having a minimum price higher than market price somehow can be shown to not harm competition. Thats going to be a hard burden of proof to meet.
            • Re:So what (Score:4, Informative)

              by queequeg1 (180099) on Friday December 21, 2007 @10:59PM (#21787532)
              It may not be a hard burden at all. The court held that vertical price fixing of this type of not per se illegal if (i) the seller doesn't have "market power" (i.e. such a high market percentage that it can influence prices throughout the entire market), and (ii) the seller can make an arguable justification for the price limits as improving competition. Note that "arguable" when used in this context means nothing more than presenting some argument that is not completely laughable. It does not mean proving the point beyond a reasonable doubt, with clear and convincing evidence, or with a preponderance of the evidence.
              • by truesaer (135079)
                Nintendo clearly has market power in the gaming console industry.
                • by queequeg1 (180099)
                  Does it? Proof may be difficult to come by. In the anti-trust world, market power is generally considered to be the ability to command prices above normally competitive levels. In this case, the Wii is priced well below all other competing consoles. Granted, it does not have the same hardware specifications as its competitors, but given the lower price and lack of clear comparables, a plaintiff might have a difficult time showing that the Wii is priced abnormally high.
                • by DRJlaw (946416)
                  You really need to stop playing amateur antitrust lawyer. Market power alone does not constitute an antitrust violation and prevent a manufacturer from making unilateral decisions concerning their business conduct.

                  "Second, a single firm that lawfully has acquired Stiglerian market power is permitted, without violating section 2 of the Sherman Act, to exercise that power by raising price and restraining its own output in that market. This follows from the argument, carefully set out by Donald Turner, that f
        • They most certainly can dictate a *maximum*.
        • Re: (Score:3, Interesting)

          by Skynyrd (25155)
          Generally, manufacturers can't dictate a price to retailers. There was a supreme court case this past year that changed the situation somewhat though.

          Yrs, but there are way around it. I do some consulting work for a 4x4 shop that sells a lot of hardware on the net. Many of their vendors have MAP pricing (Minimum Advertised Prices). Your cost (as a dealer) is set by how much volume you move - sell more, get lower prices. However, if you are selling below a certain price point, your purchase price goes up. If
        • Wrong. Even before the Supreme Court decision, MS used to insert minimum prices into their contracts with retailers - I know - we had one at CompUSA (which we subsequently violated during the store closing sale... ooops!!!).

      • Re:So what (Score:4, Interesting)

        by Breakfast Pants (323698) on Friday December 21, 2007 @10:46PM (#21787454) Journal
        The record companies tried to stop Best Buy from selling CDs at a loss and they ended up convicted of price fixing.
      • Re: (Score:2, Insightful)

        by Barraketh (630764)
        The ability to set a *minimum price* has nothing to do with this particular case, as the retailers are selling at above MSRP. At no point was the manufacturer allowed to set the maximum price for the product, so if Nintendo stopped shipping to the retailers that do so they'd have a price fixing suit on their hands.
    • Given that Nintendo frowns on store bundles, they are unlikely to endorse the retail eBay business as well. The store could see its next few Wii and other Nintendo-ware shipments cut off for a while.
      • by Tony Hoyle (11698)
        Nintendo doesn't give a crap about store bundles.. try buying a wii that is *not* part of a bundle.. I've never seen one.
        • Re:So what (Score:4, Insightful)

          by Kadin2048 (468275) * <slashdot@kadin.xoxy@net> on Friday December 21, 2007 @10:47PM (#21787456) Homepage Journal
          Huh? You can go to any Best Buy or WalMart and buy a Wii that's not in a bundle. Or at least you could until they ran out of stock for the Christmas rush, but I'm sure if you stand around on the day they get their resupply that they'll sell you one in the regular retail box, which is nothing but the the console, one Wiimote, and Wii Sports, just fine.

