What's up with Nintendo under-supplying their products?

[Zhukov]

Whoa! Hold up one fucking second. Yes, you.

Let me make this very clear: this isn't an attack or even criticism of Nintendo. I don't use Nintendo stuff. I don't give a flying fuck if people are having trouble buying their overpriced emulators or plastic Happy Meal toys.

I'm just asking about the logic behind it.

Okay? Cool.

So yeah, people are getting frustrated because they can't get their hands on one of those mini SNES things. Same as what happened with the mini NES. Same as what happens regular as clockwork for those plastic toy things.

Presumably Nintendo is doing this on purpose. I mean, it can't be sheer incompetence right? They're been in the business a long time and seem to know what they're doing. Surely they can do demand forecasts and production logistics in their sleep by now.

I don't understand is how it benefits Nintendo to under-supply a highly sought after product. It just creates scarcity and drives up resale prices, which only helps scalpers. (Not that I'm complaining. I personally made a tidy little profit reselling three Mini-NESs.)

You could say it creates hype, but that doesn't help you sell more units if you don't have any units on the shelf to sell.

Do they just do it for the publicity? Keep their name on people's lips and somehow that translates into more people buying Switchs and DSs or whatnot?

 

[Phoenixmgs_v1legacy]

I'm guessing Nintendo just does it to make themselves look good. I could understand the mini-NES being an unexpected high seller. What I don't understand is then making a mini-SNES and making a shit supply of it when you now know people want it. Nintendo screws over their consumers more than probably anyone in the industry from the Sonys and Microsofts to the EAs, Ubisofts, and Activisions. Nintendo charges people $15 for a couple bucks worth of DLC, and then purposefully doesn't even make enough. Nintendo fans are on par with Apple fans, they like being taken advantage of, that's the only logical conclusion I can come up with.

 

[McElroy]

But... The console isn't out for a whole month. Have all pre-orders just been pre-ordered in advance? No reason to panic yet, I'd say.

 

[Zhukov]

I'm guessing Nintendo just does it to make themselves look good.

How does this make them look good?

And even if it does, how does that make more money then just selling people the thing they want?

 

[Casual Shinji]

I doubt it's some conspiracy to make the public crazy for their products or to turn the Mini into a collector's item. I think it's just Nintendo being weird and stubborn like that, just like they are regarding YouTube, or regarding their IPs. Maybe they think releasing too many Mini's will make it look cheap and damage their brand. They're Japanese, so who knows what they're thinking.

 

[sXeth]

I'm guessing Nintendo just does it to make themselves look good.

How does this make them look good?

And even if it does, how does that make more money then just selling people the thing they want?

The idea is that they're such a high quality brand that their stuff is so heavily in demand that its almost impossible to buy at launch day. That they don't have to worry about used games cause nobody every sells off their cherished Nintendo product.

That's what they'd like to think anyways. Its kind of come apart as a narrative with store employees shining light on them undersupplying everything.

Its basically another approach to pushing pre-order culture. Most companies in the industry acknowledge that you haven't needed to pre-order the game itself for years, so their pre-order "incentive" is bonuses, or collector editions, or what have you. Nintendo's method is to actually try and make it so you do have to pre-order the thing to get it, by means of logistical sabotage (or negligence, whichever)

 

[Johnny Novgorod]

it's just Nintendo being weird and stubborn like that

I'm gonna go with weird and stubborn as well.

 

[stroopwafel]

I can't really explain either other than that Nintendo structually underestimates demand. My guess is they place orders late at the manufacturer than ramp up production when demand is high than quit when they estimate it will lead to surplus stock. I guess they figure it's a collector's item only a limited audience(for only a limited time) wants so it would be costly to oversupply(not so much the production costs but espescially the distribution costs that are really, really high). Execs at Nintendo probably figure it's better to have profit loss from not meeting demand than the excessive costs of oversupply. Better to sell too few than ship too many.

