The “Wii” Mystery

No, not a “wee” mystery, this post is asking the (possibly naïve) question: Why is the Nintendo “Wii” system still almost impossible to obtain five weeks after Christmas? For those of you who have been living in a cave somewhere for the past six months, the “Wii” system is the latest video game console available from Nintendo. It makes use of a number of new types of controller to give the player the sensation of actually being “in” the game – such as a hand-held controller with a set of accelerometers that allow the player to actually “swing” at a baseball or “roll” a bowling ball. As with all Nintendo video games, it supports a huge range of software and tie-in products, and like most groundbreaking new home video game systems, it was the hottest possible Christmas gift for several key demographic groups (including children 3-12, teenagers, and males 18-36) during the last holiday season. You can visit the company’s Official “Wii” Site if you want to.

Now, as much as we don’t like it, the strategy of Artificial Scarcity is hardly a new concept. In fact, most people have had at least one run-in with a new product that was released to the public in limited numbers to avoid market saturation – and keep the price up. This is a fairly simple of using the laws of supply and demand to keep demand high and support the price point you have set for the product. Nintendo has used this strategy for most of its recent product releases, as has Sony with the “Playstation” lines and a number of other electronics companies with their newest releases. And so far it has certainly worked with the “Wii”, which still sells out the moment it hits the stores. In fact, a sales associate at Best Buy told me today that the “Wii” units are often sold out “even before they open” on the days new shipments arrive.

I don’t think he meant it literally, although there have been documented cases of retail workers purchasing scarce consumer products before the store opens (using their employee discounts) and then selling the products privately (or on eBay) later that day. A very alert store manager can prevent this, but more often the local management team is in on the scam (and is raking off a share of the profits) or just doesn’t care. The practice isn’t actually illegal, and in any case, given the way most of the retail industry (and the “Big Box” retailers in particular) treat their employees, it’s completely unrealistic to expect those workers to put the company’s interests ahead of making a few extra dollars on the side – or, in this case, on eBay. But even leaving issues like employee relations and private/cash sales over the Internet aside, why maintain the artificial shortage this far after the holidays are over?

By the end of January, all of the kids who were hoping for a Wii for Christmas either have one, or are resigned to not getting one. Kids with January birthdays may still be expecting one, but for the most part, the huge pressure to obtain the ultimate gift (and keep up with relatives, neighbors or other rivals who have also done so) is over for most consumers. Even more to the point, if none of Nintendo’s competitors has managed to bring a product to market that can take away (or recover) market share from the Wii by now, they probably won’t until next fall (the run up for the next Holiday season). Nintendo could increase the supply of Wii units available to the public, dramatically increasing both their profits from selling the basic hardware and their potential market for new software and new product releases without diluting the demand significantly – provided they maintain a very strong grip on their distribution channels, the way Apple did with the iPod and iPhone releases.

Of course, it’s just barely possible that Nintendo is actually having problems meeting production demand, given that the Wii was a runaway hit all over the world, not just in the U.S., Japan, and a few of the wealthier European countries. In which case, they really need to fire whoever they’ve got doing sales forecasts …