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Xbox Shortages Continue, Console Meeting Goals
Eurogamer reports that Microsoft is finally beginning to get some more 360 consoles into the retail channel. From the article: "Xbox does not announce details of shipments, but I can tell you that we're on track to meet our 90 day forecast of 2.75 to 3.0 million units ..." Despite that level of success, Microsoft is still disappointed with production levels and sales.
Well ignoring the irony of saying that you shouldnt take other peoples word for it, yet you appear to only have other peoples word for it that the shortages are on purpose...
IT isnt clear at all that they're using scarcity as a factor, you dont leave a good chunk of your pre-orderers without there product. Those are you most valuable customers and they have very little impact on the walk in rush that gets the media headlines. Makes no sense for them not to fulfill those orders. There's also the fact that the 360 was a rush to get out, games printing before final checks, tweaks to the system being made right up to the beginning of production. Not to mention MS want to keep production costs down and getting production up to a level that would succefully fulfill demand would cost them vast sums of money.
There isnt any real evidence to support the idea that MS purposefully restricted supply and a host of good reasons why supply would be short. Nothing clear about it at all.
Yeah, releasing a product right before Christmas is always a shitty decision.
Anyone who'd have bought it in Spring 2006 can still buy it in Spring 2006. If they can't get one because they're all sold out now, they're not waiting any longer than they would have if Microsoft had held off the release as you say they should have.
Scenario A: MS is capable of making 500,000 units and delivering them to the USA. They do and sell 450,000 by the end of the year (I think they'd sell out, but I'll be cautious). They therefor take in 450,000 * $350 (average price of the two SKUs), or $157,500,000 gross.
Scenario B: MS is capable of making 500,000 units and delivering them to the USA. They make 300,000 and sell them all fast. They end up with tons of pent up demand (150,000 ready buyers according to my numbers). XBox 360s go for as high as $1000 each on eBay. MS makes 300,000 * $350 (because they only get retail) or $105,000,000 dollars. They lost out on a possible $52,500,000 which would be 33% or ONE THIRD of their possible gross intake.
So by making a shortage they:
I see ONE of those that is good for them. That means they traded $50 MILLION for good press. Don't you think that $25 million could have bought them good press?
Your logic makes absolutely no business sense. The only way your idea would work would be if (as someone in an article suggested, someone from Forbes or CNN perhaps) MS sold them auction format or on a sliding scale against demand so that when the 360s sell for $800, MS gets $780 of it instead of $330.
But they didn't do that. So a false shortage makes NO ECONOMIC OR BUSINESS SENSE. If you disagree, please (using my hypothetical numbers) show me how they would have derived more than $50,000,000 worth of benefit with the false shortage.
Comment forecast: Bits of genius surrounded by a sea of mediocrity.
Yeah, it's like that whole Christmas tree thing...if people would just wait a few days later, they could find them out in the street!
No reason to lie.
Hey,
MS is using a sales tactic that has been used by other companies in the past. I have been in sales and marketing for nearly 20 years and have seen this many times.
What has happened is that MS wants to sell Japan more than anywhere else. They are ok with their sale here at home and so so in Europe. But they time and again have stated that they must sell in Japan.
There were several routes that could have been taken, and the one they have used is the most risky and only a very bold or arrogant company would attempt it i.e. Phillip Morris, but it can potentially give you incredible leverage in the market.
This is very easy to see if you have seen it done; which I have by many companies in the past. First you use your current business partners(EB and Gamestop)to field the market;doing presells to be able to project sales. This is something that is done on the wholesale level everytime a new product is brought to market, and occasionaly with retail to fine tune marketing strategies. What MS did was to give EB and Gamestop an allocation of guranteed product by a specified ship date. EB and Gamestop did not oversell their preorders, instead MS cut their initial allocation by 60 percent.This is unheard of for presells, normally the product ship date is readjusted to a time when the presells could be met,this protects the distributors.EB and Gamestop were being used by MS, both of these game distributors have wrestled with console launchs before and do not want to damage their relationship with their customers.MS launched with the shortfall at the expense of their loyal distributors.
However this is the risky part of this sales strategy, in order to create a demand in a non existing market you must limit supply in existing one.Example; I don't ship the C store near your favorite candy bar, I tell that C store that I cant get enough from manufacturer. I then go down the road and sell it to another C store that has never bought them from me before but now is ready because the people who couldnt find them other places is in his store now asking for them.
As I said it is risky because you jeopardize your relationship with your current customer base, but it is a way to get in another market without very much extra advertising. If the shortage in USA and the craziness on EBay had worked, Japanese consumers would have bought them as many people here have simply for their resale value, which doesnt' matter just so long as it generates positive sales figures.
I think that MS has used the shortfall in USA to gain ground in Japan, the reason you all are having a hard time thinking that is because it seems to have failed at this point. That is why few companies will risk it.
MS is not the first to exploit their customer base and will not be the last.
I've been to the malls and such every day this week, and a couple last week (but I'm definetly out before 9 a.m.) I've seen XBox360s everywhere. I went to Toy's R Us this morning for nephew gifts, and lo and behold, there were about 6 of each SKU on the shelf, just sitting there. I've seen them in Kay Bee, EB and god knows where else, I stopped noticing.
I don't want one right now, but I can't understand why I keep hearing about the shortage continuing. I could easily buy 20 right now if I had the cash.
-- I have fans? Wow.
Shortages like this almost always happen for any popular new console release. Even if Microsoft could have met demand, there are some good practical reasons not to.
1. Product defects: You don't want to get too many consoles out into the channel only to bring them back if some real show stoppers are discovered in the wild. Once you're sure everything is okay, you can make minor tweaks for the subsequent production runs using what the first run taught you.
2. No Dust Please: Too many consoles would mean some sitting on shelves gathering dust and people beginning to mumble about waiting for the first price drop. To the space conscious retailer, oversupply is probably worse than shortages.
3. Games Make Money: Each console is sold at a loss. You make your money from game royalties. Right now the number of available games is not very high and there really aren't any must have system sellers to speak of. (The Dead or Alive 4 delay killed the Japanese launch.) A console shortage minimizes money lost while game publishers catch up and hopefully produce the killer games that sell systems. *Cough*Halo 3*Cough*
Of course, I could be wrong about all of this, but in the end it does seem that something in short supply becomes all the more desirable, as long as it doesn't suck too badly.
To the making of books there is no end, so let's get started
That doesn't make any sense. Shortages are never good. The only argument you could make is that they wanted to be "the hot item for Christmas", but that makes no sense. It's a well known product that fanboi's have wanted since it was announced.
Holding off two weeks wouldn't have helped supply. Assume they are building as fast as they can, using far east slaves working factories around the clock. All they could have done to improve the shortage on release would have been to start building EARLIER, stockpile and release more initially, but as we developers know, that would have meant pushing up deadlines and maybe cutting corners on testing. In all probability they targetted november for delivery, but the compromise was that the designs didn't get to the factory in time to build up a huge number of units.
MS is using a sales tactic that has been used by other companies in the past. I have been in sales and marketing for nearly 20 years and have seen this many times.
It's strange, then, that you never saw the "enter" key.