 

[Specter Von Baren]

I assume it's because, thanks to the Wii U's sales, they didn't want to go whole hog with the Switch and their other recent products in case they didn't do well either.

In the case of the mini consoles, it could be because of any number of reasons, remember that the original Donkey Kong was made with the machine for a different game entirely. I can't remember the details off the top of my head but basically the big game that got Nintendo started was made with repurposed machines due to cost constraints. If I were to guess, the mini's were also made with this kind of method for repurpusing hardware.

 

[Zhukov]

I'm guessing Nintendo just does it to make themselves look good.

How does this make them look good?

And even if it does, how does that make more money then just selling people the thing they want?

The idea is that they're such a high quality brand that their stuff is so heavily in demand that its almost impossible to buy at launch day. That they don't have to worry about used games cause nobody every sells off their cherished Nintendo product.

B-b-but how does that help?

They're presumably doing this to make money at some point. They make money by selling stuff to people. How does brand quality and demand help if they don't have enough stuff to sell to everyone who wants to buy their stuff?

Its basically another approach to pushing pre-order culture. Most companies in the industry acknowledge that you haven't needed to pre-order the game itself for years, so their pre-order "incentive" is bonuses, or collector editions, or what have you. Nintendo's method is to actually try and make it so you do have to pre-order the thing to get it, by means of logistical sabotage (or negligence, whichever)

Once again though, getting people to pre-order their stuff doesn't improve the bottom line when you don't make enough stuff to cater to the people trying to pre-order.

 

[RaikuFA]

I'm guessing Nintendo just does it to make themselves look good.

How does this make them look good?

And even if it does, how does that make more money then just selling people the thing they want?

To investors it looks great. Seeing headlines that the company that they invested in is making a product that is flying off shelves makes them happy.

Also, this seems to be a USA only thing.

 

[Parrikle]

I don't know the official reasoning that Nintendo (and the other companies) use, but to make a stab at why I'd see it as a reasonable business decision. Clearly the one that everyone raises is that it creates the impression of great demand if you sell out, making the product look more desirable. The other side, of course, is that not selling out maybe seen as having an unsuccessful product even with good actual sales. But I don't think the reason is that simple or that mercenary.

I think the main issue will come down to risk management. Manufacturing will ramp up over time to meet demand, but initially you need to take a guess at how many you need to produce. If you overestimate demand you'll end up with unsold production and a production line that is producing more than is required, causing down scaling of production and/or discounting to overcome the supply issues, with a proportional drop in profits. Underestimating demand, on the other hand, reduces the financial risk and (mostly) only delays (rather than prevents) purchases. Thus I'd expect them to underestimate to reduce risks rather than overestimate and get burnt.

I'd also add that the initial spike in purchases don't reflect ongoing demand, in that the manufacturing capabilities that you need to meet the demand for a product after the initial launch is lower than you may need for the launch. So you need to run your production line prior to the launch to build up stock for day 1 sales. This takes time and is a risk - reducing your stock by not making as many products in advance will bring your product to market quicker and reduce the required initial investment. You can then run your production at normal levels to meet the extra demand.

 

[sanquin]

B-b-but how does that help?

They're presumably doing this to make money at some point. They make money by selling stuff to people. How does brand quality and demand help if they don't have enough stuff to sell to everyone who wants to buy their stuff?

Because it artificially creates high demand. The same is true for diamonds. The companies have warehouses full of diamonds, but they only trickle in little bits of it at a time to keep the demand for them high, and thus the price high. In Nintendo's case, it just keeps the demand high, as the price of their products isn't generally THAT super high compared to diamonds, but still.

 

[stroopwafel]

They're presumably doing this to make money at some point. They make money by selling stuff to people. How does brand quality and demand help if they don't have enough stuff to sell to everyone who wants to buy their stuff?

Most likely the profit margins are really low for the nes/snes mini and that sales are secondary to the (free) PR and marketing of the product. It's also a form of advertisment. Not necessarily nes/snes mini but Nintendo as a brand. Consoles in general are sold at low profit(PS3 even at a loss during last console gen) with most profit coming from software and subscription services. Not really comparable with nes/snes mini but still..I doubt they make a lot of money off it.

