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Print E-mail del.icio.us 49 comment(s) - last by Hoser McMoose.. on Apr 1 at 7:14 PM
Wedbush Morgan analyst blames Wii supply woes on weak dollar.

Nintendo's Wii remains a brisk seller in the United States and sells out almost instantly whenever a store gets new stock to sell to customers. When stores like Toys R Us or Best Buy send out their weekly sales flyers advertising that they will have Wiis in stock, there is invariably a line of customers waiting in line Sunday morning to receive a voucher to get a Wii.

Michael Pachter, an analyst for Wedbush Morgan, says that the reason for the poor supply if Wii consoles in the U.S. has nothing to do with component shortages or strained production capacity -- it all relates to the weak dollar.

The weak dollar is affecting trade with many countries around the world and Japan-based Nintendo stands to gain a lot more by selling its Wii consoles to its customers in Europe rather than those in the U.S. according to Pachter.

Pachter goes on to note that supply levels in Europe are starting to normalize after Nintendo initially sent its excess production there. It is expected that Nintendo will begin funneling more of its Wii allotments to the U.S. later this year which Nintendo hopes will coincide with a stronger U.S. dollar.

"Of course, all things being equal, Nintendo would probably have preferred to be able to supply both Europe and the U.S. simultaneously," said The Dallas News' Victor Godinez. "But the company might be betting that the dollar will be stronger by the time European demand for the Wii subsides, and that may well happen."

For those without a Wii, you can hopefully expect to have an easier time finding one by the Holiday 2008 shopping season. For those that do have a Wii, you can look forward to upcoming releases of Wii Fit and Mario Kart Wii.

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Wii can't has your dollars?
By MrBlastman on 3/31/2008 9:44:28 AM , Rating: 3
At face value, I have a hard time believing this argument, but, lets look at the data.

When the Wii came out, the US Dollar was approximately 1:118 - 1 buck would get you 118 yen.

Currently it is 1:99.1 so it has fallen in strength by approximately 16%.

Well, currently it would take more dollars to buy yen than previously and the price of the Wii remains unchanged.

If this were a problem - IF it were, given the popularity of the Wii, they could raise the price if they really wanted to and people would still probably continue to pay for it (though this would be an unprecendented move - they'd probably have to bundle it or give some small form of low-cost value to justify the price raise).

The problem is, you want people to continue to adopt a VG system as rapidly as possible and hampering access to it only hurts the potential software library as the client base is stalled out. It has grown phenomenally so in real world case this is not exactly the situation we have right now.

But, you can't ignore that Nintendo is making an enormous profit margin off of the Wii. I just don't buy it - I think they could stand to have a slightly reduced profit margin and still pump them into our marketplace.




RE: Wii can't has your dollars?
By mdogs444 on 3/31/08, Rating: -1
RE: Wii can't has your dollars?
By OrSin on 3/31/2008 10:03:54 AM , Rating: 4
You guys are completely missing the piont. The Wii is still selling out everyone. But if I'm going to sellout my product, might as well sell it out where they are paying more for it. Since the EU is paying more fo the same product they are shipping them more. Stop with the USA is so great we should get always be first in line thing. Profit beats patriotism anyway. And its not like the Wii is made here so, why shoulds they give a crap. They are doing exactly what any good business should do. Make that money. And if they did send us more, then they would be shorting the EU, and that makes no sense at all.


RE: Wii can't has your dollars?
By MrBlastman on 3/31/2008 10:10:52 AM , Rating: 2
I never said the USA is so great - where in my post did I do this?

I never said we should be first in line either.

I based my rationale purely on a market saturation standpoint. In the VG business, it generally has made the most sense to saturate a market with your system as rapidly as possibly to achieve widespread acceptance by software developers so your library can grow, further attracting more adopters.


RE: Wii can't has your dollars?
By Frallan on 3/31/2008 10:14:56 AM , Rating: 2
I think his answer was to MDogs...^^


RE: Wii can't has your dollars?
By MrBlastman on 3/31/2008 10:19:40 AM , Rating: 2
Correct. Not sure how it got under the wrong guy, probable ID 10 T on my part.


