Very interesting information. Note to the markup on hardware vs software. Like I've said all along, without software sales, consoles make very little profit.

http://arstechnica.com/journals/thumbs.ars/2007/12/19/forced-wii-bundles-an-independent-game-stores-perspective

Forced Wii bundles: An independent game store's perspective

By Ben Kuchera | Published: December 19, 2007 - 02:12PM CT

Yesterday, we talked about Nintendo's stance against forced bundles, and we gave some instructions about how to fight back against scuzzy retailers. I've already received some great leads, and I'm following up on them. Before we start reporting on that, though, I thought I'd share another e-mail I received from an independent retailer who has a very different perspective on bundling.

"I am a single independent video game store with annual sales of above $700,000. The markup on consoles is less than 1 percent and games are around 14 percent," he writes. Running any game store is a hard business, and these margins don't help. What's worse is dealing with the distributors. "My distributors tell us that Nintendo has an 'attach rate' and we are often forced to purchase four games with each console. We pay $246 per console. If we sell the console for $249.99 retail, it's a $3.99 markup. If a person pays by credit card we lose money."

So how do you deal with distributors while trying to turn a profit? "We sell the units with a 3 game attach rate. We call it a choice bundle. A customer buys a Wii and three games of their choice. 99 percent are more than willing to do it... Basically the distribution network for product is controlled by the distributors, not Nintendo and not the retailers. If I didn't lose money on each sale of the console we wouldn't need to make bundles."

He also complains that they've only been able to purchase 15 Wii systems so far in December, and no Wiimotes or Wii Zappers in a long time. It's hard a business when you don't have the buying power of the chains, and bundles are one way to deal with it. "The key is not forcing them to buy a memory card or some crap they don't want," he tells me. He also says it's rough when practically every customer wants to buy the system to put it on eBay for their own profit.

It's a hard position to be in, and this is one of the reasons why independent game stores often focus on repair or selling used products. I thought it might be interesting to look at the this issue from the point of view of the little guy before trashing some really terrible behavior on the part of other stores tomorrow.

Yeah. I would say that the bundle he describes sounds fair for such a limited device. But, when places make you get 6 games and a forced extra warranty, that's bs.

I would say a forced bundle with wii play, a nunchuk, and a choice of two other Wii games would be fair, and probably not far off from an average purchase anyways. When I bought my Wii that is exactly what I did. Well, not at exact same time as it was not all in stock, but by the next day I had.

The CHOICE bundles, I don't mind. Provided you actually get to choose what games go with the thing. Honestly, i think this is actually a nice little push for the casual gamers to actually try something out besides Wiisports and Wiiplay.

But if they're going to try to offload chicken shoot and carnival games on me, I'm not going to buy it. Really though, that's what it comes down to, if the bundling gets that much out of hand, people will go where they don't have to get the bundle.

Yeah, but this is absolute BS:

http://www.toysrus.com/product/index.jsp?productId=2967682

$700 for an absolutely craptastic bundle. Sorry, absolutely NO EXCUSE for that. At the very least, we should get to pick the games. "Wii: $250 with a 3 Wii Game purchase" would be better. What does the store care if it is going to be sold on ebay, the store gets the same amount of money either way.

I remember reading about the profit margins on consoles right about when the Wii and PS3 were released, and I believe that it was closer to $6-$12 depending on the console. Not $4. I don't know if he's being accurate here, but if he doesn't make money on Wiis then stop selling Wiis and sell the software and accessories instead. Nintendo isn't forcing you to sell their product.

$4 out of $250 is also closer to 2% than 1%.

Hopefully someone with retail experience and access to this information can shed some light on it.  Is is suggestion that they're making $4 per console accruate?

 Glad I wasn't the only one who thought this.
 

 Although I will admit the bundles he is doing are tolerable compared to some of the shit Walmart and TRU have been pulling online all year. 

At least this guys is bundling. Where I live a few independent retailers are charging $400 for a Wii (no games), $550 for an XB360 Elite (retail bundle with Forza and Marvel: UA), and $500 (Retail with Spider-Man BD) for a 40GB PS3 and $650 (retail with MotorStorm) for the 80GB.

I know independent retailers need to make money but if they cheat the customers they lose out. I held out for my Wii cause of the retailer I mentioned and found it at Circuit City for $249 so they lost out.

They can't markup those products without problems. They have an agreement with the companies when they sell those things.  Take a digital camera into that store, take some pictures, ask for some names, and contact Sony, MS and Nintendo. Tell them that this guy is inflating the cost of the systems.

I agree with everyone who is saying that this is a reasonable/tolerable bundle.  However, it is difficult to make distinctions between good and bad bundles.  Nintendo could approve, perhaps, a specific bundle style: three games of your choice or two games and an a nunchuck or classic controller, perhaps.  But it only becomes more confusing, especially for independent retailers who don't even know how the rules work for all of the different products they stock.

 I think the distributor takes a chunk of the profit for theirselves. 

I don't think you can sell Wii software without also selling Wii hardware.  The same would go for the 360 or PS3 (or any other console).  Also, if he stopped selling Wiis, he wouldn't get as much traffic to his store for people buying software.  It's not all black and white, cut and dry -- everything has an effect on everything else.