          Gamestop seem to be notorious for its bundling policies, but then again I think Gamestop is one notch up from a guy selling electronics and Persian rugs out of the back of a van.
        • Re:So what (Score:4, Interesting)

          by Rallion (711805) on Saturday December 22, 2007 @12:58AM (#21788168) Journal
          Nintendo of America's president recently made what sounded like a subtle threat in regards to retailers that forced bundles on consumers:

          "Retailers have already been given feedback that we are not big fans of that. We think it masks some of the price advantage we have versus our competition and, frankly, the consumer should decide what they want."
          • by xenocide2 (231786)
            It's not a price advantage if you can't actually ramp up production.
    • by mzs (595629)
      Nintendo probably can't do a thing, they most likely get the Wiis through a distributor.
    • Re:So what (Score:5, Informative)

      by DRJlaw (946416) on Friday December 21, 2007 @11:04PM (#21787564)
      [Repost - didn't notice that I hadn't logged in correctly]

      Legally it's fine. Nintendo doesn't want them to, but they have to be very careful about cutting off shipments or Nintendo could get busted for price fixing.

      Your first statement may be true, especially if there's no distribution agreement price ceiling. Your second statement is essentially false. There is nothing exceptional in antitrust law that prevents a company in Nintendo's position from refusing to deal with with a customer who wants to resell the product a different price, especially if that price is higher than the MSRP. In addition, the Supreme Court's Leegin Creative Leather Products decision this year made it much easier for a company like Nintendo to obtain actual agreements with its customers that products cannot be sold for less than the MSRP.

      Even before Leegin, companies could impose so-called Colgate pricing policies where they could unilaterally refuse to sell to distributors that resell at prices other than list price, and terminate distributors who fail to comply with the policy. Those policies are not "agreements" under Section 1 of the Sherman Act, so that the manufacturer would have to be a monopoly under Section 2 in order to be subject to antitrust scrutiny.

      In Nintendo's case, even if it were to be ruled to be a monopoly, it would be difficult to prove that the termination of a distributor for selling products at a higher price than it desires creates an anticompetitive market for consumers and creates a monopoly rent.
    • I suppose that technically setting a price lower is also price fixing and maybe illegal, I doubt that any prosecutor would prosecute. I don't think that Nintendo is required to do business with anyone either as long as the reasons are non-discriminatroy.
  • by Manip (656104) on Friday December 21, 2007 @10:11PM (#21787232)
    Honestly if they're only making just below $4 I can't blame them for requiring bundles. In the article it says they're losing money if a customer uses a credit card but even if they don't you have to wonder how they can keep the doors open.

    I kind of feel a little bit bad for small games stores right now even if I'm just a consumer with no real vested interest in making the prices higher.

    • "In the article it says they're losing money if a customer uses a credit card but even if they don't you have to wonder how they can keep the doors open."

      They make money on the games.
      • by G Fab (1142219)
        Except people buy games at their favorite electronics store. People buy Wiis whereever they manage to find them. So some stores are not going to sell wii games to wii console buyers.
    • by Jester998 (156179) on Friday December 21, 2007 @11:56PM (#21787866) Homepage
      I have a friend who was a manager of a computer retail store, including a full line of Apple products. iPods are *exactly* the same situation as Wii consoles are -- retailers make absolutely nothing on them, and either you play by Apple's pricing rules or you get cut off.

      I forget exactly how much he said the profit was, but IIRC it was $2-3 on a top-end iPod (which was the 60 or 80GB model at the time). By the time you pay your staff to deal with the customer to explain features, etc, and make the sale, he'd already lost money. If the customer paid by credit card, he lost a lot more.

      However, third-party accessories (skins/cases, FM tuners, headphones, etc) had significantly higher markup, and that's where the money is for retailers, just like games are for the Wii.
  • Capitalism (Score:5, Insightful)

    by Anonymous Coward on Friday December 21, 2007 @10:11PM (#21787234)
    In a capatilist society it should be possible to buy any item, no matter how rare, with rarer items being more expensive. Should we blame retailers for doing what economic theory expects them to do? When supply is low and demand is high price should rise until supply = demand.
    • Re: (Score:3, Insightful)

      by Anonymous Coward
      yes, we all know how a "perfect" free market works. the issue is in whether we actually agree with the tenants of true free market capitalism. I'm sure there are plenty here who, like me, think that there should be some regulations on the market.
  • MSRP vs Wholesale (Score:3, Insightful)

