What do companies (specifically Nintendo) gain from limited stock?
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LordRaptor
Member
Which is why I think its premise is as a means of dissipating cognitive dissonance, not as a means of thinking about supply chains.
Literally the same as the other enduring myth based on ignoring any and all data about how most wii owners bought one game then put it in a closet.
Thats how disruptive the wii was. People need to invent mythologies to explain it.
Skittzo0413
Member
Didn't the PS4 have major stock problems for a long time? Which is why the Switch is selling faster than it in certain regions?
Basically I'm pretty sure the bolded is false, at least when it comes to consoles. Regarding physical games it does seem that Nintendo produces a lot less of some of them.
Darth Ghandi
Banned
I'm propper pissed that Epona is locked behind a fucking amiibo.
I would seriously rather have her as a DLC/micro transaction rather then buy these fucking things.
*huffs*
I would seriously rather have her as a DLC/micro transaction rather then buy these fucking things.
*huffs*
Or they just don't want to overship. I don't know, that sounds a tad more realistic to me.
KratosEnergyDrink
Member
Yes, this artificial demand thing has been out of touch with the obvious reality here on gaf since long.
LordRaptor
Member
Not really, but both the X1 and PS4 only launched in selected regions.
If they'd had worldwide launches they almost certainly would have had bigger supply chain issues.
I would only say it's artificial because I would assume that they have the production capabilities to meet demand otherwise. I agree with other posters that not having product sit on shelves is also an aspect, but there's a cultural perception around the supply around nintendo consoles that's been around long enough to be more than "nintendo sucks at estimating demand"
Nintendo has been producing consoles since 1983, but they don't have production capabilities to meet demand if they wanted to? I'm not buying it. Not saying I'm infallibly correct, it's just my interpretation.
both of those things can be true.
Skittzo0413
Member
I remember reading "PS4 sold out" or "hard to find" for at least several months into 2014. Maybe it wasn't actually the case but it at least got headlines like that for a while.
God this thread has made me remember how exciting and crazy the first couple of years of the Wii was.
If only Nintendo had managed to keep the momentum going, rather than waiting for it to die out before bringing out a new console that nobody really wanted.
Hey ho.
But it was exciting times.
If only Nintendo had managed to keep the momentum going, rather than waiting for it to die out before bringing out a new console that nobody really wanted.
Hey ho.
But it was exciting times.
darkstar0155
Member
except it didn't work for the Wii U or 3DS as their was ample stock.
And they don't because of the reasons I mentioned in QP.
It's just happening too often. It happened with Wii, Amiibo (repeatedly), GC adapter, NES Classic in the US and now the Switch. Nintendo seem very comfortable with heavily undersupplying most of their products.
Given that a major limitation is screen production, they are very much limited by production capacity of partners (Japan Display, who provides the Switch screen). Beyond that, it takes time to increase production lines. Nintendo doesn't own the factories. They contract. It's not just a matter of flipping a switch. Stuff has to be contracted, planned, made, shipped.
I don't remember who it was, but I remember a thread on this very subject and a poster who gave a much more detailed explanation than I could, a poster with knowledge of production lines. Unfortunately I can't remember the name of that thread or poster. Maybe someone else does.
Anyway, as shown before, Nintendo did pay attention to pre-orders and began working on increasing production before launch. What monthly numbers they hit and how long it takes to get there are the question.
But, back to the point of conversation: Nintendo gains NOTHING by not capitalizing on hype NOW. Hence, "artificial supply" as an argument is almost nonsense. Artificial supply would not sustain interest in the Switch for 2-3 years and even if it did, limiting supply to 20-30 million units over that timeframe if they have the ability to sell twice as many makes even less sense.
Nintendo needs to sell systems to sell software to make money. There's no magic tipping point of artificial supply > demand > sales at which Nintendo orgasmically releases 50 million units on the market and frenzied buyers snatch up all of them and buy 8 games each. Then Nintendo stocks skyrocket and Kimishima sits back puffing on a cigar in his big bossman chair, laughing maniacally.
