This time of year is widely acknowledged as the busiest time of year for retailers. 25% or more of the entire year’s sales may be in the period between Thanksgiving and Christmas.
This year among other things, our son wants a Wii video game system. This would be his third video game system and we have never bought one. He has received other systems as hand-me-downs from relatives when they move to a newer system. We have bought games, but never a system.
I’ve been tring to find the Wii with no luck. I’ll give it a few more days and if I don’t find it I’ll buy his second choice, which is about the same cost - a musical instrument.
The thing I don’t fully understand is why the manufacturer has limited availability at the time when they could sell the most? I know if I don’t find a system now, I will spend the money on something else and likely will never buy the system. So by limiting the availability they are effectively losing my money, and quite possibly there are many more like me.
What kind of business model is that?
BTW, I know I could pay more and buy it from someone on Ebay, but it’s not that important to me. I have budgeted a certain amount and the Ebay prices are substantially over my budget.
Right now these companies don’t care about you the everyday consumer. They care about the hardcore gamer and are trying to win his/her loyalty. Scarcity is a big factor in that game. If you can’t get a Wii now, they are banking on the fact that you will buy one later. The stats show you likely will. That said, they tend to tweak these things up until the last moment making mass production very difficult in light of desired quality standards. Thus they play the scarcity card.
The systems are brand new and it is Xmas. The demand right now is substantially above what it will be at any time in the future. If they build manufacturing facilities to meet this demand, it will be a huge and costly waste as they will never need them again.
These companies make very little or perhaps even lose on the game hardware. They make it up through royalties on game sales. If you are the type who is not going to buy a system at all if you don’t get one at Xmas time, then you probably wouldn’t have bought that many games for it either. If this is the case, then they definitely don’t care about you.
There are production run constraints, other supply chain issues, etc. “Buzz” and creating artificial demand might be a reason, though buzz is really more about functionality but demand has an impact.
It’s either PS3 or Wii that is being produced intentionally in short supply, and I thought it was PS3, but I could be wrong.
Buy the instrument, it has a greater chance for lifelong impact.
Though your assumption about losing money is certainly not guaranteed to be true. They could be elongating their demand cycle by doing this. Typically, companies factor all this into their supply chain and production runs.
Remember to try K-Mart. Evidently during the PS3 runs people forgot K-Mart existed and while the lemmings were waiting hours in lines at BestBuy, the next day people were casually walking into K-Mart and buying multiple units.
“The thing I don’t fully understand is why the manufacturer has limited availability at the time when they could sell the most?”
Nintendo launched about a month ago along with the Sony Playstation, and Nintendo put about 5 times as many consoles on the market. They’re making holiday money on games and accessories, not on consoles. Wii consoles are not available because they were sold out with pre-orders. This seems to have been the pattern with each major console launch. There is never any way any company can make enough to go around to everyone who wants one. They’ll be in stores again soon. Don’t worry. You can get a pre-order or a gift certificate so that your son can go into the store and pick up the console as soon as they have more in stock.
You really have to consider the whole supply chain. To build the kind of inventory necessary to have a surplus a launch would be very expensive. You would have to negotiate one time contracts with suppliers, manufacturers, shippers, storage and retailers. It would be a huge cost, much more than any lost sales from inadequate launch inventory most likely. Not only that, you would have to pay for all that excess inventory which would put a huge strain on cash flow.
I think the hardcore gamers likely were standing in line to get these on the first day they were available. Shortages just prevent people like me from getting them. Even if the mfg doesn’t make much on the console, they can’t make anything on the games unless they sell the console. When people like me spend our money elsewhere they have lost the future dollars I would have spent on the games.
When my son gets hand-me-down systems, I have bought new games. However, by then many of the games can be bought from used game stores so the mfg isn’t getting my money there either.
I can see where a very short term temporary shortage could create a buzz for the product. But once the buzz is there, they should capitalize on it. By delaying broader availability they are losing a percentage of customers who get caught up in the hype. Once the buzz dies down, these people are no longer interested as they have spent the money elsewhere.