    by TubeSteak (669689) on Friday December 21, 2007 @10:13PM (#21787250) Journal

    "My distributors tell us that Nintendo has an 'attach rate' and we are often forced to purchase four games with each console. We pay $246 per console. If we sell the console for $249.99 retail, it's a $3.99 markup. If a person pays by credit card we lose money."
    1. Why is the Manufacturer Suggested Retail Price (MSRP) so close to the wholesale price?
    2. Why doesn't the stores sell it for more than MSRP? The "S" does stand for "Suggested"
    • by truesaer (135079) on Friday December 21, 2007 @10:20PM (#21787290) Homepage
      1. Why is the Manufacturer Suggested Retail Price (MSRP) so close to the wholesale price?


      2. Why doesn't the stores sell it for more than MSRP? The "S" does stand for "Suggested"


      1) Because it makes MSRP effectively a price floor. Stores have little incentive to undercut each other if they're already making zero profit or a loss on the sale (still beneficial to sell em to get people through the door where they'll buy games and accessories).


      2) Thats exactly what they're doing...selling em on eBay above MSRP.

    • by skelly33 (891182)
      Indeed - they would be better off selling them at the eBay pricing in their stores because then they wouldn't have the eBay fees on top of the CC processing fees for the ones sold in store. I think though that the entire gaming industry has been geared towards throw-away hardware for high-profit software. Speculation: perhaps the console-makers are unconcerned with retailers profiting on the consoles when the intent is to make the money on the games...
    • Re: (Score:3, Insightful)

      by alanshot (541117)
      Yes, the "S" does stand for "suggested". It stands for suggested the same way cousin vinny "Suggests" you pay him back in a timely manner, or the way a mugger "suggests" you hand him your wallet.

      I am all for Slackers selling them for the max profit. Price controls dont work. They hinder the market and cause problems. Just ask those in the south that needed their roofs fixed or needed generators after a hurricane.

      Since price controls went into effect, it did two things. First it forced retailers to maintain
    • by _KiTA_ (241027)


      "My distributors tell us that Nintendo has an 'attach rate' and we are often forced to purchase four games with each console. We pay $246 per console. If we sell the console for $249.99 retail, it's a $3.99 markup. If a person pays by credit card we lose money."
      1. Why is the Manufacturer Suggested Retail Price (MSRP) so close to the wholesale price?
      2. Why doesn't the stores sell it for more than MSRP? The "S" does stand for "Suggested"


      1. The MSRP is close to the wholesale price because, well, the manufactur
      • :: Not only that, it's not feasable to do -- if Gamestop priced the Wii at $300, everyone would go over to Bestbuy where they're $250.

        Only if Bestbuy had them in stock.
    • Nintendo sets the MSRP, but not the Wholesale price. The distributors (the wholesalers) do that. If the distributors are buying them from Nintendo for $200 each and selling them to the small stores for $255, the small stores don't have much choice. Nintendo probably sells units in 1000 lot batches or something similar, and only large retail chains can afford to buy whole lots at a time. So, not only do the large retail stores get more units, they also get higher profits.

      This is the way almost all produc
    • by Asgard (60200) *
      Does that account for any of the various 'rebates' that are kicked back down the chain? IE 'advertising rebate', a bonus for selling certain volumes, distributor-paid advertising, etc. There a lots of ways the margin might be higher per-unit without having the MSRP built it in.
    • Re:MSRP vs Wholesale (Score:5, Interesting)

      by gordguide (307383) on Saturday December 22, 2007 @02:14AM (#21788558)
      Let me just say right off the bat that I do not have any special information regarding the pricing of Nintendo products. What I do have is years of experience as an owner of a reasonably successful electronics reseller. We didn't sell consoles or games, but the industry is not so different that there is going to be that much difference. I won't offer anything in the way of secrets or inside information, so you will have to read between the lines, but broadly speaking some or all of this is going to apply. Guaranteed.

      Which means I'm going to accept, without any further comment, his assertion that he "pays $246" for a Nintendo Wii console that he is supposed to sell at $249.95. I would not be the least bit surprised that he has a piece of paper somewhere that says so. And then I'm going to say that when he says he pays $246 for a console, you should not interpret that as meaning it costs him $246 for a console. If it does, he has no business being in the industry he's in.

