The Wii Shortage

One of the consumer electronics most in demand for Christmas 2007 is the Nintendo Wii.

There are two reasons for this.

1. The Wii is fun for nearly everyone to play, including women of all ages, kids, grandparents and other people who would give up after ten minutes of trying to play video games on an XBox 360 or Sony PS3.
2. The Wii, which has been on the market for over a year, is still in limited supply, and many people who want to buy them as a gift for Christmas this year will not be able to get one.

The question in my mind is why there is still a shortage more than one year after the initial launch of the Wii. One would think by now that manufacturing capacity for the Wii could have been increased to the point where everyone who wanted the video game console could buy one. At this point, though, one must wonder whether the situation is due to a conscious choice by Nintendo management or if it's come about in spite of those top decision makers.

Is the shortage due to a scarcity of components, manufacturing process challenges for one or more of the components of the Wii, or bumbling amongst the people responsible for manufacturing the consoles? The lack of Wiis in the store could be caused by Nintendo management deciding from a marketing buzz standpoint that Wii shortages would in the long run sell more units than immediately boosting production to have store shelves full of Wiis. Another possibility is Nintendo might be simply making a prudent business decision to ramp up production cautiously to prevent unsold inventory if consumers lose interest in the Wii.

One factor Nintendo may have taken into account if they are consciously limiting Wii supply is there have not been any megahit games for the Wii. In the video game console market, megahit games often drive sales of the consoles. The release of the XBox 360 game Halo in September 2007 resulted in more XBox 360s being sold than Wiis that month. It was the only month in 2007 in which the Wii wasn't the highest selling console. No megahits on the Wii yet is likely more an outcome of video game studios pooh-poohing the Wii prior to its release than a reflection on the console's gaming capabilities. Many studios are scrambling to develop and release new Wii games, and at some point the combination of wide demographic appeal and the sheer number of consoles sold will produce best seller Wii games. A lack thus far of a Wii megahit was mentioned in a recent Associated Press article on Yahoo! News:

"...A year after its introduction, Nintendo's console isn't easy to find. In spot checks of retailers (Target, Best Buy, GameStop) last weekend, I was able to find plenty of Xbox 360s and PlayStation 3s, but not a single Wii. While the Wii has outsold its competitors, there have only been a few great games — "Super Paper Mario," "Metroid Prime 3: Corruption" — for the system. That will certainly change as other publishers devote more resources to Wii games and Nintendo brings more of its franchise characters to the console. And Nintendo has enlisted the biggest video-game star of all to celebrate the Wii's first birthday..."

A NewsFactor.com article on Yahoo! News points to manufacturing problems without mentioning any specific issues:

"...For Nintendo, the critical question is whether the revolutionary gaming platform will continue to be a consumer favorite or a lingering manufacturing hangover will stifle sales...Given the robust sales and continued demand for the Wii, the upcoming holiday season should be a good one for Nintendo, but the company has been hampered by manufacturing delays. "Here's the good news," Roger Fils-Aime, the president of Nintendo America, said in an interview with the San Jose Mercury News. "The good news is we're flowing more and more product into the marketplace, and the amount of Wii hardware that will be in North American stores will be unprecedented. Substantially more than the launch, substantially more than has been seen to date."...Fils-Aime said that retail outlets would receive regular shipments, and that consumers should periodically check with retailers in their area to see when new shipments would arrive..."

Echoing the thought that Nintendo is consciously managing production rate and inventory is a NewsFactor.com article from Yahoo! News:

"...Retailers have reported that Wii units sell out within a few days, even though Nintendo has said it increased production for the holiday season. Some observers have said that Nintendo appears to be increasing supply slowly, so as not to cause a glut..."

In the end, it may simply be decided the Wii achieved that most difficult of objectives in our global economy: balanced supply and demand for a highly desired product. Luke W said although the store shelves may often be bare of the consoles, it's not all that hard to find one somewhere if you do some calling around. His opinion is echoed in an Associated Press article on Yahoo! News:

"...But this year, it looks like the gift everybody is looking for is the same as last year: the Nintendo Wii. A year after its launch, the small video game console sells out almost immediately when it reaches stores, even after Nintendo Co. has ramped up production several times. "Right now, if you work at it, it's not too hard," said John Lawrence, of Fort Worth, Texas, who bought a Wii a few weeks ago for his 9-year-old grandson. It took him some online sleuthing to find one at a local GameStop..."

As Luke W stated today, "Regardless of the reason for the Wii shortage, the console is pretty much a license for Nintendo to print money."

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