Wii Shortages Costing Nintendo 'A Billion' In Sales

A New York Times article from this past Friday highlights the 'problem' that Nintendo is facing: more people want to give them money than they can handle. Analysts quoted in the story discussing Nintendo's unique Wii shortage problem indicate that the company could be selling twice the 1.8 million consoles a month it ships. All told, these same individuals believe the company could be leaving as much as $1 billion on the table this holiday season. "'We don't feel like we've made any mistakes,' said George Harrison, senior vice president for marketing at Nintendo of America. He said there was a shortage because the company must plan its production schedule five months ahead, and projecting future demand is difficult. He added that there had been a worldwide shortage of disk drives that had hurt Nintendo as well as makers of many other devices. 'It's a good problem to have,' Mr. Harrison said of the demand, but he acknowledged that there could be a downside. 'We do worry about not satisfying consumers and that they will drift to a competitor's system.'"

Comments

Let's use the music argument...

[Gothic_Walrus]

When people try to justify downloading music, they say it's okay because they wouldn't have bought the album in the first place, which means that no money was lost in the process.

Wouldn't the same kind of logic hold here? How can Nintendo lose money on nonexistent consoles if they're already at full production?

Re:Let's use the music argument...

[lukas84]

Well, a day has 24 hours and if that isn't enough there's still the night ;)

Curious

[Infinite Wave]

I just don't understand how they could not have for seen this shortage. I mean last year the same thing happened and they said then they would be ready for this year. Yet here we are. I have friends, family and co-workers asking me where they can get thier hands on a Wii. It really makes me wonder about the rumors of intentional shorting. From a business point it would make no sense to short your sales. From a marketing point however it's been brilliant. Wii is all the rage and is likely so popular BECAUSE it's hard to get. Nothing lights a fire under middle American purchasing power like that hard to get must have Christmas gift.

Re:Curious

[Fozzyuw]

I just don't understand how they could not have for seen this shortage.

They saw the shortage and they knew it was going to happen. The people running Nintendo's financial and business planning know what they're doing and probably have spreadsheets of predicted outcomes.

The problem is reaching the best profit margin. (Reminding of an old computer game in High School business class) Nintendo could build spend money on 100 new factories and pump out 100 million Wii's in one month to satisfy demand. But what happens when the month is over? Nintendo is left with 100 factories with 1000's of works sitting around picking their noses. Effectively, they'd start hemorrhaging money in keeping said factories with the only recourse to sell the factories.

Otherwise, they're now pumping out millions of of systems a month that no one is buying, because demand was just satisfied in one orgasmic explosion. All those systems are being pushed into storage, which costs money. Now, we look at something like the PS3 and all the design/model changes it had. If a design/model change happened to the Wii, it'd have to firesale it's entire stock to make way for the new stuff.

It's a balancing act and Nintendo has the benefit of pop-culture status with the Wii. The "OMG, there's a Wii on the Shelf" shock (thanks to customer experience and news media hype) practically guarantees an impulse purchase, if for no other reason to tell their friends they finally found a Wii (even if they just got a 360/PS3 as a gift).

Also, Nintendo increased output (that started 5 months ago) to *help* meet holiday demand but as there is with super popular things, there can only be a reasonable amount of product produced. Demand can come in spikes (holidays), but production simply cannot be spiked like that. It takes time to make a product, but takes an instant to create demand. And unlike the 360 or PS3, the Wii hasn't had time to stock up units for the holiday rush as it's been more-or-less sold out since it launched.

Cheers,
Fozzy

Re:Curious

[MobileTatsu-NJG]

"I just don't understand how they could not have for seen this shortage."

In the space of a year, Nintendo sold 14 million consoles. That's more than the 360 sold in 2 years. Historically, consoles don't hit 10 mill in a year.

"It really makes me wonder about the rumors of intentional shorting."

The Wii was a surprise hit. The surprise wasn't that it's a hit, but that it was such a massive hit. Even the biggest Nintendo fanboy wouldn't have expected nearly this many sales the first year. The Playstation didn't even manage that and Nintendo's last couple of consoles didn't even come close.

Re:What are people buying instead?

[plague3106]

I'm spending it on mercury, then dumping it in the local lake. On the way home, I run over squirrels and cute bunnies.

Re:What are people buying instead?

[Chris Burke]

Includes such games as Real World TENNIS (indoor and outdoor versions available)

I'm not sure where you are, but up here in the Northern Hemisphere it's winter when Christmas time comes. Even as far south as Texas playing outdoor sports is not something most people, even athletic, think is a good idea.

As far as indoor, while it may be a helpful, I don't know many kids who are going to think "fitness club membership" is an awesome gift.

bowling alley... FRESH AIR.

You know in my word association, "fresh air" makes me think "bowling alley" just before I think "corner dive bar".

Re:Production Ramp Up

[Leo Sasquatch]

There was an article ages ago about this, and the Nintendo guy said something I thought was very telling about their attitude to customers. He said they were ramping up production as far as they could, but to stretch the supply chains any further would mean dealing with component manufacturers and suppliers they neither knew nor trusted. Yes, the result would be a larger supply of Wiis, but a much higher percentage of defective machines; either as soon as the customer got it home, or soon after purchase. They didn't want that to be associated with their brand, and said they'd rather manufacture less consoles, and have them work properly, and hope people would be patient and understand.

Compare and contrast Microsoft's attitude of denying the problem for ages, then setting aside billions to handle defective machines under extended warranty. My Wii's seen daily use since launch date - all I've ever had to do was change batteries in the Wiimote. If it does break down, I'm stuffed as far as getting another one is concerned, at least for a few more weeks.