Nintendo thinks depriving potential customers of the coveted Wii is a sound business decision that will ensure its long-term survival. Sure, you want the Wii now, but your passions are fleeting and unreliable. If you can’t wait for Nintendo’s post-holiday production ramp-up, hit the jump and we’ll tell you how we snagged our Wii.
Already, the persistent shortages have led to speculation by angry consumers that Nintendo was deliberately keeping supplies short to create more hype for the product. Reggie Fils-Aime, the president of Nintendo’s U.S. division, denies this, saying Nintendo simply didn’t anticipate this level of demand for the Wii this holiday season.
“It really is a missed opportunity if we’re not able to satisfy that demand, which is why we’re working so hard with retailers,” he says.
Supply-chain management experts say missed opportunity may still be better than being stuck with excessive supply. Unsold Wiis could create a negative impression that consumers don’t want the product. The consequences are so painful that many companies end up erring on the side of a shortage.
“If you flood the market, it will come back to haunt you,” says Christopher Tang, a professor of supply-chain management at the UCLA Anderson School of Management. Nintendo may be missing opportunities by allowing other people to profit from the shortage by charging premiums, but Mr. Tang says that isn’t entirely a bad thing because it creates hype. “Psychologically, it’s better if the customer is begging for the product,” he says.
An excess supply also angers retailers, who must work harder and offer discounts to get rid of the product. The manufacturer’s financial results also suffer because they are forced to lower prices or take back the products retailers can’t sell.
The delay is only partly Nintendo’s fault: “The Wii contains dozens of parts, which means “one manufacturer can hold the whole darn thing up,” says David Cole, an analyst with industry-research firm DFC Intelligence, based in San Diego.”
Finding a Wii takes time and persistence. If you are in New York, a shipment of Wiis arrives daily at Nintendo’s World Store in Rockefeller Center. After several failed attempts, we walked in on a Tuesday before 10 a.m. and walked out with a Wii. Other retailers usually receive a scheduled shipment of Wiis. It may only be five consoles every three weeks, but by cultivating a relationship with your local store, you can find out when it might be wise to pop in. As a last resort, eBay and Craigslist are overflowing with overpriced consoles.
Nintendo Plays It A Wii Bit Cautious [WSJ]
(Photo: largeprime)
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Don’t you see? If Nintendo is holding back the supply of Wiis, they’re just going to earn the ire of every person out there. Nintendo would lose it’s good reputation as a customer-friendly company. I doubt they’d want to piss people off like that.
@scoobydoo: I disagree. A component is not simply a component and I doubt assembly is a problem. Nintendo is even better positioned than American companies to exploit the vast manufacturing potential of Asia.
The problem is usually when you have a component that can only be manufactured by highly specialized locations.
Having worked at a large chipmaker, I can understand if the top-of-the-top processors that require a special manufacturing process are available in small companies because very few plants are fitted to that.
I can understand when flash memories or large LCDs are available in limited quantities (flashback two years ago and iPod and digital camera shortages) because at the time manufacturing was complicated and wasn’t prepared for the demand.
But a bunch of old technologies assembled together? Sorry, I don’t buy it. And Nintendo is missing on a lot of money because the best sellers are Nintendo games.
@Usama: I don’t think that the blame is with the controller because these are more available than popup ads on a porn site. They’re so available that toys r us frequently has sales on them. The problem appears to be with the console. And honestly, after reading the bill-of-materials on it (any google search will do), I don’t see why this would be difficult to either manufacture or assemble.
In fact, a DS may be much more difficult to make and they’ve been making loads.
Unlike Microsoft or sony, Nintendo doesn’t sell anything except video games. You’re telling me a company with that market cap can’t get its way?
@The Bigger Unit: Umm, introductory economics?
Your “Keep supply short, demand up, and prices stay up too. Shift the supply curve right, and your prices drop” would make sense if the profits were from the console. The real profits are from selling games.
Every extra copy of Super Mario Galaxy costs them 1$ (marginal) and retails for 50$. Most people who buy a Wii would buy that. Same goes for Zelda, Super smash brothers, etc. etc., and of course, the percentage they get off games from other manufacturers.
Our family is getting a Wii for Christmas this year. Our kids are young and love to play it becaust they can play it without having to worry about acute hand-eye coordination movements that normal controllers rely on.