 

[Zhukov]

B-b-but how does that help?

They're presumably doing this to make money at some point. They make money by selling stuff to people. How does brand quality and demand help if they don't have enough stuff to sell to everyone who wants to buy their stuff?

Because it artificially creates high demand. The same is true for diamonds. The companies have warehouses full of diamonds, but they only trickle in little bits of it at a time to keep the demand for them high, and thus the price high. In Nintendo's case, it just keeps the demand high, as the price of their products isn't generally THAT super high compared to diamonds, but still.

Artificially high demand is only helpful to the seller if they provide a supply to meet that demand.

There is a supply of diamonds. Anyone who has the money can walk into a jewelry store and buy one.

There isn't a supply of Mini-SNESs. Few people, if any at this point, are able to buy one at will. The high demand only raises the resale prices which profits scalpers on Ebay but not Nintendo.

To investors it looks great. Seeing headlines that the company that they invested in is making a product that is flying off shelves makes them happy.

Sure. But they could be having a whole bunch more of them flying off the shelves.

Most likely the profit margins are really low for the nes/snes mini and that sales are secondary to the (free) PR and marketing of the product. It's also a form of advertisment. Not necessarily nes/snes mini but Nintendo as a brand. Consoles in general are sold at low profit(PS3 even at a loss during last console gen) with most profit coming from software and subscription services. Not really comparable with nes/snes mini but still..I doubt they make a lot of money off it.

Maybe.

I'm struggling to imagine those things cost much to make though. All they need to do is store and execute a bunch of programs so tiny, simple and ancient that they could run on a potato and two LEDs.

 

[Rednog]

Artificially high demand is only helpful to the seller if they provide a supply to meet that demand.

There is a supply of diamonds. Anyone who has the money can walk into a jewelry store and buy one.

There isn't a supply of Mini-SNESs. Few people, if any at this point, are able to buy one at will. The high demand only raises the resale prices which profits scalpers on Ebay but not Nintendo.

There's artificially inflating prices by letting supply trickle out like in the case of diamonds, and then there's limiting the supply like in Nintendo's case where it creates artificial hype. Remember Amiibos? When they released no one really gave a fuck besides maybe a handful of people at best. That shit was just sitting on the shelves. All of a sudden it gets released that Nintendo is discontinuing those first few. Prices for the people that have them suddenly sky rocket, and now it's a mad frenzy to collect them pushing people to go out and buy them despite those same people not giving a fuck a few months earlier. It's a case of not wanting to miss out.

As soon as Nintendo starting pumping them out again people stopped giving a fuck.

I'd argue it might be the same case for the Switch. I mean why else are people scooping it up like mad? Just for Breath of The Wild?

 

[stroopwafel]

Maybe.

I'm struggling to imagine those things cost much to make though. All they need to do is store and execute a bunch of programs so tiny, simple and ancient that they could run on a potato and two LEDs.

Yeah, that's what I mentioned in my first post. Production costs aren't high but distribution costs add up to a considerable amount. When you know all your profit comes from initial sales(no software or network services) than it's not really worth making cost intensive risks with low margins.

 

[Kerg3927]

B-b-but how does that help?

They're presumably doing this to make money at some point. They make money by selling stuff to people. How does brand quality and demand help if they don't have enough stuff to sell to everyone who wants to buy their stuff?

Because it artificially creates high demand. The same is true for diamonds. The companies have warehouses full of diamonds, but they only trickle in little bits of it at a time to keep the demand for them high, and thus the price high. In Nintendo's case, it just keeps the demand high, as the price of their products isn't generally THAT super high compared to diamonds, but still.

Artificially high demand is only helpful to the seller if they provide a supply to meet that demand.

There is a supply of diamonds. Anyone who has the money can walk into a jewelry store and buy one.

