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posted by malloc at 03:37 pm on 2007-12-07 |
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Wii shortages: Psychologically, it's better if the customer is begging for the product
The Wall Street Journal has an interesting article on the Wii supply and demand issue with views from professionals including supply-chain management. They say that the shortages are emblematic of the Japanese company's native caution. Nintendo has a rare strategy which puts a great deal of focus on cash flow, while it tries to keep its inventory as low as possible. A supply expert believes that Nintendo may be missing out on opportunities but the hype it creates will have benefits as "Psychologically, it's better if the customer is begging for the product." They also note that even when Nintendo does try to increase capacity, it is difficult because it outsources all production. This means waiting for a part from one manufacturer can hold the whole process up.
quote:
Supply-chain management experts say missed opportunity may still be better than being stuck with excessive supply. Unsold Wiis could create a negative impression that consumers don't want the product. The consequences are so painful that many companies end up erring on the side of a shortage.
"If you flood the market, it will come back to haunt you," says Christopher Tang, a professor of supply-chain management at the UCLA Anderson School of Management. Nintendo may be missing opportunities by allowing other people to profit from the shortage by charging premiums, but Mr. Tang says that isn't entirely a bad thing because it creates hype. "Psychologically, it's better if the customer is begging for the product," he says.
An excess supply also angers retailers, who must work harder and offer discounts to get rid of the product. The manufacturer's financial results also suffer because they are forced to lower prices or take back the products retailers can't sell.
But even when it plans to step up capacity, Nintendo's job is all the more difficult because it outsources all production, compared with other companies, who make their own products. The Wii contains dozens of parts, which means "one manufacturer can hold the whole darn thing up," says David Cole, an analyst with industry-research firm DFC Intelligence, based in San Diego.
Nintendo also must balance demand in the U.S. with other markets. The Wii craze has calmed down somewhat in Japan, for instance, but the company still needs to make enough consoles available to support the debut there earlier this month of its highly anticipated videogame Wii Fit, which lets users play exercise games by standing on a board that can sense shifts in weight.
But analysts believe it will get easier for consumers to find a Wii next year as Nintendo increases production.
News Source: wsj.com
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