Are stock shortages the new marketing strategy for consoles?

In the video game industry hardware sales are an extremely important factor in deciding which console a game should be developed for. Realizing this, companies like Nintendo, Sony, and Microsoft have done their best to keep consoles in the hands of consumers and sell as many systems as possible each month.

And while some of the more common practices of selling consoles are already used--promotion of a software library, marketing, and pricing--a relatively new phenomenon has developed where console availability has dropped significantly and hardware sales stay at a relatively steady, yet inflated level.

In essence, hardware scarcity is running rampant and yet, demand for these devices has grown at an astounding rate. In fact, most experts in the field think 2008 could be the biggest year for gaming ever.

So what is it about a scarce product that makes us want it more? Does it somehow tell us that the device is far more valuable and worthwhile if it's not available? If so, does that line of thinking even make sense?

Sadly, I'm left wondering if we've entered a phase in the video game industry where scarcity is being used as a tool to increase demand, only to be followed by a flood of consoles to satisfy it.

Even though there's really no way to prove that any of the three console manufacturers are using scarcity as a marketing technique, the evidence seems overwhelming.

After all, how many times have we been told by Nintendo that it's unable to forecast demand? Even today, Microsoft announced that it's experiencing Xbox 360 shortages because the company "misjudged demand."

Really? If that's true, Microsoft--one of the world's largest and richest companies--may want to spend some of that extra cash on some better researchers. Sure, there's no precise way to calculate exactly how many consoles will be sold in the coming months, but it's as if these companies have subscribed to the belief that "less is more."

Let's be honest--would the Wii fervor be what it is today if the console was readily available since its launch? Would Nintendo still trumpet its console's ability to beat out demand because of its "immense popularity"?

I doubt it.

There's no debating the fact that the Xbox 360 and Wii have sold exceptionally well over the past two years, but we can debate exactly how the companies did it. Is it possible that each and every sale of the Nintendo Wii was a result of everyone's fascination with the new console? Sure.

But isn't it also possible that the Wii has sold well because of all the coverage media outlets were giving to it saying it's one of the holiday season's most popular gift ideas and it's barely available? Surely that must speak to the narcissist in all of us who wants to be one of the few people on the block with the shiniest new gadget, right?

Of course, some critics would say that I'm nuts for even thinking that companies would intentionally turn customers away, and I can understand that point. But maybe those people should look at the big picture.

If there are people shopping for the latest console with little knowledge of their differences that find two out of the three unavailable in stores, while the third is fully stocked, what does that tell the person? If it were me, I'd say that the available console was either just delivered today or it sucks. And if it sucks, why would I buy it?

So, in a moment of confusion, that person leaves the store with nothing to show for the trek. And just one or two days later, they'll call the store up to see when the next shipment will be in so they can be first in line. All the while, that console that's readily available sits there waiting for the next sucker.

The video game business is like none other. Instead of being replaced each year or becoming obsolete quickly, video game consoles can last for the long haul. Because of that, sales tend to drop off toward the end of the second year in the cycle and hardware manufacturers constantly try to find ways to sell the inventory.

Historically, vendors cut prices to dump stock. But today, these companies may be trying to hold back shipments in an attempt to increase demand and sell even more consoles than imagined.

It's simple economics, folks. And it could very well be happening right under your nose.

[Tinman52]

It's certainly happening, which makes it interesting that the government hasn't stepped in yet.

[natronforever]

The government? So now you want the government to regulate the supply of video game consoles? You're saying that if you don't like how a company regulates the release of its own products, then we should have the government write laws to bring them in line? Sorry, but that's fascism.

[aztec92154]

LOL... companies using shortages as a marketing tool, government involvement, fascism. It all sounds a little far fetched to me. :-)

Maybe:
- The PR people are just making a bad situation sound good.
- Nintendo has dropped the ball on their supply chain, and so has Microsoft.

Surely you dont think that at launch time and in the months after, Nintendo purposefully made nun-chucks, wiimotes, and Twilight Princes (software) hard to find on purpose? You dont believe that a publisher would produce less Rockband / Guitar Hero boxes just to create artificial demand, right?

Hmmm... So if I follow Dons logic, Apple has slowed production on the iPhone BECAUSE it wants to create the demand to sell 10 million of them?

Source: Engadget Article: "Apple reduces iPod / iPhone build rates, increases iMac production"
http://www.engadget.com/2008/02/13/apple-reduces-ipod-iphone-build-rates-increases-imac-producti/

[vbonline]

I can buy a Wii or a PS3 or a XBOX360 whenever I want. There are plenty of all of them in the shops....

But let me explain:

Nintendo, Sony and Microsoft are global acting companies. A Wii is selling for 249 USD which translates to 26.800 YEN. But a WII is selling for 249 Euro in Euroland (Europe) which translates to 39.300 YEN. Where do you think are all the produced WIIs?
Even during the Holiday season I could get a Wii in every shop I wanted to buy one. There was no shortage! (I actual got one. Sometime mid december. In the first shop i went to and they had plenty of them)

During the time of a strong dollar it was vice versa. It was allways Europe which got products late and in short supply. Now you are suffering... Thats the price you pay for electing an administration who spends money faster than they can print it :-)

To quote the last good president you elected: Its the economy, stupid!

[vbonline]

I just looked up the stock of an retail shop in walking distance of my workplace:

WII: 107 in Stock
PS3: 84 in Stock
Sorry, not selling XBOX360...

To repeat: There is no shortage of consoles (here) :-)

[aztec92154]

@vbononline
Name of store + Phone number please...

[mk-1601]

As usual, your argument makes no sense. We've seen consoles be supply constrained many times (the PS2 and Wii being particularly extreme examples), resulting in the obvious limiting effect on sales. It's generally accepted that Nintendo lost out on millions of dollars in hardware sales over the last two Christmases because they couldn't meet demand. What an awesomely successful marketing stunt! Only a clueless hack with a quota to fill and a woefully inadequate pool of expertise to draw on would entertain such risible nonsense.

"Sales tend to drop off toward the end of the second year in the cycle" - simply not true. The marketing leading console usually nets the bulk of its sales in the latter part of it's life once the price has fallen into the impulse purchase range.

The Wii has sold over 20m units worldwide now. It's fun to watch you come up with increasingly bizarre theories as to why it doesn't deserve to succeed.

[brianmv]

The more I read your articles, the more I feel you are an uninformed jack***, a "Bill O'Reilly" or "Ann Coulter" of tech news. I agree entirely with mk-1601's response and it makes me wonder if you ever actually graduated high school, because if you did you would come to understand that BASIC ECONOMIC THEORY is what keeps your stupid opinion from being informed or cohesive. The only way for any company to maintain sales is to maintain availability of products. If anything, Nintendo is hurt by this, not helped.