Friday, December 7, 2007

Wii R price discriminators

In my thus far futile search for my niece & nephew’s Wii console to deliver by December 24, I found the Wii Tracker website. It’s a website that offers links to places that sell Wii consoles.

They link to a Mercury News interview (excerpted on a blog) in which Reggie Fils-Aime, the president of Nintendo of America, explains the sales frenzy:

Q: The Wii console has been a big hit to date, with you guys having a difficult time meeting demand. This is going to be a bad Christmas for folks still wanting to buy one, isn't it?

A: We have been sold out worldwide since we launched. . . . Every time we put more into the marketplace, we sell more, which says that we are not even close to understanding where the threshold is between supply and demand.

Q: What is it about your manufacturing system that doesn't allow you to catch up with demand?

A: The issue is not a lack of production. The issue is we went in with a curve that was aggressive, but the demand has been substantially more than that. And the ability to ramp up production and to sustain it is not a switch that you flick on. We're working very hard to make sure that consumers are satisfied this holiday, but I can't guarantee that we're going to meet demand. As a matter of fact, I can tell you on the record we won't.
Given this supply constraint, Wii Tracker makes Nintendo’s strategy quite clear: it’s quite easy to buy a Wii today, as long as you’re willing to pay $500-$600 for a “bundle” rather than $250 for just the base console. Increasingly, parents are paying twice what they were willing to pay in order to have the “must have” game in time for Christmas.

If course, this is exactly the sort of price discrimination (versioning) that Hal Varian advocates in Information Rules: charge more money to those who are willing to pay more, less to those who are not, and keep the two groups separate. So those who want to buy a W for junior's birthday in February will do fine, but those who want to be a hero on Christmas morning are hosed. That's me: in fact, my niece and nephew have birthdays in December, so I can't even try the wait-until-February ploy.

Update 12:45 p.m.: This morning’s WSJ says the Wii shortage is caused by 2007 sales exceeding Nintendo’s forecasts by 25%, by extremely conservative supply chain management, and by huge lags in ramping up production because it is 100% outsourced. Upon further investigation, I also found that the profiteering is not (directly) due to Nintendo, but its dealers.

1 comment:

Mac G said...

I am in the same boat for the WII as you are. I have was able to get on Sears today following the WII tracker and was shut out in minutes.

Great Blog and I would love to hear your take on 2 year cell phone contracts. I HATE them.

I want an IPhone but ATT&T has the worst service ever.

I am holding out hope for the Gphone.