Ship v Sold Wii/PS3/360 - Dec 2013 and post adjustments.

[dunno001]

Machina said:

dunno001 said:

Actually, the supply numbers seem reasonable to me. We're late in the console life, news (and buzz) is forming for the next gen of consoles, word of price cuts on current systems (and the Wii one has happened since the last numbers here), and a general approachment of saturation means that stores will want to start waning supply down. The Wii is a little low, but 2.5 weeks isn't a dangerously low inventory level. In fact, since it did actually have the change happen, coupling that with the previously considerably slower sales over the Wii's prior year, means that stores are naturally going to scale it back quickly, expecting a continuing decline.

That aside, it's nice to see where things are going, and I'm most interested in the daily supply watching. It really helps to show how the shipped vs sold numbers can be varied.

Is it realistic for it to be that low without shortages though? On shelves, in stock, in retailer warehouses and in transit, without shortages, worldwide. Same goes for all of them. We had Wii as low as 50,000 in the Americas at the end of March tho iirc. It just sounds incredibly low; it's what it sells on a weekly basis (pre-cut).

At this time of year, I would say yes. Retailers order much less to sell down any excessive stock left over from the holidays. (Note the stock levels from Dec. 31- only a few weeks stock, but entering a much slower sales period.)

The way I see things (though I don't know how the industry itself does) is this: I'd allow 3 days transit from company to warehouse, and another 3 days from warehouse to store. Most stores get at least 1 delivery per week, so 1 week's supply in the store plus one week total in the transit system means that I would want to see at least a 2 week supply in the wild. Anything less, and I think there would be sellouts.

Now, looking at the current numbers. You will note that I did express some thought that the Wii's number was low. At that stock level, my guess is that there are sporadic isolated cases of the Wii being sold out at a few stores. I would also guess that Nintendo, planning the upcoming price cut, tipped retailers off to keep stock levels low for an upcoming change this quarter. A new SKU would make selling older SKUs harder, so Nintendo intentionally aimed to keep the old stock low. (That, and the sooner people have to get the new SKU, the better of a chance there is to sell the new Wii Sports game SKU.)

Both Sony and Microsoft being closer to a month's supply I think is ideal for retailers. A common term of sale, that I've heard all 3 companies use, is about 1% 10, net 30. This means that a retailer must remit 1% of the invoice total within 10 days of the shipment, and the full bill is due in 30 days from shipment. When the manufacturer is paid by day 30, ideally, most, if not all, the merchandise is already sold, to allow the cash flow for the retailer. (Things which you can't depend on being sold out in 30 days with these terms are usually sold at better margins for the retailer- look at clothing.) Having too much inventory, let's say 40 days worth, means that when the bill is due in 30, you've only sold 3/4 your inventory. The small margin on consoles means that the difference in monies not seen from sold consoles needs to come from another source. (To put this in numbers, say I had ordered 40 3DS systems {Net retail- $10,000. Net wholesale- $9500.} I will owe $95 to Nintendo within 10 days. Easy- I see more than $100 revenue from selling one- and I sell on average, one every day. But, by day 30, I owe Nintendo another $9405. I just sold 3DS #30, for total revenues of $7500. Where does this other $1905 come from? I have to get it somehow, and in the meanwhile, it's sitting there in my 10 other unsold 3DS systems.) If I have no other income, I've just defaulted. (For the record, I used Nintendo because they are the only one I actually know the wholesale on. All I know about both Sony and MS is that they are both worse margins.)

Sure, there will be exceptions to things- Sony might offer me a deal on the wholesale, but only for net 10 terms. Microsoft may want to encourage a promotional display, and offer me 10% 30, net 90 terms. In the former case, if I have the cash availiable, I may wish to take advantage of it, since I do know that I can eventually sell the systems (assuming I don't go completely overboard), and a favorable wholesale means that I get more profit in the long term. For the latter, the favorable terms in exchange for the display means that I have access to more money for a longer period of time, and can use that to make more money. (Or, in a case of irony, use the revenue from the latter to take advantage of the former deal.)

So I really can't fault retailers for these current stock levels. It's a slow time of year, and there's not much on the plate telling me that sales will increase. (Well, except for something Nintendo is planning, but that's not availiable to me at these numbers' time.) If there were visable widespread shortages, then I'd see reason to blame them. As things stand now, I have to call it smart business sense, esepcially in the current global economy.