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Reggie: We won't be able to meet Christmas demand
Reggie: We won't be able to meet Christmas demand
GI - October 1, 2007
Submitted by Just_Ben (112) at 2:05AM PST on October 1, 2007
Reggie:"We're working very hard to make sure that consumers are satisfied this holiday, but I can't guarantee that we're going to meet demand. As a matter of fact, I can tell you on the record that we won't,"..."What I can tell you is that typically, our inventory is lasting a day... I don't think we will know when supply crosses with demand until after the holiday season," ... "The issue is not a lack of production. The issue is we went in with a curve that was aggressive, but the demand has been substantially more than that. And the ability to ramp up production and to sustain it is not a switch that you flick on,"
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1Gaara42 posted on Wii (Wii) at 7:38PM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demand@kspraydad,
My comment was not directed at any one specific person (hence the lack of "@Players Name" at the beginning of the comment), but rather just throwing out what I thought about the idea of artificial shortage that has been floating around since the PS3's launch.
I included the other current generation consoles (Xbox360 and PS3) because they are supposedly part of the same generation as the Wii and therefore many (I would assume, though it might be a stretch) might consider them substitutes. The analogy would work a lot better if it was referring to last generation's consoles (Xbox, Gamecube, PS2) since they were much more alike in price and hardware than the current generation of consoles.
I think someone had submitted an article or provided a link as to why Nintendo can not just ramp up production faster (something like they have to find new suppliers for all the components for the Wii, etc).[ Oracle ] [ Level 23 ] [ Rank: 8 ]bids
2Animate posted on Wii (Wii) at 7:25PM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demandbids
2kspraydad posted on Wii (Wii) at 7:22PM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demand@Gaara42,
I'm not saying that Nin is purposely keeping supply short (but I can't understand why they can't ramp up faster...) but merely pointing out that such a concept DOES exist in economic theory.
Also...I don't consider any of the consoles you mentioned as 'substitutes' as each console plays proprietary software (and multiplatform of course) that people are either attracted too or not. There is also a significant enough price difference such that newer systems are not considered direct substitutes (regardless of Shrimpjuice being able to move from a sub 300 to over 600 dollar console in the blink of an eye ;) )
For instance a Wii could be $100 and I still wouldn't buy one because the games do not attract me...the reverse is true too...NIN can extend their period of high console price (and imo it IS expensive for the tech you are getting) by creating a false shortage because they have built a huge following with its GB and DS handhelds and 'unique' IP like the Mario and Zelda series.[ Oracle ] [ Level 21 ] [ Rank: 475 ]bids
1Animate posted on Wii (Wii) at 7:22PM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demand@Laoldar,
When did I ever say "supply is low"? I didn't. And I'm starting to get irritated with people putting words in my mouth. I am wondering how much their supply will actually be increased for Oct, Nov, Dec. I also think the shortages are helping them IF the shortages are not huge #'s meaning if for example if the supply per month is 400K and say the demand is under 500K per month, then the shortages are helping them through free advertising and 'gotta have it' status. Kids see friends and others with a Wii and to them its like a rare trading card or action figure making them want one too. This is only if the demand is not much higher than the supply. If the demand is actually over 500K per month for a year now then no the shortage doesn't help. (add up all the 100K extra for every month that had sales of 400K since launch, total that # and see how many more Wii's would've been sold).[ Oracle ] [ Level 26 ] [ Rank: 241 ]bids
2Gaara42 posted on Wii (Wii) at 6:51PM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demandWould you be more inclined to buy a product if there is a shortage? No, demand would decrease because of the availability of substitutes (the Xbox360, PS3, PS2, Gamecube, etc). There is no reason to believe that a company would artificially create a shortage in order to gain more sales, it does not make sense; why would a company risk losing many potential customer to create the perception that everyone wants one and it is sold out because of that. The customer will not desire the product more because there is a perception that everyone else wants it but rather if there is the perception that everyone else wants it (therefore it is a desirable product); it fits their taste and price range; and it is readily available.[ Oracle ] [ Level 23 ] [ Rank: 8 ]bids
5shrimpjuice posted on Wii (Wii) at 6:34PM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demand@kspraydad,
It does nothing good for nintendo to do Artificial Scarcity because if some mom goes into best buy looking for the wii and its not there she going to think about her child wanting a game system so she is most likley going to pick up a 360 or a ps3. I actually did that i went in to a store looking for the wii when they told me they were sold out i asked for a ps3 and got it along with a few games, now that i have the 360 and the ps3 i dont see myself getting a wii at all. So to sum things up they lost me as a consumer (i know one person does not make nintendo fall but i know iam not the only one).[ Veteran ] [ Level 15 ] [ Rank: 660 ]bids
2kspraydad posted on Wii (Wii) at 4:12PM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demand@Laoldar,
There IS an economic concept called Artificial Scarcity which DOES support the concept of squeezing supply.