Also, thanks to selling a few on ebay, I could tell our kids that Christmas was brought to them by Nintendo, not Santa.
Nintendo isn’t just making nearly 2 MILLION Wii units every month but are churning out millions of DS units as well, which continue to sell extremely well. Nintendo can only produce so much every month. Heck, it sold 3 million more Wii units than they originally predicted. Overall, I think their manufacturing operation is at max capacity.
Don’t get mad at Nintendo if you didn’t get a Wii for Christmas, be mad at yourself because they’ve been announcing shortages ALL YEAR LONG!!!
@uricmu: I was just giving the controller as an example, I didn’t think it was the problem either, mainly because as you said they’re so very easy to find.
Again, I think the bottleneck is actually a problem in the design of their manufacturing. If everything was done in-house it wouldn’t be a problem.
I also agree, it’s probable that the DS is harder to make, but it’s also a more mature product than the Wii. Ofcourse, I don’t know why Nintendo can’t meet the demand, all I’m saying is I doubt it’s deliberate. Holding back supply is not a good business move given these circumstances. Not only do you lose potential sales, you may actually help your competitors and alienate people (as many here are upset that they can’t find one and believe Nintendo to be holding out).
URIMCU is right in that the profits are in the games. But I’m also sure you know that the Wii does make them money as well. Not nearly as much of a margin as a video game, but it’s profit nonetheless. Here is yet another reason Nintendo would want to sell as many consoles as it can.
@Usama: Actually, I didn’t mean “if everything was done in-house it wouldn’t be a problem.” because, you know what? it probably would be .. the demand is just too much.
@rbb: Clearly you missed this one called the Playstation 2: it was the hottest selling console for 2 holiday seasons, easy: it’s release year and the following were utterly dominated by PS2 sales if not for another year or two after.
@humorbot: Not really. Wii’s are easiest to find in big cities because they get resupplied on a much more regular basis. West coast cities even moreso because they get shipped in to North America via San Francisco and Vancouver.
As far as a manufacturing bottleneck goes, I don’t buy it. I think Nintendo’s building at capacity, and raising that capacity takes a lot of time and resources. They anticipated being able to stockpile over the summer (as they say, which is good logic based on past summer console sales), which they couldn’t, and now they’re left with a shortage and no way to quickly increase production. But seriously, if you’re smart about it, there’s no reason that you couldn’t have gotten one for retail price in the past year.
As for some of you saying that the hardware is the same as the Gamecube: it isn’t. It’s very similar, however. There’s still a PowerPC CPU in there, and there’s an ATI GPU based closely on the ‘Flipper’ from the Gamecube, but since they share very few parts, there’s no efficiency to be had from Gamecube manufacturing. That, and Nintendo never manufactured the Gamecube in the numbers they’ve had to for the Wii.
It’s a gaming phenomenon, yes, but it has the recent Nintendo plague: you get one fantastic Nintendo release every quarter, and the rest of the games are slag, with a few pleasant surprises. Cool for young families, but I don’t get a lot of mileage out of mine, aside from some nostalgic VC releases and Mario/Metroid.
@Topcat: Well put. Except for that last bit, since I get plenty of mileage out of mine. It is the only console I have. That and a Nintendo DS. And a Gamecube (but well, it’s been made obsolete now). I don’t game a lot (unless it’s Mario or Zelda), so the Wii is perfect for my needs. For anything more (Bioshock, for example, or The Orange Box) I use my PC. But I don’t hate the other consoles, they’re just not my thing. I respect what the Xbox360 has done for community-oriented gaming.
My local Target got a shipment of 37 today, and there were only 25 people waiting in line to get one.
Usama: I was going to say that consoles are a headache to the producing companies because of the need to maintain them, but then I realized that this problem mostly applies to Microsoft.
My Microsoft XBOX 360 was noisy out-of-the-box, and scratches discs like crazy (it’s a known problem), as for some reason MS couldn’t design a DVD drive of the same quality as a 10$ chinatown dvd player.
On the other hand, my Wii had travelled around the country, and got knocked over many times while running (our Roomba seems to want to mate with it). Still works perfectly.