RE: Wii can't has your dollars?
By jeff834 on 3/31/2008 11:52:39 AM , Rating: 3
And they are doing exactly that. They are selling them as fast as they can make them, but theyre shipping more to Europe than the US because of higher profits. It's not like in Europe Wiis are collecting dust on store shelves. If they could make enough to meet worldwide demand they certainly would, but the point of this article is to say with the supply limited they have to pick and choose where they sell, and Europe is currently the most profitable market.

Let's say you made a product and you could make 500 of them a week max (arbitrary number). Now let's say country A wants 500 and country B wants 500 per week. If you could make 1000 per week you would sell them all to both countries, but since you can only make 500 you sell to whomever gives you more money (or in this case where the money is more valuable). So it's not a question of saturating the market, they're not sitting on stock piles or limiting their manufacturing capacity, just choosing where their limited supply will earn the most profit.


RE: Wii can't has your dollars?
By MrBlastman on 3/31/2008 11:59:45 AM , Rating: 3
I don't think it is as simple as to say:

We can sell it in Country A for 200.00 profit

We can sell it in Country B for 150.00 profit

The reason is it fails to take into account demand for the units.

If the demand in Country A is 1000 units per month and the demand in Country B is 2000 units per month, you will generate 50% more profit over a month in Country B (which in our case is the United States).

It is important to keep supply strong enough that demand does not sputter out and succumb to pressures of substitute goods. What will happen when the 360 and PS3 reach competitive price levels?

We need data to support the European argument - units supplied to each country vs. units sold and cost of units vs. profit generated. We also need figures that point towards the demand of the units.


RE: Wii can't has your dollars?
By Lonyo on 3/31/2008 1:16:32 PM , Rating: 3
250 euros per item.
Price to manufacture will be the same.
Import tariffs and taxes will reduce some of the profit, but basically the Wii in Europe is priced very highly compared to the Wii in the US, even after you take away tax, so they are almost certain to be making quite a lot more from Europe, especially with a strong Euro.

Euro vs Yen has remained fairly static over the last 12 months, whereas, as mentioned, the dollar has dropped. If they are saturating the European market and shipping anything left over to the US then that's what makes most business sense. Using specific numbers of units is pretty pointless.
Wii's are still often sold out in the UK at least, even with this claimed extra supply, so demand is high enough.


RE: Wii can't has your dollars?
By jeff834 on 3/31/2008 4:17:16 PM , Rating: 2
Well for the time being demand is about 100%, even more really as I believe Wiis are STILL selling for more than retail on ebay. I've looked for months (not very hard but checking every time I'm in a store) and I have never once seen a Wii on the shelf, and if they were there they're gone in under an hour. That's 18 months after release. I've been a gamer for 22+ years and I have never seen a video game system consistently sell out for 18 months after its release. If I'm guaranteed to sell out all of my available systems no matter where I sell them, I will surely sell them where the most money is. And it doesn't take a financial genious to tell that for the time being 250 euros is much better than $250 USD.


RE: Wii can't has your dollars?
By evanhaut on 4/1/2008 10:53:12 AM , Rating: 2
Nice thinking, but wrong. In a game console business model it is not the price return of consoles sold that creates the revenue, but the volume of media copies sold. As such market share gets top priority and with the US (with its ever consuming tendencies) its top market.


RE: Wii can't has your dollars?
By MrBlastman on 3/31/2008 10:08:44 AM , Rating: 4
I agree to an extent - as Japan has not been the most friendly of nations when it comes to allowing OUR goods and services to be sold over there.

There still are, to this day, many barriers of entry into their economy for US products and businesses.

However, Nintendo has never publicly admitted this (but Japan does have a history for not admitting to things over time if you know what I mean).

I just don't, at least for now, see a reason to hamper supply because of our dollar sputtering except for pure profit reasons. As a business strategy, it doesn't make sense - there are much better alternate solutions.