      He may be factoring in the cost of financing his buying from his wholesaler (or a company specializing in this field), but if all his inventory is off the floor plan then generally speaking he is not really making money and should get out. This is where you don't have the necessary financing so you use the inventory itself as collateral, and it's expensive financing; akin to a credit card rate for consumers compared to a bank loan rate.

      Typically there is something associated with the floor plan he makes very decent profit on but he needs certain items around to get you to buy the other items, but whatever. I hope I don't have to say out loud what a game reseller would possibly have around that makes lots of profit when the consoles don't.

      If he is financing his entire inventory this way he is in bigger trouble than slim console margins. Properly done, it's fine. You get $249.99 the very morning the truck drops off the items, and pay $246 some time in the near future. The $4 is yours at zero cost and zero outlay. That is profit any way you look at it. It limited by supply, but it's still profit.

      The alternative is to use your own money (probably financed, but at a much, much lower rate) and seek to reduce your costs to the maximum. This is the better way to make money but your operation has to have the cash flow to do it.

      In that case, the invoice price does not include any discounts he had damn well be taking advantage of if he plans to stay in business. One example: shipping discounts. These are based on a variety of factors and can vary from free shipping to a cash allowance that comes off that $246. Another: early payment discounts. Again, they vary, but if he is not paying his invoice quickly and getting the early payment discount then he should be doing something else. They vary widely, but one real-world example is take 10% off the invoice price if your payment is received within 5 days after delivery to you; others may not be so generous but they still give you something. There are volume discounts, there are deals you get at trade shows for your commitment to buy in the near future, there are cozy relationships with your supplier who may be selling you other things, which may be where the discount applies that otherwise would not had he not bought the consoles, and so on, but these are just the mundane details.

      Note that if you are on the floor plan, the guy you pay the high interest rate to is the guy taking advantage of all these discounts, because he owns your inventory. A savvy reader will figure out how likely it is that this type of lender is going to pay $246 for a console that he sells for $246. Sure, that interest income is nice, but they are all about the money and don't leave any on the table if they can avoid it.

      I'm not suggesting these exact opportunities exist with this exact transaction or line of business, but I am suggesting that the impossible is, well, impossible. So if the story about his cost versus his sale price is too tough to be believed, it probably
  • Why the shortage? (Score:3, Interesting)

    by calstraycat (320736) on Friday December 21, 2007 @10:17PM (#21787270)
    Does anyone have the inside scoop on why -- over a year after introducing this product -- Nintendo has not been able to ramp production up to meet demand? It wasn't a surprise that they couldn't meet demand last Christmas. But, this time around they've had a full year to get the production line up to speed.

    What's up? Is their a particular component that is hard to come by or has a real low yield?
    • Re:Why the shortage? (Score:4, Informative)

      by truesaer (135079) on Friday December 21, 2007 @10:23PM (#21787310) Homepage
      They've doubled production this year but demand is still increasing. There was a hard drive shortage a while back. Nintendo also is being careful about how they ramp production to ensure they don't end up with poor quality...if you ramp up too fast you'll end up with higher defect rates.
      • Wouldn't affect the Wii and its 512M of flash. I think the key is that they've exhausted all their existing suppliers and assemblers. Any new contractor would require hands-on quality assurance time in addition to the usual ramp-up time.
      • by torkus (1133985)
        I think it has more to do with scarcity promoting sales. If they're hard to get, EVERYONE who can will buy one and try to hock it on ebay. Nintendo is virtually guaranteed sales. wiitracker and similar are all free advertizing along with the news: OMG it's rare. buy one if you have any opportunity immediately.
        • by cduffy (652)
          The other thing is that overestimating demand is risky, while underestimating it is safe. Manufacture too few items and sell them all at a profit, and you've turned a profit. Manufacture too many items, and it's easy to find yourself taking a loss on enough of them to eat up all the profits you might otherwise have made.
        • by Tim Browse (9263)

          I think it has more to do with scarcity promoting sales. If they're hard to get, EVERYONE who can will buy one and try to hock it on ebay.