I didn’t have any trouble because I haven’t bothered to purchase a Wii. I don’t regret missing out paying too much for a console when it’s in high demand. By the time I come around to purchasing one, it’ll be much cheaper and easier for me to find at a store and the games will be better and the older games that are worth playing will be cheaper.
All you people who think Wii is silly or nothing special are likely the same ones who thought Google at $100 the first day it traded was a bad investment…
@rich815: You do realize that dotcom stocks largely are bad investments, so it’s a perfectly valid viewpoint? We’re not psychic.
I can’t even begin to figure out how many posts I’d have to reply to in order to respond to all the points I’d like to, so forget that..
As far as graphics go..anyone who wasn’t already aware that the wii had amped up GC graphics and that’s it probably didn’t care about them. Sure, you can see some real pretty stuff on the 360 or PS3, but I’m buying my console to have fun. Which means gameplay is definitely the more important aspect of the console, and the games I have, well..have it.
The controller as a gimmick..well, yeah. Is there something wrong with that? It’s worked pretty freaking well for guitar hero and the Nintendo DS. Nintendo tried something different, and it worked. Good for them. And as far as games without using the wiimote’s motion sensing goes..why would companies focus on that when the whole idea of the system is this new innovative control system? Not that there aren’t games that won’t offer you options..the upcoming Super Smash title instantly comes to mind. But when I’m playing Metroid Prime, I’ve got great control that I could never seem to manage with a PC or a console.
Why stores don’t get a lot? Well, I don’t know what Radio Shack whoever was visiting, but I’ve never been in one that’s much bigger than a few hundred square feet, tops. They don’t carry much in the way of video games, they’re not one of those one stop shopping places like a Target or Walmart, they simply do not have the business to support more than say, 6 wiis a month or something along those lines. Of course a Best Buy or Circuit City or what have you is getting more, and of course higher population areas are getting more. You put your product where the greatest demand and audience will be able to get it. It makes perfect sense to do it that way.
On profitability..the 360 and PS3 may rely on games for their profit, but right now, Nintendo profits on console sales alone. Every Wii they sell makes them money before you even add another Wiimote, Nunchuck, Metroid Prime or whatever. Combine that with selling the most consoles thus far in this generation, and I’d say Nintendo’s in great shape.
The Circuit City in Green Bay, WI lets us special-order Wiis “as long as the system allows it”. They don’t guarantee the system on a specific date, but I got mine within a few days. No money down either.
Kudos to them for not forcing customers to stand out in the cold for hours. I hope other stores follow suit with a waiting list.
@Usama: I’m not a fan of how off-topic this has gotten, but here’s my take: I’ve got all three systems. The Wii I play when a major Nintendo release comes out (Metroid, Mario….) or when people are over (well, before Rock Band changed that scenario). There’s been a more consistent stream of worthwhile releases on the PS3, let alone the 360 (though I end up playing a lot of games on the 360 on the PC instead). For a non-casual gamer, there just isnt enough going on with the Wii: I can satiate myself with VC releases, but there’s only so much Super Metroid even I can play. Now, if they could coax some SNES RPGs onto the VC for download…
Like I said, great for the kind of people who can get their fix from Wii Sports and casually plug away at Galaxy, for sure.
@Topcat: While the PS2 may have dominated the console market, after the initial release, they were easy to find after that. The Wii on the other hand has been “scarce” ad difficult to find for its entire run. Christmas 2007 has made that shortage even worse.
@parad0x360:
Shortages of the Wii make sense because Nintendo is a.) a conservative business and b.) paranoid.
They got burned, and hard, with the GameCube. They expected huge demand, and when sales had gone into the dumper within months of its release they had no choice but to slash the price. Negative press ensues, causing a cycle of bad press that culminates in Nintendo shutting down the manufacturing facilities that just years before they were convinced they’d need.
Nintendo is still worried that the Wii bubble will burst. If they ramp up capacity to meet current demand, what do you expect them to do with that capacity when demand reaches more sane levels?
@Shadowfire: “If Nintendo could double production overnight, I really think they would.”
(Someone may have already said this farther down)
I’ve been reading that Japanese companies are pretty conservative about ramping up production, and that Nintendo had a bad experience with overproducing GameCubs, so while they ARE increasing production, they’re not doing it at a rate an American company would — not to increase hype, but because it’s considered good business sense in Japan.
@Zombietime: “I just don’t see why it’s so popular.”
