A “Sense & Respond” Retailer Would Have Bet Early On the Wii
I just bought a Wii. They are still hard to find, but I happened upon a pallet of them in my local Costco last week (right place, right time). Although I have been blogging about the Wii Experience for months, I had never experienced it personally. After the first swing of the virtual tennis racquet, I felt it. I was really “playing” tennis. I was not “pressing A to swing”. With just that brief experience, I completely understand why the Wii has taken off like it has. ‘It’s the experience, stupid!’, and it’s quite a success story.
Nintendo has long been the underdog in the video game market. Sony and Microsoft flew past them in terms of titles and realistic graphics during the last cycle. Nintendo titles have historically been more “family oriented” (no cop killing or hidden sex scenes), and their stock performance has historically been lackluster. When the third generation (3G) console war started heating up last year, the PS3 was supposed to be the big cheese (with the big price tag). XBox 360 had gotten a head start on the 3G market a year ago and had over 150 titles so they were expected to hold on to the number 2 position.
Retailers, while covering all the bases, believed that PS3 would be the big winner. As a result, they all fought for the same scarce pre-christmas inventory. Fast forward three months and we are now seeing headlines like: “Nintendo’s Wii Leaves Sony’s PS3 In the Dust and Nintendo Wii Sales Quadruple PlayStation 3 and Analyst: PS3 Readily Available, Wii Still Sold Out?
I visited no less than 6 stores on Monday night – EB Games, GameStop (NYSE: GME – News), Best Buy (NYSE: BBY – News) and Target (NYSE: TGT – News). None of them had the Wii in stock. I spoke to one of the employees at GameStop and he told me that they get Wii shipments from time to time, but the units sell within minutes. Talk about demand. He did volunteer that they had plenty of PS3’s stacked up in the back.
Were there early indicators that the PS3 would fail so miserably against the Wii? If you recognized those indicators, could you have profited by changing your retail strategy and focusing more on the Wii? Did any retailer see opportunity? Perhaps Gamestop did as they secured an exclusive agreement to have Wii demonstration kiosks in their stores. Did they “Sense & Respond” or was it accidental? Here are some early indicators that could have pointed the way:
1. PS3 is too expensive for the average household
Lots of discussion about this from analysts following the E3 debut. An analyst with ABI Research was quoted as saying “Asking consumers to pay $500 to $600 for a game console, when most have yet to purchase an HDTV, will give many current PlayStation 2 owners reason to consider the competition.”
2. E3 Performance: Poor PS3 showing; Big Nintendo buzz
“We went into E3 2006 unconvinced of the Wii name or the machine’s potential and walked away from the Convention Center knowing for certain that Nintendo has another hit on its hands…. The Big N’s new platform may lack the graphic horsepower of competitor PlayStation 3, but its innovative controller stole the show right out from underneath Sony’s collective feet.”
3. Continuous stream of bad news and missed expectations from Sony
Originally slated to debut in May, 2006; pushed to August, and then to November, Sony just could not deliver. Industry observers were warning as early as February, 2006 that the PS3 could be a flop due to the high cost of the technology-bloated console. Sony’s strategy was to use the PS3 as a Trojan horse to get Blu-Ray into your family room, but limited availability of key components which were reported as far back as July ’06 caused Sony to scale back the number of units available in North America delayed European availability until 2007.
4. Nintendo’s disruptive shift that focuses on the experience of the gamer
I think this was the biggest indicator that Nintendo would be the clear winner. Nintendo’s decision to approach the business from the players perspective and make a product that truly engages the player (at half the cost of a PS3) was disruptive.