          Nintendo are currently producing 1.8 million Wiis per month.

          I doubt that the number being sold on eBay is significant compared to that number.

    • Re:Why the shortage? (Score:5, Informative)

      by thpr (786837) on Friday December 21, 2007 @11:11PM (#21787594)
      Does anyone have the inside scoop on why -- over a year after introducing this product -- Nintendo has not been able to ramp production up to meet demand?

      The way I read your statement, you're making an assumption that I'm not entirely sure is true. It appears that you are assuming Nintendo wants to meet demand.

      To be fair, I don't think they are intentionally holding back on production solely to produce scarcity. I think the statements they have made (of wishing they had more product) are honest. However, I also believe that this is not a marketing and sales issue, but a financial one.

      Nintendo might be able to ramp up to meet demand, but the problem is one of understanding demand. What no one is sure of is what the real demand is. If they are producing 1.5M units/month, is real demand 1.501M units/month? 3.0M units/month?

      The risk that Nintendo faces is the same risk that many telecom and networking companies experienced in 2000-2001. In that case, a capacity shortage of certain components led to over-ordering of the product, and thus when production was ramped to meet the (artificially) inflated demand, the equipment companies sat on billions in inventory that they were forced to write down (because no one wanted to buy it).

      This is a slightly different situation (no artificial demand, just hard to forecast the real demand), yet the same lesson applies. I believe Nintendo is taking a cautious approach to its product ramp. Since the supply chain is something on the order of 4-6 months from initial orders to final assembly, they face huge inventory risk if they significantly overshoot demand. Their conservative forecasts and production have lost them some sales, but it may be less risk to lose sales than to risk sitting on a ton of inventory.

      • Re: (Score:3, Funny)

        by Triv (181010)

        ...the equipment companies sat on billions in inventory that they were forced to write down (because no one wanted to buy it).


        If that's a typo I apologize for the following, but it looks like an idiomatic misunderstanding to me so, in the interests of the free exchange of information, I feel the need to tell you that the expression is write off, not write down. :)


        Triv

        • Re: (Score:3, Informative)

          by Jardine (398197)
          If that's a typo I apologize for the following, but it looks like an idiomatic misunderstanding to me so, in the interests of the free exchange of information, I feel the need to tell you that the expression is write off, not write down. :)

          Write down is an accounting term. When you have inventory that won't sell because it's overpriced for the market, you lower the value of it as an asset. Say you've got a big pile of widgets in a warehouse. They're selling quite well, but then someone comes out with a widg
    • Re:Why the shortage? (Score:5, Informative)

      by Tom (822) on Friday December 21, 2007 @11:27PM (#21787680) Homepage Journal
      You don't need an inside scoop, you just need to read the news and use your brain.

      Nintendo has ramped up production, considerably. However, demand is still strong. Building a new factory isn't a minor investment, and it takes months to do it. Which is why they are rightly cautious doing it, because if you guess wrong, and the demand wasn't permanent, you sit on a million-dollar factory and trucks of devices.

      Everyone underestimated both the permanence and the amount of demand for the Wii. Which means Nintendo didn't get a chance to stock any overproduction during the summer for the christmas business, because there wasn't any overproduction.
    • by MobileTatsu-NJG (946591) on Friday December 21, 2007 @11:28PM (#21787686)

      Does anyone have the inside scoop on why -- over a year after introducing this product -- Nintendo has not been able to ramp production up to meet demand? It wasn't a surprise that they couldn't meet demand last Christmas. But, this time around they've had a full year to get the production line up to speed.

      What's up? Is their a particular component that is hard to come by or has a real low yield?
      To date, Nintendo's sold 12 million Wii's. That's a pretty strong demand for consoles. I'm not saying it's neverhappened, but I've never heard of a console selling over 10 million in its first year. Heck, the XBOX 360 has been out for two years and the Wii surpassed it in half hte time. If I'm right about the history of console sales, then the question I'd ask is: "What reason would Nintendo have to think they needed say.. double the amount of Wii consoles available?"
    • Re:Why the shortage? (Score:5, Informative)

      by Deslock (86955) on Friday December 21, 2007 @11:52PM (#21787834)

      Does anyone have the inside scoop on why -- over a year after introducing this product -- Nintendo has not been able to ramp production up to meet demand? It wasn't a surprise that they couldn't meet demand last Christmas. But, this time around they've had a full year to get the production line up to speed.