Because my GRANDPA can play it. And I can beat my little brother at boxing.
My husband and I grew up gamers, but now that we’re about 30, we just don’t have the interest in investing 100 hours of gaming into a game anymore. We LIKE video games, but they’re not our primary source of entertainment. So even for us “graduate gamers,” the casual gaming of the Wii provides an excellent experience; we can play something engaging for a couple hours and then PUT IT DOWN.
We skipped the Game Cube in favor of the X-Box, so we’re actually getting some good “deep” RPG gameplay from Game Cube games we missed (Fire Emblem, Tales of Symphonia) while we wait for 3rd-party developers to come out with RPGs. (Or while we wait for my little brother to come kill that damn-ass second pig on the bridge thing in Zelda, because I am apparently not that coordinated when using my not-thumbs.)
Anyone who doesn’t understand the appeal of the Wii needs to go rent Trauma Center. Best. Game. Evah.
@guroth: “Zelda is a perfect example of a game you can spend hours in front of and not have your arms or hands become sore”
Apparently your sword-swinging is a little more conservative than mine, lol!
Sure, you want the Wii now, but your passions are fleeting and unreliable.
But isn’t that a reason to make more not less? Aren’t they supposed to get me to buy one while I still want one and before the games I want become impossible to find?
Here is why it make no sense for Nintendo to purposely cause a Wii shortage…the casual gamer market.
The reason that the Wii is outselling the PS3 and 360 is b/c they are tapping into the casual gamer market. Casual gamers are not obsessed like your average gamer. When they go to the store and they are out of stock on the Wii, those casual gamers are not going to then go and search in five other stores…they are not going to keep coming back and check every day to see if the store got any more in stock.
It is truly a lost sale (unless they’re trying to get it for their kid).
@Zombietime: I agree with you 100%, I think that the Wii is totally gay and it has an even gayer name. I don’t want to play games moving and shaking a controller around, I’ll take a dpad, two analog sticks, and good ol button mashing anyday.
All my friends, nieces and nephews and their friends too, (who range in age from teen to adult) do not want or have no desire to play the Wii. Sure, I tried it, they tried it and we all think that it sucks big time.
I know you can still use that crappy controller like
a normal one but it simply has no games good enough to justify the purchase. I’ve been over Zelda since OOT and over Mario since sunshine. Theres just not that one killer game that would make me buy the system. They should stick to handhelds.
As a producer of something, you can’t really control demand, but you can certainly control supply. Keeping the supply just a little short seems like a good strategy to keep prices and demand up for awhile AND saves money since you didn’t just produce 500,000 units at today’s cost that you will have to cut prices on in 6 months in order to get them moving.
So it makes sense…but it also seems like the supply is way too short for a system that’s been out so long. At this point I might as well just wait for the next gen to come out and get a Wii for under $100 just like I did with Dreamcast and ‘Cube. If I could have gotten one easily, I’d probably have paid the $300+ at some point over the last year.
Those who do not understand the economics of supply and demand should consult someone who does.
Every day Nintendo is leaving money on the table because people can’t buy the system. However, there is a large production boost coming (1Q 2008 supposedly) and the gray market for Wiis will probably collapse at that point.
Sooner or later everyone will get a Wii, those who work harder will get them sooner. I myself would love to have one but I just don’t have the desire to put in the time to find one. The conversations online all point now to a collective hold on Wii stock until 12/16. A kind of last minute Christmas video game bonanza. So be it.. sadly I will be away on vacation. Oh well.
@howie_in_az:
Hi-Def graphics are a waste of time if the game isn’t any fun.
@Topcat: That’s exactly what I’m saying. I’m not what you would call a steady(?) gamer. I do try to make time to play the big name games (I’ll try to get to Crysis?, and I have Bioshock) but casual gaming is what I need. Medical school makes it difficult to sit for hours through a game. I love that I can just open my DS and it’ll start Zelda where I left off, and then I can forget about it for weeks. Mario Galaxy affords me the same pick and play attitude. Well you’re right, we are way off topic but I just wanted to say that I agree with the points you made earlier on about the Wii in general, and the Wii fits my needs but I completely understand if it doesn’t fit other people’s needs.
