Well d'uh, of course they don't sell well. Most early adopters are still paying the mortage loans they had to take in order to buy a PS3 in the first place. =P

Thanks for the update, and thanks for the game sales. So you actualy had to wait longer than usualy for Wii deliveries? So guys what do you think is the Big N starting to save stock for the 3 big launch or is the stock going to Europe? I know that Sweden isn't supply constrained any more. Don't know about the rest of EU.

I'd think Nintendo does it to save money. The trend is familiar with my store. We get about 2-3 every 2 weeks. They don't sell out right away either. Found 2 yesterday, probably are still there, and will be for another week. I live in a retirement community and most young people probably already got their Wii's so it's just people from out of town or maybe some old people buying them. PS3's sell at about 1 every 2 weeks, and they still have 2 in stock from about 3 weeks ago. :P Haven't been paying attention to the 360's since they're not up front. I'll venture a guess they sell more than the 360. :P

Do Nintendo represent themselves there? The Wii isn't really supply constrained any more in Portugal either. And I have a fealing that the fact that Nintendo has another company representing them here played some role.

We got a lot less units at launch than would seem normal, and the Wii was completely sold out for months, people would laugh at you in stores if you asked when stock was coming, and whether you could pre-order. After that though, we've kept getting healthy shipments units and supply kinda caught up with demand. They keep moving fast and selling out eventually, just not instantly, and if you pick a mall with multiple game stores, at least one store will have some in stock more often than not. This seems to contrast with other countries where the Wii is more popular, and Nintendo represents themselves.

I think this added layer may not allow Nintendo to know just how fast systems are selling in these smaller markets. After all, it's in the best interest of the local representative to push Nintendo to supply them as many units as possible, as long as they can sell them, regardless of whether they sell in two weeks, or two days.

There is some time cost involved in having unsold merchandise on the shelves -- most retailers get "receipt + XX days" billing, meaning they don't actually have to pay for the merchandise until XX days after they receive it. It's best for the retailer if the product is selling briskly, because then they can actually realize their profit before they have to pay for the goods. If that's the business model a store normally counts on, any merchandise that sticks around LONGER than the payment-due cycle (often 30 or 60 days) becomes much more of a "real" cost than product that moves right away. Stores want to have enough to sell steadily, but having too much stock on hand is not a good thing either. Right now they want all the Wii's they can get, but they sure don't want a steady supply of PS3's, and they have to monitor sales trends closely on all products they carry to stay in business.

Interesting thread. One question : do you know the profit you (TRU) do on each format (consoles and their games) ?

ddobson: That's interesting, and I was just about to ask how we can explain stores being willing to stockpile so many PS3s. It is a little more understandable when they have 30-60 days to pay off the console so they can order for projected demand up to 30 or 60 days into the future. It sounds like many stores have significant stocks of PS3s and I'm beginning to wonder when they'll simply order from Sony only as many units as they sell (or perhaps less to keep a smaller inventory). Does anyone have any idea how this works? Also, from Sony's last report it sounds like they have piles of PS3s they're waiting to sell to retailers, so they must have basically approached the stock saturation point.

I think Nintendo in Sweden isn't controlled by themself, but we have a company that only deals with Nintendo products and have done that since Game and Watch. Sweden was a quit strong nation for Nintendo during the NES days, that and Amiga

TheBigFatJ: I've wondered the same thing. If the PS3 continues to decline in sales, stores will almost certainly start to reduce orders. That's why they spend money on inventory management systems. We've already heard some anecdotal evidence that small shops aren't stocking the PS3, just ordering one at a time and replacing it as needed, because that's enough to keep up with the current sales volume. If that happens on a larger scale, and Sony still has a stockpile of PS3's in the warehouse, they'll almost certainly need to reduce production, which if anything might drive manufacturing cost in the OPPOSITE direction needed to sustain a price cut, or delay the opportunity to realize it. (I can cut the price by $200 if my cost drops by $200, but if I've already spent the money to make a bunch at the higher cost, when do I institute the price cut?) I think the next round of quarterly reports will tell us something -- the shipping numbers will almost certainly go up or down. Sony can't keep shipping 5.5 million consoles and selling 3.6 million -- you can play that game for a quarter or two, but the warehouse costs and retailer resistance eventually come home to roost. On the other hand, if PS3 shipments go up, then it means Sony management has faith in a plan of some kind, which will be interesting to watch.

And don't forget -- Sony forecasted 11 million PS3s would be shipped by the end of 2007. This is, interestingly, just a little more than the number of 360s shipped (10.4 million I believe) over a similar time frame from launch. I wonder if those numbers are related, or if Sony just believes they'll ship 11 million. As you're probably aware, Sony looks to have decreased PS3 production. I'm sure this is something they only decided to do when they absolutely had to, and therefore is not a very short-term change. It would make sense for them to stockpile some if they were going to decrease production and they didn't want to have to increase production as soon as there is a spike or two in sales. On the other hand, I'm sure they want to be ready for the holiday season and have at least 1 million units in the retail channel or ready to be shipped just for December. I'd be very interested to understand more about the economics of decreasing production. Obviously, you believe cost-cutting will make future production cheaper so you do not want to over-produce at the high cost point. Additionally, you don't want to create huge costs this quarter which will not be covered by sales for several quarters. But what are the other motivating factors for decreased production and what are the motivating factors against it? Will it slow cost reduction? How does it affect your ability to price-cut? The latter seems a much more complicated question than one may assume at first glance.