The benefits include higher margins per unit sold, longer periods of high or stable price (if the Wii was easily available would it really demand 2.5 time the price of a Ps2?), free advertising from the 'buzz'.
http://en.wikipedia.org/wiki/Artificial_scarcity[ Oracle ] [ Level 21 ] [ Rank: 475 ]bids
3Laoldar posted on Wii (Wii) at 2:59PM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demand@Joe80,
Saying "expect shortages" doesn't mean "our supply is low". They're likely predicting huge demand that will outstrip increased supply.
Again, there is zero benefit to having a shortage. A console that is flying off the shelves doesn't need "advertising" from shortages (really, who is putting out stories about shortages? anyone? anything?). There's no benefit to having consumers being unable to purchase your product.[ Oracle ] [ Level 21 ] [ Rank: 182 ]bids
1Animate posted on Wii (Wii) at 1:44PM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demand@Laoldar,
Nintendo apparently did make changes to increase production by Fall/Late Fall of this year, and Reggie had said that supplies in this timeframe would be unprecedented. But now they're saying expect shortages. So I'm wondering how much will the supply actually be increased for Oct, Nov, Dec. I think the shortages are helping them because the shortages are not huge numbers. They're presently producing probably a little bit % wise under what they actually could sell per month. So if the shortages per month, at this point, are a small % then they're benefitting from it.[ Oracle ] [ Level 26 ] [ Rank: 241 ]bids
3Laoldar posted on Wii (Wii) at 11:20AM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demand@csinning,
It may be "easier" to produce, but they're already producing far more consoles than their competitors as well as having to use their manufacturing contracts to keep up with continuing demand for DS systems. It's not as simple as just saying "ok, let's build more!". You can say it's "easy to produce" all you want, you still need the factories to produce the chips (being "old" technology doesn't mean they're lying around) and for fabricating the consoles, localized for each region.
"Planning for shortages" is the silliest thing I've ever heard of and it's a terrible business plan (unless you're desperate for any press and frustrated consumers). Shortages DO NOT spur sales. That concept doesn't make any kind of logical sense. Besides, any first-year marketing student can tell you that a product in abundance moves much faster than the last item on the shelf (one reason why stroes front face their merchandise to make the shelves look full).
Consumers don't care about products that are hard to get. They care about products that appeal to them...be it from word of mouth (shortages kinda prevent that), advertising, reviews, etc. I have yet to hear of a person going "wow, that product is hard to find! I suddenly want one!"
Also, consider your mention of the iPod. The iPod is successful because of its crushing ubiquity, not because of false shortages.[ Oracle ] [ Level 21 ] [ Rank: 182 ]bids
2csinning posted on Wii (Wii) at 11:04AM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demand@Laoldar,
The Wii is also the lowest tech console and by far the easiest to produce. Demand for all three current consoles will also skyrocket during the holidays. There are ways to predict this, Nintendo probably has a pretty good grasp on the how many they will sell. The very fact that there are systems availble in other regions (and even parts of the US) shows that if they really wanted to they could spread things around and cover more of the shortfall. So, there are a few possibilities here. Either they are planning for the shortages as I stated in my earlier post, they really can't ramp up production any more, which since the console race is really all about adoption rate (games will go were the most console sales are)and the Wii is relatively easy to produce I personally find unlikely. The only other logical conclusion is that Nintendo is simply saying there will be shortages to spur sales. Though if they say this and there are not shortages they risk giving investors the impression that the system is selling less than expected and thus providing even more motivation for an artificial shortage.