Just look at their Market Cap - it has grown to over 74 BILLION in a very short time.

That is a 13.78 per share in March of 2005 vs. 64.67 a share today change in value. A growth of over 369%!

To put that in perspective, SONY corporation has a market cap of 41 Billion.

Nintendo has nearly 57% more value in their market cap.

That's huge. Nintendo has gone from a small company in Japan to a powerhouse in a couple of years.

I don't see them hurting at all.

You don't see Sony cutting production on their products they sell here currently, do you?


RE: Wii can't has your dollars?
By Noya on 3/31/2008 10:51:20 AM , Rating: 3
quote:
I agree to an extent - as Japan has not been the most friendly of nations when it comes to allowing OUR goods and services to be sold over there.


Most of our goods (car & electronics) are inferior to their domestic products and the Japanese are fiercely loyal to their own domestic companies.


RE: Wii can't has your dollars?
By BZDTemp on 3/31/2008 1:07:52 PM , Rating: 2
Well it is not like the US has a great track record of admitting to things over time!

For example the US is a nation which will not stand by UN rules of war crime for fear of having it's soldiers brought to trail (or maybe it is just about protecting Kissinger).

IF Nintendo is supplying Europe over the US then it is just good business sense. Hell if the dollar get much lower I will start doing my weekend shopping in the big apple rather than say London or Paris simply because it is getting so cheap.


RE: Wii can't has your dollars?
By aos007 on 3/31/2008 4:34:01 PM , Rating: 3
Exactly what goods does US still manufacture?

Besides, all this is just whining. When Canadian dollar goes down, we are almost always faced with the price increase, no matter what the product is. I can't see any good reason why the US' Wii price shouldn't go up. What's so special about you guys that you should be exempt from price increase when your currency loses value?


RE: Wii can't has your dollars?
By Ringold on 3/31/2008 6:56:43 PM , Rating: 2
quote:
Exactly what goods does US still manufacture?


Common public misperception. Job loss from automation more than anything else does not equal a true loss in industrial output.

Snippet from FRED data, Jan-1 of each year-
1945: 18
1955: 22
1965: 34
1975: 46
1985: 61
1995: 80
2000: 102
2008: 112

In other words, from late 1945 after the end of WW2, where the index sat at 12, which supposedly is one of the glory eras of American industrialism, to today, we've grown by 933%. Output continues to grow.

I suggest, instead of trade, to rage against evil, ruthless, family and job destroying technology. Particularly CPU's, and the vile robots they power. Might just avert the Cylon War.

And by the way, the Canadian's see the value of their looney pass through to retail so much more easily because the size of your economy. Firms don't care so much about taking a loss and possibly losing a sliver of their Canadian market share. Losing market share in America, on the other hand, would be a big deal. No offense at all intended towards Canada, its just all about the size.


RE: Wii can't has your dollars?
By Ringold on 3/31/2008 11:01:02 PM , Rating: 2
I forgot to clarify that data..

The index of industrial output in 2002 was set equal to 100.


By Hoser McMoose on 4/1/2008 7:14:41 PM , Rating: 2
Two things are special about the U.S. First, it's a HUGE market, often the biggest market for companies. Second the U.S. economy is rather poor and no company wants to further jeopardize sales by raising prices as demand levels off or drops. These factors have put companies in a bit of a jam, particularly for any companies in industries were profit margins are low.

Inflation in the U.S. is already at 4%, which is pretty high, however it probably SHOULD be higher based on the drop in the U.S. dollar.

Up here in Canada we don't get the same sort of protection because we're a much smaller market. Losing 10% of the Canadian market is of less consequence to most companies than losing 1.5% of the U.S. market. Also, lets face it, NOTHING is priced in Canadian dollars on international markets. So when the Canadian dollar drops we pretty much immediately need to pay more.


RE: Wii can't has your dollars?
By afkrotch on 3/31/2008 10:12:22 AM , Rating: 2
Read the article again. No where in there does it say that Nintendo publicly stated that they wouldn't send shipments to the US, due to the declining dollar. That was a research firm saying that.