This entire argument is one of the most nonsensical around. It might make some sense for a limited product like an LE Amiibo, but not for a mainline product like the Switch.
Switch is not heavily undersupplied by industry standards, and any conservative estimates on Nintendo's part are justified by the abysmal sales of the Wii U.
Nintendo is a very conservative company from what I understand from investment reports. Their goal is to minimize capital on hand at the end of each quarter, therefore their manufacturing strategy would be to maintain an output that matches long term demand for the console. By aligning production with these levels they do not have to deal with write down of assets no longer required in production of consoles later in life, or penalties with the likes of Foxconn for have to reduce production from initial expectations.
Probably not the elaborate marketing scheme everyone expects, but the most realistic reason.
Probably not the elaborate marketing scheme everyone expects, but the most realistic reason.
darkstar0155
Member
Wii: Fastest selling console ever, and they shipped more than any other console ever at that time
Amiibo: Except for the amiibos that are just collecting dust on the store shelves, and even then what other example could they have used to gauge demand of a new unique product? Even skylanders you couldn't use as a metric given the difference in demographics and uses
NES classic: Obviously a case of just not correctly predicting demand as they never released a new large quantity during the holidays to capitalize on any "artificial demand" and the production lines are now closed
Switch: There is no proof of a huge difference between supply and demand, it actually seems like they were pretty close to gauging demand.
Skittzo0413
Member
It did not happen with the Wii. They shipped and sold more consoles more quickly than any other console in history. How is that artificial scarcity? Could it just be that, perhaps, it was a very desirable product where the demand overwhelmingly exceeded the supply capabilities?
And I still don't see the Switch being undershipped, it's breaking all sorts of records based solely on the first shipment.
Steve Youngblood
Member
With the GC Adapter and the NES Classic I think the answer is really simple: these were conceived as niche product and weren't deemed important. I mean, sure, they screwed up by vastly underestimating demand initially, but I don't think it really mattered to them all that much to try to rectify that mistake.
With Amiibo I think the issue is that the logistics involved in planning out the release of these dozens of different figures was always going to create some issues. When some Wave 1 figures sell out, it's hard to react to that when you're already focused on manufacturing Wave 2 stuff. Why were they so conservative to begin with? I think the failure of the Animal Crossing line is all the evidence you need to be able to understand why overshipping is bad.
Not that they had this data at the time, but the Infinity line is another prime example of what can go wrong. Someone correct me if I'm wrong, but my understanding of what happened there was that 1.0 stuff was undershipped and there were a lot of complaints of figures being hard to find. So in preparation for 2.0 they turned the production dial up to 11 and wound up with a ton of figures that wouldn't sell.
Yes, maybe that's their trade-off? Rather having people wait a bit longer before they can buy their product instead of dumping them on the market and the market devaluing them.
The Switch situation seems fine. Every company bases their projections on data. The last data point is the Wii U. But Nintendo just is a very conservative company. They are all about value, about long-term thinking. I know it fits this message board conspiracy theory thing pretty well but what if Nintendo is just super conservative in some instances and incompetent in others? Is that so hard to believe?
I'm glad there is some common sense at least in the first post.
Also, shelf space is not infinite and free, they make estimates and a compromise between the expected demand and the available shelf space they can get, with BoTW, demand surpassed expectations, it's really that simple.
No company ever will withhold their product to create artificial demand, unless they are really dumb and don't like money.
If that were the case, and I don't think we'll ever know or be able to prove either side regardless, then it sounds like the trade off for that decision is to gain a reputation of being unable to meet demand and for people to have varying theories on it..
Gai Murakumo
Member
Most companies experience stock problems when new products come out. It is just Nintendo is what most people focus on that is all.
This is the correct answer. "Artificial scarcity" with the NES Mini and Switch is Internet stupidity not grounded in reality.
darkstar0155
Member
They over supplied some products, under supplied some, and correctly supplied some, same with all companies.
