Retail Store Scalping Wii Consoles on eBay 236
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.
Re:So what (Score:5, Informative)
Welcome to capitalism ... (Score:1, Informative)
Re:So what (Score:3, Informative)
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 permitted to advertise Apple products below a certain price. However if they WANT to sell them below MSRP they're welcome to. Since advertising iPods is a great way to get people into your store almost everyone accepts the MSRP.
Generally, manufacturers can't dictate a price to retailers. There was a supreme court case this past year that changed the situation somewhat though.
Re:So what (Score:5, Informative)
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]
Re:Why the shortage? (Score:4, Informative)
Re:So what (Score:1, Informative)
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 rules 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.
Re:So what (Score:4, Informative)
Re:So what (Score:5, Informative)
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.
Re:Why the shortage? (Score:5, Informative)
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:Why the shortage? (Score:5, Informative)
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.
Read Slackers' response (Score:5, Informative)
Re:Why the shortage? (Score:5, Informative)
What's up? Is their a particular component that is hard to come by or has a real low yield?
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:3, Informative)
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 widget that is better than your widget, but costs the same. Now no one is buying your widget so you have to write down the value of your pile of widgets because they suddenly aren't worth as much.
I can't quite see the problem in our country (Score:3, Informative)
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
Re:So what (Score:2, Informative)
There aren't too many times that I'm happy with the police or management of anything, but that left a smile on my face.