There isn't a supply of Mini-SNESs. Few people, if any at this point, are able to buy one at will. The high demand only raises the resale prices which profits scalpers on Ebay but not Nintendo.

To investors it looks great. Seeing headlines that the company that they invested in is making a product that is flying off shelves makes them happy.

Sure. But they could be having a whole bunch more of them flying off the shelves.

Most likely the profit margins are really low for the nes/snes mini and that sales are secondary to the (free) PR and marketing of the product. It's also a form of advertisment. Not necessarily nes/snes mini but Nintendo as a brand. Consoles in general are sold at low profit(PS3 even at a loss during last console gen) with most profit coming from software and subscription services. Not really comparable with nes/snes mini but still..I doubt they make a lot of money off it.

Maybe.

I'm struggling to imagine those things cost much to make though. All they need to do is store and execute a bunch of programs so tiny, simple and ancient that they could run on a potato and two LEDs.

You have to look at it long term. And you also have to look at Nintendo's monopoly power. I think a huge portion of people that buy Nintendo products buy them not just because they want to play games. But because they want to play Nintendo games, i.e. Mario and Zelda. They have something PS and XBox can't offer, so they don't have to worry about losing customers as much as some would think.

So most of those Mario/Zelda fans will wait. And in the long term, pretty much everyone who wants a Switch right now is going to eventually get one, and so sales numbers aren't being hurt all that much in the long run. And in the meantime, the higher demand created by the scarcity allows them to charge higher prices than if they were to flood the market on launch day.

Yeah, scalpers will make some money off of the shortage, but I guess Nintendo thinks this is a acceptable loss, because they are still charging more than they would have been able to if they were to flood the market and make scalping unprofitable.

It's the same concept of OPEC. They don't give the world all the oil it wants. They carefully control supply so they can charge more. Monopoly power.

All that said, I think it's only part of the explanation. The other part is likely that Nintendo is simply being conservative to protect themselves from overproduction losses. Also, as someone said above, this strategy allows them to spend less on production infrastructure.... they produce the same amount in the long run, but with less production equipment and fewer employees.

At any rate, I don't buy that Nintendo is just incompetent, like this Forbes article [https://www.forbes.com/sites/insertcoin/2017/07/27/nintendos-artificial-scarcity-is-a-myth-but-supply-is-now-its-greatest-challenge/#5456776b4810] claims. There is likely a rhyme to their reason, because Nintendo has lots of money to pay smart people to advise them.

 

[sXeth]

I'm guessing Nintendo just does it to make themselves look good.

How does this make them look good?

And even if it does, how does that make more money then just selling people the thing they want?

The idea is that they're such a high quality brand that their stuff is so heavily in demand that its almost impossible to buy at launch day. That they don't have to worry about used games cause nobody every sells off their cherished Nintendo product.

B-b-but how does that help?

They're presumably doing this to make money at some point. They make money by selling stuff to people. How does brand quality and demand help if they don't have enough stuff to sell to everyone who wants to buy their stuff?

Its basically another approach to pushing pre-order culture. Most companies in the industry acknowledge that you haven't needed to pre-order the game itself for years, so their pre-order "incentive" is bonuses, or collector editions, or what have you. Nintendo's method is to actually try and make it so you do have to pre-order the thing to get it, by means of logistical sabotage (or negligence, whichever)

Once again though, getting people to pre-order their stuff doesn't improve the bottom line when you don't make enough stuff to cater to the people trying to pre-order.

Possibly some long game towards establishing Nintendo games as premium or collector products by themselves, so they can sell the games themselves as Collector/Deluxe editions, with a matching price, without having to muck about making statues or whatever the trendy box filler lately is.

That the have enough brand loyalty they could probably just get by without the barrel of nonsense (hell, they could probably have just sold the Amiibos as toys without the weird DLC chips that probably were more expensive to produce) is the inanity of it all.

 

[Yoshi178]

So yeah, people are getting frustrated because they can't get their hands on one of those mini SNES things.

i got my hands on 2 of them. you can buy one if you like. :3