There are theories and then there is business management. To put it this way, for a company to attend this "artificial scarcity" game time and time again, that company must be completely insane.
It's nonsense.
TwoDurans
"Never said I wasn't a hypocrite."
Actually, the PS3 60GB was really hard to find at launch, and I had trouble finding a 3DS at launch in NYC.
This. If you think Nintendo doesn't want every person out there who is mildly curious about the Switch to be able to buy one you're crazy.
Teletraan1
Banned
I just think they are incompetent. NES Mini proved that. I can understand wanting to under ship to be conservative and not end up with a landfill full of ET carts. However they should be able to forecast demand better than they are and react quicker to when they need to provide more units. Use some of the modern avenues available like facebook, twitter, non limited pre orders so they have a ballpark of how many they would need. Most of Nintendo's contemporaries seem to handle all of this much better than they do so it is unsurprising they take the most flak for it.
The Hermit
Member
It's not artificially. It IS constrained on purpose, because the demand is low. They rather have people wanting to buy than people not buying.
When you say artificially it sounds like they have a warehouse full of them and not selling on purpose.
Yeah, this is the real problem. I though it was a niche thing and so did Nintendo, but I am pretty sure they are kicking themselves for no having produced more Minis.
The other day I saw one at the store and almost impulse bought it.
I understand now that the prices have gone up for Zelda amiibo, but these things were everywhere on clearance before. Nintendo could make more, sure, but why if they were on clearance and took up too much shelf space that could be used for other things or newer amiibo. Link has been around since day 1(I believe it was the most produced amiibo as well), so it wasn't hard to find and could be had on the cheap, but now it's "artificial scarcity" because you didn't buy it or is it because it's being scalped by the dozens?
Broadly - Demand at a price point is what it is...however artificial scarcity can create "hype" or "buzz" and change preference causing the demand curve to move the right. There is a legitimate non-tin foil hat reason to do this. It is a common practice( famously, Diamonds). It allows suppliers to move more units at a certain price then they would under non-hype conditions or more commonly, command a higher price to move a certain number of units.
When the hype cools, the demand curve will naturally move to the left and they will either sell less units at that price or cut price to move the same amount of units. A game. say a Mario or a splatoon can help spike the curve out.
The curve will move to the left if the public taste changes( bad or anemic games line up, hardware issues, other system coming out that are preferable) and will further magnify this change after hype cools.
I imagine they will slowly increase production until stock starts to sit around...and then they will cut the price or do a pack in. A big new game can obviously spike demand.
When the hype cools, the demand curve will naturally move to the left and they will either sell less units at that price or cut price to move the same amount of units. A game. say a Mario or a splatoon can help spike the curve out.
The curve will move to the left if the public taste changes( bad or anemic games line up, hardware issues, other system coming out that are preferable) and will further magnify this change after hype cools.
I imagine they will slowly increase production until stock starts to sit around...and then they will cut the price or do a pack in. A big new game can obviously spike demand.
Sword Of Doom
Member
NES classic was strange because "conservative" is an understatement. Honestly who knows what Nintendo's supply chain is doing
boiled goose
good with gravy
How would it even happen in practice?
Unused production capacity? Stupid and Super expensive.
Stacks of supply hidden away somewhere? Also stupid and super expensive.
Nintendo can be overly conservative with production. Saying they purposefully do this is beyond asinine. I would like to see some of the people claiming this to propose it a business strategy meeting.
Shipping less units
???
Profit
It's beyond silly.
Version 3.0
Member
Very briefly on the PS3.
Don't you remember the "I'll pay anyone who can find one $1200?" fiasco? It was hard to find for maybe 2 weeks. Then, Jack Tretton said that, and people were posting tons of pictures of huge pyramids of them, and joking about how much money he owed them.
edit: after a little searching, that quote wasn't until February. But this thread about PS3 availability shows that they were fairly easy to find by mid-December-ish. So it was about a month of stock issues.
boiled goose
good with gravy
Except in this case the price is set for Nintendo and all gains from shift go to scalpers.