      What's up? Is their a particular component that is hard to come by or has a real low yield?
      This was already discussed at slashdot:
      http://games.slashdot.org/article.pl?sid=07/12/17/178206&from=rss [slashdot.org]

      To summarize, Nintendo more than doubled production (to 1.8 million/month) but underestimated how much demand there would be (can't really blame them as this is the first time I remember one item being the thing to get two Christmases in a row).

      It's estimated that they could've made an additional billion in sales this season. However, increasing production too quickly is risky as it can cause decreased quality control. And while it appears they're not trying to manipulate demand, they're also don't want to cause it to plummet by putting too many units on the market.

      More details:
      http://www.next-gen.biz/index.php?option=com_content&task=view&id=7965&Itemid=2 [next-gen.biz]
      http://www.nytimes.com/2007/12/14/technology/14wii.html?_r=3&pagewanted=1&ref=technology&oref=slogin&oref=slogin&oref=slogin [nytimes.com]
    • Re:Why the shortage? (Score:5, Interesting)

      by tknd (979052) on Saturday December 22, 2007 @12:25AM (#21788006)

      Does anyone have the inside scoop on why -- over a year after introducing this product -- Nintendo has not been able to ramp production up to meet demand? It wasn't a surprise that they couldn't meet demand last Christmas. But, this time around they've had a full year to get the production line up to speed.

      I don't have the inside scoop but it isn't hard to see what is going on when you know a thing or two about business.

      Suppose you are going into business for developing a widget and you have determined that you can sell the widget for $15. Now suppose that to make the widget you have two components: fixed cost and variable cost. The fixed cost you (almost) can't do anything about; whether you make 1 widget or 1 million this cost stays the same (later we'll see that isn't necessarily true, but it still works against you). Fixed cost would include something like the cost of the building for your factory. Even if your factory only produces one widget, you still gotta pay for the building. So then there's variable cost which as you might guess is the cost associated with each particular widget--it increases and decreases depending on how many widgets you make. Variable cost would include things like raw material or parts you buy from a supplier. When you order more, the cost goes up, when you order less, the cost goes down.

      So let's say for your widgets, which are special widgets that only you know how to manufacture, have a variable cost of $5 but a fixed cost of $2,000,000 a month. And that fixed cost only applies to one factory that can make your widgets. Let say if you wanted two factories making widgets, your fixed cost would roughly double to $4,000,000 a month. But we'll only consider one factory for now. So how many widgets do you have to make and sell to break even? Simple, that's just the fixed cost divided by the contribution margin where the contribution margin is the sale price less the variable cost: $2,000,000 / ($15 - $5) = 200,000 units per a month.

      Now throughout this we have not considered the capacity of the factory. So let's say that the factory can produce up to maximum of 300,000 units a month. Well, 300,000 is greater than your breakeven which is 200,000 units so you can actually make money off of this factory as long as it produces more than 200,000 and you sell all of those units. Easy enough.

      But now you start selling your widget and notice that because your widget is really special, it is in hot demand. But you recognize that at some point, demand will drop when everyone who wants one of your widget will have one. So let's say demand for your widget turns out to be 400,000 units a month. HMMMM. We have a problem. Your single factory can only produce a maximum of 300,000 widgets per a month so in order to meet demand you would have to setup another factory to produce the remaining 100,000. If you setup the additional factory your fixed costs will jump to $4,000,000 instead of $2,000,000 a month. If we now recalculate your break-even point, it will be: $4,000,000 / ($15 - $5) = 400,000 units per a month. But you've already determined that demand is only 400,000 units a month so by setting up the additional factory, suddenly you are no longer making a profit!