This buzz about shortages, or buzz that would develop around actual shortages is VERY good for Nintendo. Current estimates are that they make around $50 on each Wii sold. You can give up say a million Wii sales generate well over 50 million worth of free advertising in the form of news coverage and general buzz, and then provide the systems and make the majority of those sales anyway. The beautiful part for Nintendo is that the alternatives are nearly twice as expensive as the Wii so they are not driving consumers to the other consoles the way that Microsoft or Sony would drive people to the other if their systems sell out. Also there set up is unique enough that even if some consumers buy one of those consoles its doesn't rule out a later Wii purchase.
Loss of immediate sales is bad. However if you create a shortage which generates news articles you full fill Nintendo's strategy of appealing to non gamers. Most people who don't currently game will pretty much ignore a system no matter how well it sells. They don't really pay attention to video game adds, they don't read this site or likely any of the ones we link articles from. However, most of them likely read a news paper, or watch the TV news. Get the word Wii in front of those people, make Wii a word everyone knows even if they would never ever use one much like Ipod, and that is priceless. Worth way more than the loss in sales.
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1Laoldar posted on Wii (Wii) at 9:42AM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demand@csinning,
The Wii has been selling out for the past year. They don't need press from shortages. Besides, shortages do NOT help a company, they only remove potential profits.[ Oracle ] [ Level 21 ] [ Rank: 182 ]bids
1Just_Ben posted on Wii (Wii) at 6:50AM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demand@csinning,
You should read the whole article. They have a stockpile. And i don't get how people still say it is on purpose. Tell me why we have no shortage in europe than? Why is the Wii now available in Japan (lower sales at the moment). The Wii is the fastest selling console in history in every territory! The sales for America grow and grow. And if you think people will buy more Wii after Christmas than they would before, just because it where not available you will see that you will be very wrong.[ Oracle ] [ Level 21 ] [ Rank: 112 ]bids
1csinning posted on Wii (Wii) at 6:14AM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demand@shrimpjuice,
This is actually all according to design I imagine. Nintendo could have ramped up production by now if they wanted to. However, shortages will make Wii one of the hot holiday toys this year. The kind that gets people waiting in line and that people get into fights over at the local wal-mart. That in turn will generate press. Free advertising like that is worth more to Nintendo than whatever they loose in profits from missed sales. Then right after the holidays I bet there are suddenly a huge pile of Wii's hitting the market. All those that were reading about how hard to find the Wii is in the news with a glut of cash from returned sweaters that don't fit and the $25 grandma gave them for Christmas will buy one. Then they can ride the sales wave created by sudden availability through the normally slow post holiday months.[ Elite ] [ Level 14 ] [ Rank: 722 ]bids
1shrimpjuice posted on Wii (Wii) at 5:16AM PST on October 3, 2007. RE: Reggie: We won't be able to meet Christmas demand@Just_Ben,
That has got to make nintendo mad. I thought with all the money they been making they would have put a little extra to produce more consoles this holiday season.[ Veteran ] [ Level 15 ] [ Rank: 660 ]bids
24Just_Ben posted on Wii (Wii) at 2:05AM PST on October 1, 2007. Article: Reggie: We won't be able to meet Christmas demandReggie:"We're working very hard to make sure that consumers are satisfied this holiday, but I can't guarantee that we're going to meet demand. As a matter of fact, I can tell you on the record that we won't,"..."What I can tell you is that typically, our inventory is lasting a day... I don't think we will know when supply crosses with demand until after the holiday season," ... "The issue is not a lack of production. The issue is we went in with a curve that was aggressive, but the demand has been substantially more than that. And the ability to ramp up production and to sustain it is not a switch that you flick on,"[ Oracle ] [ Level 21 ] [ Rank: 112 ]
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It doens't affect the margins because there's no reason to assume that Nintendo would have dropped the price if supply/demand were in equilibrium.
As long as people were buying the system (not to where there are shortages, but a steady stream of purchases), there's no reason to change the price.