It's tin foil hat unless we say Nintendo selling the Wii for 500 at the peak of it's popularity
AHA-Lambda
Member
i believe it was manufacturing switches
boiled goose
good with gravy
I have a different take. Selling you switches.
With nes mini, especially hacked, their vc value proposition gets deflated. They never wanted it to be so popular. They want to constantly sell you games.
Here's what I see never being addressed in these discussions: there are only two possibilities dealing with scarcity of Nintendo products at launch
(1) Nintendo knows that the supply will not meet demand at launch but proceeds anyway. This does not mean that Nintendo intentionally creates and manages scarcity, though that is certainly a possibility that I think many people simply do not understand can be a valuable sales strategy. It could mean something as simple as Nintendo can't produce enough stock before a launch but they don't want to delay it for other business/marketing reasons. The basic requirement here is simply that Nintendo knows that their supply will not meet demand at launch.
(2) Nintendo does not know that their supply will not meet demand at launch.
If you believe (2) is correct, and you then factor in how consistently this scarcity has occurred over almost every significant launch since the Wii, you cannot conclude anything other than the fact that Nintendo is very, very bad at understanding markets and predicting demand. So those are your choices: either Nintendo is knowingly allowing scarcity and scalping to occur by going ahead with launches when they know that supply will not meet demand, or Nintendo is incredibly incompetent and has survived as a company for the past twenty years by the happy coincidence that the scarcity of their products keeps demand and thus prices high over long periods of time post launch (yes, they make wonderful games, but we're talking about hardware prices here).
Edit: To be clear, the point I'm trying to make here is that (1) is the case in which Nintendo looks like a competent, aggressive business that knows exactly what they're selling and how to most effectively sell it. I see people everywhere constantly claiming (2) is the reality, and I don't understand why they are more comfortable believing that Nintendo is incompetent than believing they may actually know what they're doing and "GASP" manage their products in a way that leverages their niche position.
(1) Nintendo knows that the supply will not meet demand at launch but proceeds anyway. This does not mean that Nintendo intentionally creates and manages scarcity, though that is certainly a possibility that I think many people simply do not understand can be a valuable sales strategy. It could mean something as simple as Nintendo can't produce enough stock before a launch but they don't want to delay it for other business/marketing reasons. The basic requirement here is simply that Nintendo knows that their supply will not meet demand at launch.
(2) Nintendo does not know that their supply will not meet demand at launch.
If you believe (2) is correct, and you then factor in how consistently this scarcity has occurred over almost every significant launch since the Wii, you cannot conclude anything other than the fact that Nintendo is very, very bad at understanding markets and predicting demand. So those are your choices: either Nintendo is knowingly allowing scarcity and scalping to occur by going ahead with launches when they know that supply will not meet demand, or Nintendo is incredibly incompetent and has survived as a company for the past twenty years by the happy coincidence that the scarcity of their products keeps demand and thus prices high over long periods of time post launch (yes, they make wonderful games, but we're talking about hardware prices here).
Edit: To be clear, the point I'm trying to make here is that (1) is the case in which Nintendo looks like a competent, aggressive business that knows exactly what they're selling and how to most effectively sell it. I see people everywhere constantly claiming (2) is the reality, and I don't understand why they are more comfortable believing that Nintendo is incompetent than believing they may actually know what they're doing and "GASP" manage their products in a way that leverages their niche position.
Either they are artificially creating scarcity... or they are stupid enough that 30 years later they don't still don't how to measure demand...
People still going on with this artificial scarcity when the numbers of systems available for launch is on the high side.
They said it before when the Wii or the DS craze I think that they don't do this, because the consumer just gets tired and never buys it
Edit: here's one
https://www.cnet.com/news/will-the-wii-be-a-set-top-box/
They said it before when the Wii or the DS craze I think that they don't do this, because the consumer just gets tired and never buys it
Edit: here's one
https://www.cnet.com/news/will-the-wii-be-a-set-top-box/
Yeah. See THQ and the uDraw.