@URICMU: Yup, I’ve never had a problem with a Nintendo console because of the quality that goes into each build. Wow your Wii has certainly travelled! Haha, your Roomba wants to mate with it.. good one.
PS3, good seats still available! Anyone? Anyone…?
A profitable product can easily become a money sink if you flood the market, I respect what they’re doing, it’s called fiscal responsibility.
@uricmu: Once again; this has nothing to do with the technology. They could make the Wii out of wooden blocks and they’d still run into shortages. When you need 2 million of something a month it doesn’t matter what it is you need, it’s going to be a problem.
The Wii uses a fairly basic DVD drive. But no matter how basic it is, Panasonic is going to have a harder time delivering those than Sony is getting 150k Bluray drives made on time, despite the BD drive being far harder to make.
Two million old technology PPC chips are harder to get your hands on than 150k Cell processors.
Even just the logistics of shipping and storing that many parts is mind boggling. They are looking at 70000 of each and every component EVERY DAY. Can you imagine how much space that requires just to store? 70000 dvd drives, 70000 cpu’s, 70000 user manuals…
Then you have the logistics of getting them across the ocean on time. Let us assume that Nintendo assigns half their production to the US, that is still 35k boxes a day. With weekly shipments that means someone has to transport a quarter of a million units AND get them in stores.
I know we are now way off topic, but anyone that thinks that Nintendo “should just make more” clearly underestimates the challenges Nintendo is facing.
Now I’m off to ship my $580 Wii to my poor Ebay buyer and play some Paper Mario after that on my free Wii.
First off , The wii is not an overclocked gamecube. The gamecube did not have wifi hardware, it did not have motion controls, and it did not have onboard memory.
Second the powerglove was not made byt nintendo it was made bby matel.
Nintendo does not want to make too many wii’s otherwise they will be left with all these extra wii’s laying around.
Also the demand for the wii is huge, blame all the people going into the store buying 5 or 6 at a shot and selling them all on ebay. I bet if stores limited purchases to one only you would see more.
Also please keep in mind the system has been in high demand since it came out. Not just for christmas. Christmas added to the already crazy demand.
Also the wii is not a gimmik .Just look at the ds. All the same comments were made towards the ds and look how its still selling.
The dvd drive is not basic either. Its a slot loading drive that accepts mini dvds as well . That is a great improvement and something that very few if any other SLOT laoding drives do.
So, Reggie scrambles to cover his ass by lying through his teeth? Makes sense, afterall, he is the president of a company division.
The Wii has been “available” to market for over a year now, if initial sales didn’t make it obvious enough that this was an in-demand product, Nintendo must have some serious issues. Let’s not pretend even for a second that product reps, company devs, buyers/vendors and anyone else associated with the company don’t check in on consumer opinions via blogs, forums, or other sites. There’s entire research analysis departments devoted to web crawling in various companies across the board, the shortage of product has been known since it first became an issue.
Does Reggie honestly believe by leaving customers begging for product and retail without a surplus of stock make for good business? Of course not, you’re not elected to head of the U.S. division by being completely pants-on-head retarded (thank you, Zero Punctuation). I’ve seen several managers and store managers chewed out by angry customers because they were just one person in line away from getting a Wii, both in my store and other retail chains. It actually lead to the cancellation of future shipments to my Costco after our warehouse manager decided it wasn’t worth the hassle we’ve been dealing with for the last year.
I see that trend continuing, why create unnecessary stress and backlash when one can simply eliminate the source of the problem by refusing to carry a product? THAT is what will hurt Nintendo.
@rockosolido: This is my point. Why would any company purposely work to earn this much hate from a potential customer. Like you said, it isn’t good business. They’ve made a mistake, they misjudged the demand. Whatever happened, I doubt this is where they want to be. Things are only going to get worse when Wii Fit comes out.
If your CostCo doesn’t want to deal with it anymore, that’s fine. In fact that is good news for other stores in the area (or other CostCos, depending on how it all works).
They weren’t hard to find a couple months ago. I saw them in Target and Wal-Mart several times. The demand has just increased massively. They’ll probably be easy to find again after Christmas.
Well, here’s on reason:
[consumerist.com]
@rbb: Sorry bub, I was a video game retailer when the PS2 came out: it was hard to get for 2 holiday seasons in a row. Sure, they flooded the market with them after that, but your point was that there ‘wasn’t a hot console for 2 years running before the Wii’, when actually, there was.