      To summarize:

      ASSUMPTIONS
      Fixed cost of factory: $2,000,000 a month
      Factory capacity: 300,000 units a month
      Variable cost per unit: $5
      Actual product demand: 400,000 units a month
      Selling price of the unit: $15

      Break-even point on one factory: $2,000,000 / ($15 - $5) = 200,000 units
      Profit on actual demand (meeting 75% of demand): (300,000 - 200,000) * ($15 - $5) = $1,000,000 a month

      Break-even point on two factories: $4,000,000 / ($15 - $5) = 400,000 units
      Profit on actual demand (meeting 100% of demand): (400,000 - 400,000) * ($15 - $5) = $0 a month

      Nintendo's situation probably has vastly different numbers but the same concept applies. If the make a speci

    • by Rallion (711805)
      The truth is that Nintendo is producing a massive number of consoles. As far as I can tell, no other system, ever, has sold as many consoles as the Wii in its first year, except perhaps the Game Boy Advance. Even the mighty DS is a not-so-close third, and the PS2 took years to reach its lofty heights.
    • I think the current shortage is caused by the usual Christmas rush. I and everyone else I knew who wanted a wii easily found one over the summer.
    • OVER 13 MILLION CONSOLES SOLD IN JUST OVER A YEAR
      OVER 13 MILLION CONSOLES SOLD IN JUST OVER A YEAR
      OVER 13 MILLION CONSOLES SOLD IN JUST OVER A YEAR

      Understand that. This situation is unprecedented in the history of the industry. I'll reiterate one of my previous posts. If demand for the Wii was half what it is now, then there would be 6.5 million consoles in stores right now. That is more than the PS3 has currently sold worldwide.

      If everyone wanted a blue Ford Focus to the exclusion of all other cars there w
      • by Tim Browse (9263)

        If everyone wanted a blue Ford Focus to the exclusion of all other cars there would be a "shortage" of those as well.

        And that does happen too - my sister bought a Vauxhall Corsa, and this model is so popular that Vauxhall are diverting parts destined for spare parts onto the production line so they can make enough cars to (try to) satisfy demand. Result is if you need a spare part, be prepared to wait. My sister had parts take 6 weeks to arrive, and my local garage said their courtesy car (also a Corsa) was broken into so they needed a new rear quarterlight. It took 3 months to arrive.

  • free market (Score:3, Insightful)

    by fermion (181285) on Friday December 21, 2007 @10:19PM (#21787286) Homepage Journal
    So what? Any retailer is free to get the best price it can for the product. And there is no price fixing. That is when any manufacturer set price is the 'suggested retail price'.

    The story here is that the Wii is worth so much money to some people. For that kind of money one could get a Playstation. But I have no idea how the world works. I still can't understand why some parent would spend $100+ to have their kids see some girl pretend to sing. At some pooint it seems that you tell the kids 'no', the market dries up, and the scalpers go away. But in reality there are enough compulsive people who will pay anything to be part of the in crowd so these scalpers will always have customers.

    In the free world we have the right to make choices, and as well as a basic education is offered, then I say let the adults make the choices(although it has been clear that when cash is too easy to get, the system tends to break down, and more responsible people end up picking up the pieces for the less responsible).

    • Re: (Score:3, Insightful)

      by Rakishi (759894)
      But in a free world Nintendo is also free to never sell any more Wiis or games for them to stores which sell above it's "suggested price."
    • by Rix (54095)
      And Nintendo has the freedom not to sell to the scalpers.
    • The story here is that the Wii is worth so much money to some people. For that kind of money one could get a Playstation.
      Not really a good comparison. No person I know desires a Playstation 3 for playing games; the only person I do know who wants to get one is eyeing it as a Blue ray player.
  • Need a Wii? Walmart has them [walmart.com], but you have to buy a $677 bundle of console + a crappy accessory + six games. All of this, for shipping some time between December 27 and January 25.

    Personally, I'm waiting for the Christmas rush to pass so I can get the console without a forced bundle.
    • by rednip (186217)

      Personally, I'm waiting for the Christmas rush to pass so I can get the console without a forced bundle.
      That's what I said last year, and I've yet to see a stack of them, even in the middle of summer.
      • by murdocj (543661)
        I was in my local BestBuy a couple of months ago and saw a stack of Wii's. Not one, a stack of 10 or so. Maybe they had just taken delivery, but when I saw a full stack I assumed the Wii shortage was over.
        • by MBGMorden (803437)
          I thought the same about 3 months ago when I was browsing in Wal-mart and they had 3-4 of them in stock. Oh well. I'm not all that impressed with it myself anywas (I'll probably get one eventually, but I'm waiting for now).
    • Re: (Score:3, Insightful)

      by Prof.Phreak (584152)
      Personally, I'm waiting for the Christmas rush to pass so I can get the console without a forced bundle.

