Paul Tassi has written an excellent article about Nintendo’s inability to manufacture enough units of their popular holiday items, the NES Classic and $99 New Nintendo 3DS promotion through Amazon.
Forecasting demand is a tricky business for all companies. If you overestimate demand and manufacture way too many units, they will sit on store shelves and eventually you will have to buy back your inventory and put them in a landfill somewhere (see: Atari’s E.T.), or the overstock is marked down to levels that ensure no retailer will be interested in stocking your item in the future.
Nintendo has seemed to struggle with estimating demand of their products for a while now. The Nintendo Wii was impossible to keep on store shelves for nearly a year and a half after it’s launch. At the time, this seemed like a great problem for Nintendo to have. After lifetime console sales had seen a continual downward trend since the original NES, it was a great time to be a Nintendo fan. The Wii was a huge success and gave die-hard fans some confidence that Nintendo wasn’t going anywhere after hearing years of market analysts predicting that the big N would be exiting the console space in the near future.
Eventually, Nintendo was finally able to keep the Wii in stock. When the successor to the Wii was announced, the wildly mismarketed Wii U, Nintendo wanted to ensure they did not see a repeat of the Wii and manufactured what they thought was enough units to satisfy demand for the launch. Unfortunately, the Wii U was a flop for Nintendo from a sales standpoint, and they had manufactured far too many units. Nintendo went on to lower sales projections for the system by nearly 70%. I believe the Wii U’s failure to take hold in the market is what has caused Nintendo to take an overly cautious stance to manufacturing ever since.
The NES Classic could have easily sold five or six times the number of units that have been manufactured thus far, which is unfortunate since it’s such a great product and would make so many people excited this holiday. What some industry analysts and journalists fear is that Nintendo will under-manufacture the Switch as well this coming spring. We can only hope that Nintendo is able to correctly predict demand for the Switch and manufacture enough units to satisfy the market. I personally hope the Switch is a huge success for Nintendo. The video game industry is stronger for having a company like Nintendo continue to think outside the box and try new things.
Please give Paul’s article a read as it summarizes the situation better than anything I could ever have written.