Why do people think production is something a company can turn on and off like a faucet? Nintendo isn’t Sony or Microsoft – it’s a relatively small company that can’t afford to lose money on Wii. They can’t just go out and throw money around just because there’s a cow to be milked.
@Jaysyn: Amen. I’m not particularly interested in the X-Box 360 because I played Halo the first time, and frankly I’m sick of first-person shooters. They’re all more or less the same, and while every now and then one stands above the pack (Halo), after 23 years of FPSs, I’m just bored of shooting things.
@spinachdip: Well, you’re right to an extent. In terms of sales and number of employees, Nintendo is much smaller than Microsoft and Sony – in terms of market cap, they’re still much smaller than Microsoft, but larger than Sony – ~$87b vs. ~$55. Things have been going great for them, but what you might be call being conservative I would call screwing up their supply/demand estimates. Last year they had an excuse; despite the big talk, I think even Nintendo executives were thinking that this would likely end up being a solid niche product, and they planned appropriately. Not so this year. They’re leaving money on the table, they’re annoying potential customers, and they should have planned better. I agree, foresight-wise it’s not as bad as making 20 million E.T. cartridges and dumping ‘em in a landfill, but eventually people will get frustrated and say, “Screw it, I’ll just buy the 360.” Anecdotally speaking, I know a couple of people who have done just that.
Thankfully, I’m all about the Counter-Strike.
@Zombietime: because anyone can play it from small kids up to seniors. The other systems with their complicated controllers closed out a big section of the population just because of the controllers. Hell, I wouldn’t even bother past the N64 but I played the Wii with the boyfriends family and ALL of us could do it and we had fun. That’s why everyone likes it. I figured it was because of it’s popularity across the ages that it was so hard to find.
@Jaysyn: Satire.
@LTS!: Pffft, no consultation needed, putz. For an expert in economics, perhaps you should think about “diminishing returns”. Maybe they’re leaving money on the table in your eyes, but maybe in their eyes it’s not worth pumping up production to simply sell more units (you know, with money needing to be expended for capital and overtime…), glut the market, aaaand….as a result, have the price go down when the market hits a new equilibrium. And the guy who thinks they aren’t making profits on the Wii…HAHA, okay buddy. Enjoy your time a daze.
@The Bigger Unit: Well, remember that the point of making consoles isn’t to sell consoles, but to sell games. THAT – along with whatever licensing agreements Nintendo may wish to grant – is the continuing revenue stream that will make the platform exceptionally profitable in the long run. Classic razors/blades model. Even if Nintendo is making a profit on the consoles, it ain’t huge and it’s a one shot. More consoles = more games = more sustainable profits. That’s why the supply shortage is a misstep. I totally understand their initial conservatism, but at this point they know it’s a hit. You want this thing to take root in as mant households as possible.
Ok, on topic:
I solved this problem by waiting overnight before the day they were released.
Off topic:
I freaking love all of these fanboys insulting the Wii. I personally cannot stand the PS3, but you won’t see me insulting it. It’s a powerful system with amazing graphics and great 3rd-party games, but it’s just not for me. Most of this is that I get all dyslexic with the PS2 and PS3 controllers. But it’s a good system.
Nevertheless, I’m a Wii man (insert Jackass joke here). I won’t lie, I’m quite loyal to Nintendo. However, I enjoy being able to play all of my Gamecube games on it, and I am also highly anticipating Super Smash Bros Brawl. Once I come into some money (and yes, a euphemism just entered my head too), I plan on aquiring Super Mario Galaxy too.
To defend the motion control, I will admit that I bought Need For Speed ProStreet last Friday. I was at first put off because of the control scheme, worrying that it would clusterf*ck me like Carbon, but the controls are amazingly fluid. The Wii Remote (OMG I resisted saying Wiimote!) is quite a versatile little tool. It’s made this game pretty fun. I can’t wait to get off work and go play it some more.
I guess I’m not like a lot of gamers. Despite wanting to go into the Graphic Design profession, graphics are not what matter to me in a game. What matter to me are control, physics, interest sustainability, and surprise. Give me a stick fighter, and I’ll play the living sh*t out of it.
And I guess that concludes my rant.
Y