      Yes, you and about a million others!
  • Couple of quetions (Score:3, Interesting)

    by bangzilla (534214) on Friday December 21, 2007 @10:27PM (#21787332) Journal
    Why even bother selling the Wii's on ebay (and paying ebay fees)? These things are in such great demand why not price them based on what the market will stand. They've proven that a market is there for Wii's at $399 - why not sell them for that in the store? Oh, and the reason that retailers only make $4 margin of each Wii is that they make it back in other ways (same way car dealers make money even when they sell cars for way under sticker price and will happily show you paperwork that they only make $100 over dealer invoice - facory incentives that are accounted for in many other ways). How - the margin on games is much deeper. Sell the console for cost and then make out like bandits on games (razor and razor blades; printers and cartridges etc)
    • by jotok (728554) on Friday December 21, 2007 @11:37PM (#21787744)
      I get the impression that the demand for the Wii is probably VERY flexible. That is to say, a huge part of the demand is that people think "PS3? $600. Wii? $250." People's perception of Nintendo is that they are the only manufacturer not trying to "gouge" their customers. If they raised the prices they would lose some very valuable street cred.

      You are totally right...they should be making money off of the games and accessories, not the console itself. That just makes sense. Needles are cheap...heroin, on the other hand...
  • The bigger problem (Score:3, Insightful)

    by sunking2 (521698) on Friday December 21, 2007 @10:45PM (#21787452)

    I think much more frequent is the case where store employees are buying wiis before they ever reach the floor and selling them either on ebay or other places. I know of at least one person who does this. They buy them for their discounted value and then sell it for a $100 msrp markup. I really don't know why Games...errr...said company doesn't put a stop to it. They are losing a lot of money by letting them go at employee discount. I'm sure these places have rules to try to stop this, but they obviously aren't enforced or the people who have the ability to cover turn the other cheek are part of it (ie store managers don't stop it, and for whatever reason the regional/corporate isn't looking close enough at the numbers).

  • by johndierks (784521) on Friday December 21, 2007 @10:50PM (#21787474)
    Why doesn't Nintendo set up a dummy company and sell them themselves on ebay?
    • by etymxris (121288) on Friday December 21, 2007 @10:56PM (#21787516)
      Why set up a dummy company? I know creative labs, for instance, has their own ebay presence, and the account name is "creative-labs" or something, with thousands of feedback. Sometimes they sell for a fixed price, sometimes they take best offers, and sometimes they start the auction at 20% below MSRP and let it go to whatever.
  • This may be the most ambitious thing ever done by anyone called "Slacker".

  • by s4ltyd0g (452701) on Friday December 21, 2007 @11:43PM (#21787774)
    They are calling foul. http://slackers.com/ [slackers.com]
  • by AbsoluteXyro (1048620) on Friday December 21, 2007 @11:43PM (#21787780)
    I walked into a local independent game shop the other day, just as they unboxed 6 new Wii consoles that had arrived that day. I asked "Do you have any Wiis in stock?" and an employee stepped in front of the stack of Wiis and said "Nnnnnnooooo.... th..these aren't for sale. I mean they are, but we sell them online. No one wants to pay the $450 we are asking in the store." Frickin' jerkwads.
  • Are those like, Nintendo Tomahawks?
  • See the accused's website: http://slackers.com/ [slackers.com]
  • by cheros (223479) on Saturday December 22, 2007 @05:32AM (#21789222)
    I was at Media Markt yesterday (and another one of their chain the day before, coincidentally) and they have PLENTY of Wiis on the shelves, ditto at another store I was. I heard from some friends in the UK they had problems getting Nintendo DS Lite so they had to eBay one - again, never seen a shortage where I live.

    I can't explain why there is a shortage in the US and UK, other than that they have obviously shipped too many our way :-).

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