Beloved entertainment giant Nintendo has a long history of trouble getting their products to the right hands.
Almost two months ago, video game giant Nintendo released its latest console—the Switch. Although it received a lot of positive coverage, a familiar problem has been marring the consumer goodwill; extreme product scarcity.
The company’s sales forecasts were off. They were so off that additional Switch consoles had to be flown to their North American and European distributors. Although Nintendo took a drastic action and its been two months since the launch, the consoles are still hard to find. Some are even claiming that it’s a case of artificial scarcity.
Before we can begin to answer the question of Nintendo’s possible motives, there’s a few basics that need to be gone over.
Make it Rare, Make it Wanted
The scarcity of a commodity or a service is an important element of the business model. If there’s a lack of supply, the price will likely go up. If there’s overproduction, the price will start going down. While scarcity is a natural and fundamental part of a free market, artificial scarcity is not.
Artificial scarcity happens when an individual, company or organization creates a scarcity either through technology, production or law, where there would otherwise be the capacity for an abundance.
A classic example would be the Beanie Babies during the 90s. Ty Warner, the person behind the craze, “would retire specific animals at whim, creating scarcity in the market and inspiring collectors to pay up to $5,000 for a plush toy that originally retailed for $5” writes New York Post contributor, Larry Getlen:
Ty’s website further fueled the phenomenon, as the company used it to make retirement announcements and to speculate on possible retirements, dropping hints that drove collectors to buy or sell different lines. Some sellers even began changing prices throughout the day based on website updates
In the end, the Beanie Baby empire came crashing down. Collectors became overwhelmed by all the new product lines and regular customers got tired of fighting with scalpers. The rise and fall of Beanie Babies is a lesson in how even the hottest products can tank if consumers aren’t respected.
Nintendo Has a History of Underestimating Demand
While misjudging demand is something many businesses go through, Nintendo is a special case. Pretty much every piece of hardware released by the company has met with supply problems.
Just to list a few, here are some examples:
- NES Classic Mini. Retailed for $60 USD, now on Ebay for $250+ and climbing.
- Amiibos, RFID-enabled collectable gaming peripherals originally sold for $12.99. Some of harder to find ones ended up selling on the grey market for over $100 USD.
- New 3DS XLs were impossible to get a hold in NYC when they released earlier this year according to an article from The Verge.
Just from these examples (there are many more), it’s safe to say that the company has a history of seriously understating the demand for it’s products. Many potential customers are turned-off from buying Nintendo products for this very reason.
Is it a problem with Nintendo’s supply chain or management? What if the problem is intentional, the supply intentionally restricted as many consumers suspect? The answer to these questions require nuance which is why we’ll leave off answering them until the next blog post. Check back again soon for the second part of this two-part topic.
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