If you overproduce, you lost money on the production AND you're burning money every day warehousing a bunch of garbage AND you eventually have to pay to dump all the stock.
This quote is hilariously out of context in 2017. The internet is, at this moment, filled with 40-50 year olds who aren't avid gamers that slept outside of a store overnight and visited a retailer five or six times to buy up every bit of stock they could get their hands on for reselling. This is exactly the rettbone meme of who buys most of the Nintendo launch stock for releases now. Is it a smart way to make money? Fuck no. But there are 300 local classifieds listings in my medium size city of people selling new switches for > $100 over retail cost, and that's not even counting those who bought and are selling at even higher volume on ebay etc.
If I saw a Switch anywhere out in the wild, I'd buy it in a heartbeat.
My nephew can't find one anywhere where he lives.
Exactly - this is why it's ridiculous to dismiss scarcity as a sales tactic simply because you don't like the way it makes your favorite company look. An intelligent company working in a niche market understands the value that perceived scarcity can bring to their product if its managed properly. You want to create the initial perception that its special and has a high intrinsic value by being rare but then make it available at just the right ratios so that people will feel like it's worthwhile to hunt down or impulse buy if they come across it. Obviously it's not an effective long term strategy, but for the initial release push it could add significant value to the product that might not otherwise exist. Unfortunately no company will ever talk about it because it's bad PR, so people will continue claiming its a myth with no evidence regardless of how often its used effectively right in front of them.
Version 3.0
Member
Well, except for the Wii U, the 3DS, and the Switch.
The Wii U did not sell out, at all.
The 3DS sold poorly enough that it got a huge price cut announced within 3 months.
The Switch is hard to find in some places, but overall it seems Nintendo's announced quantity was roughly correct vs demand. They shipped plenty; enough to break records, at least.
So...other than their 3 most significant launches since the Wii, you mean?
visiblemode
Member
Yes, because after 30 plus years in the industry, this multi-billion dollar company still hasn't figured out how to produce a reasonable amount of stock, for any launch, ever...that's more plausible?
The very nature of the "not on purpose" position implies there is no benefit (increased demand) and therefore only drawback (lost sales). So you think it's more believable that they've been fumbling sales for decades and not learning from it?
Bu-but muh artificial scarcity, muh artificially created demand.
Folks, do you think big retailers want to stock up Nintendo stuff after Wii U disaster? Shit takes place on shelf, and rather than filled it with potentially unsellable product they rather want those shelf spaces used for something else. Artificial scarcity is tinfoil hat bullshit that easily explainable by Nintendo's conservative nature which especially bolden up after Wii U disaster.
Steve Youngblood
Member
I have no problem accepting that artificial scarcity has the theoretical ability to increase demand for a product. However, before ascribing sinister motivation, I think it needs to be explained how a particular company is parlaying this demand into additional revenue. Like if the only way for me to flip my Switch purchase into massive profits was to sell it on NintendoBay.com where Nintendo takes a significant chunk of the profits, then I think the reasoning would be clear as day. I'm not hugely into going to concerts/sporting events, but I know that some of the ticket companies like TicketMaster actually run some ticket resale sites. It's not difficult to see the scam going on there.
Or maybe if massive shipments only come just at the opportune time (like the holiday shopping season), it wouldn't be difficult to understand what's going on there. Like if a massive quantity of NES Classics showed up two weeks before Christmas, I wouldn't consider it a big leap to consider that a limited launch shipment was intentional.
But far too often what I have difficulty accepting is the way people suggest this and act like it's insanely obvious what's really going on when they've failed to paint a complete picture. I've made a similar argument before, so apologies to people who recognize the argument and think I'm being a broken record, but too often I feel like the argument people are presenting is the following:
1.) Intentionally ship few units
2.) Watch demand skyrocket
3.) ??????????
4.) Profit!
It's too early to dismiss that they have a brilliant scheme running with the Switch. But with products like the NES Classic, Amiibos, and the GC Controller Adapter, I'm not clear on what phase 3 is that leads to massive profits.
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