I have about a week to find one of these. If I don’t I go to option two.
In reality, these consoles don’t lose much buzz, because they get additional buzz each time new and innovative games come out. The Wii in particular has such a new and different control scheme that I don’t see them losing any money just because some people can’t buy consoles this Christmas.
From the manufacturing standpoing I can add a little input.
These units are built by Flextronics, and Foxconn with this time of year being absolutely crazy from a demand, capacity perspecitve related to consumer products. The lack of availability is created by these companies capacity, component manufacturers capacity, design changes or engineering change orders, and overall business model of keeping supply short to increase demand.
The majority of the short demand is created by the manufacturer while the EMS companies deal with demand constraints on these units and all of the other consumer products that they produce for their customers. Adding into the picture that this time of year is end of quarter/fiscal year for many companies and manufacturing is being pushed to the limits to support holiday demand as well as fiscal demand.
“This year among other things, our son wants a Wii video game system. I’ve been tring to find the Wii with no luck. I’ll give it a few more days …I know if I don’t find a system now, I will spend the money on something else and likely will never buy the system.”
What if you create an intereting gift card which has a pic of the Wii and a promise to purchase it when it becomes available? You’ll be able to get it after Xmas, I’ll wager. Just put the money aside and earmark it for the system.
Don’t pay more money nor work yourself into a lather just for Dec 25. It’s simply a day… you can easily give him something which says “Wii” and then give him one when you can get it.
My humble opinion.
Lauren
(PS: ‘Buying frenzy’ is out of hand, in my opinion.
Last year I was given a special gift card for Christmas. I was touched by the thought of the card - but sad that my BF spent $25 extra for FedEx shipping of the card because he could only purchase it online. To me, it’s the thought which counted – and I didn’t use the card for 2 months. I would have rather had the extra $25 put directly on the card, or received another thoughtful gift).
Ever read a comic book? Hey kids, be the first on your block…!
Early adopters are considered key market influencers. If, in order to be first on my block, I spend three weeks camping on a sidewalk, chewed gum for sustenance the last few days, recharged my cell phone at a Shell Station while I paid someone to hold my place, how likely are you to be critical of the toy once you have it home?
Marketers once considered triathletes early adopters and market influencers. Where can I get those cool Oakley Test Pilots that young buck Mark Allen is wearing? Answer… Nowhere, unless your an insider. Once the demand has coalesced then everywhere, and once everyone has it or is doing it who cares?
It even gets people who don’t have any interest in the toy posting about it on far afield internet forums.
Update: I gave up on the Wii. This past Sunday several local retailers had limited stock. I went to the stores before opening time and there were long lines of people who camped out half the night in freezing temps. The stores would hand out tickets to the people in the front of the line and everyone else was SOL. I went to 3 stores and was SOL all three times. Then I tracked several on Ebay and they all ended up selling for about $450. As the Wii only costs $250 that is a pretty hefty premium. I would have been willing to go to about $290.
Option B was a musical instrument. After closer examination, the instrument turned out to be a piece of crap and a decent one would cost much more. Then the ongoing lesson costs would have been about $65/mo.
So went went to
Option C
I ended up getting a snowboard package. He has been wanting to board this year after having been a skier since he was 18 months old. I’ve boarded off and on for abour a dozen years and think he is now old enough and big enough to learn boarding. He thinks he’ll get the hang of it immediately because he is good at a snowbaord video game on knows all the moves. Haha. He does ride a skateboard a little, but I’m better than he is. We told him we would wait another year or so before he could board, so this will be a big surprise. The nice thing is we are going up to Vail late in the day on Christmas and will be there for the rest of the week. He’ll get to use his new boarding stuff. Day one for him will be all day lessons and then we’ll see how it goes from there.
I guess we’ll just see if he gets a Wii handed down to him in another year or so by one of his relatives just like he has acquired all the other video games. Nintendo sure won’t be getting my money for a gaming system.