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I happened to be reading two articles on CIO.com yesterday concerning Nintendo (OTC: NTDOY) and its Wii distribution strategy. There was an older one from August discussing the reasons why the Wii has been in short supply. Was Nintendo purposely making the Wii a rare commodity? Were there indeed production problems? The second mentioned Nintendo's decision to increase the availability of the Wii so that as many consumers as possible will become part of that system's user base. The headline said that Wii shipments will be doubled.
Let me give you my unscientific perspective on this topic. On an anecdotal basis, over the weekend, I noticed that, in my area at least, if you wanted a Wii you got a Wii. Also, if you wanted a Wii Fit, you got a Wii Fit. You didn't have to wait in line at three in the morning, you didn't have to go online, punch up eBay and get into some obnoxious bidding war to score a console so that your kid would be content on Christmas morning. The availability of the Wii hasn't been better.
And I tell you, this could be, from one point of view, bad for Nintendo. It might even be good for Sony (NYSE: SNE) and Microsoft (NASDAQ: MSFT). After all, if the Wii demand is possibly now satiated (according to my anecdotal observations), then interest may jump in the PlayStation 3 and Xbox 360.
Remember that many Wii households that don't own either of the two competing systems may want to invest in a second one. So, my advice to Nintendo would be to think like OPEC and cut the supply of Wii consoles. Scarcity is the fuel that powers demand: if the Wii is ubiquitous, then the crowds screaming for it will suddenly become silent and walk away, knowing that it will always be there if they suddenly wanted it (many potential Wii buyers actually expressed this sentiment to me).
It's a tricky balance. You want to make enough to satisfy everyone who wants a Wii, but you don't want inventory gathering dust on retail shelves. Seriously, it isn't easy to approach maximum profitability. As far as I am concerned, though, Nintendo may want to consider reducing supplies.
Of course, please realize that Christmas is still twenty-odd something days away. Maybe all the stores in my neck of the woods will see a run on the Wii and sell out. For now, though, it feels like consumers may soon be able to take the Wii's availability for granted.
Disclosure: I don't own any company mentioned; positions can change at any time.
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Reader Comments (Page 1 of 1)
12-02-2008 @ 1:25PM
acjaz said...
You're basing supply/demand off of a single anecdotal experience? Would you judge an election by merely sampling from a single election center? No, that would be silly. Equally silly to base sales statistics off of extremely limited data points.
12-02-2008 @ 1:33PM
John said...
Steve there is a certain number of buyers for the wii and the goal is to sell a wii system to each one of these individuals and get them to come back for games. We are not talking about a commodity like oil where people have to keep going back to the gas station every week. Shortages only produce short term profits in the short term and hurt profits long term.
12-02-2008 @ 3:04PM
Greg said...
This is frankly absurd. Moving large numbers of units means moving still larger numbers of games, and it looks like Nintendo moved a staggering, possibly record number of units in November. Further, there is no evidence that demand has been sated - ebay searched show that the Wii currently commands a 75-100 dollar premium over retail, and it remains generally sold out at major online retailers. That it is commonly (though not ubiquitously) available at B&M retail stores is a good thing, and indicates that supply is finally approaching (though not exceeding) demand.
12-03-2008 @ 5:04AM
Paul said...
That's one of the weirdest arguments I've ever heard. You may want to check out the current sales figures for the three consoles, the Wii has just smashed the 1.3million units per week (worldwide) level. I have all the latest numbers in my response to this post over at Wii Fit Forum (http://www.wiifitforum.org/console-sales-skyrocket-wii-sells-1-3m-per-week-t75.html)
In short, the Wiis install base is the best marketing organisation a company could want, it sells it for them. So the larger it is, the more they can keep selling.