Nintendo's challenge in this year's Wii forecast

Filed in archive Point of view on November 16, 2008

Las December I wrote a piece on iPhone and Wii supply chain (You can read the post here) mentioning some of the problems of the Wii's suppliers in scaling up and down and responding effectively to market demands. This caused the mother company, Nintendo, to lose some sales opportunity at the Christmas shopping period.

This year, the company has announced that it is going to supply 50% more Wiis in order to prevent stock-outs at the end of the year period but I myself think, the company is now facing another threat: The risk of ending up with lots of unsold Wiis. My reasons for such argument are the followings:

- Decline in consumer spending: This is a trend which has started to gain power from July 2008 adding up to the worst quarterly performance for personal spending in 28 years. A recent U.S. consumer survey by Deloitte & Touche found that holiday gift-giving budgets this year will be down 6.5 percent compared to last year.

- Manufacturer - Retailer relationship: On the day that Circuit City announced some plans for Chapter 11 bankruptcy, Sony ordered its trucks in transit to Circuit City's facilities to come back. The retailer had a hard time convincing Sony that his line of credit is reliable. Now imagine that the same thing happens to Wii; should the company replenish the product with the risk of not getting the money back? Or it should reduce the forecast considering such possibilities?

In any case, I think this year Nintendo has a hard time achieving a reliable forecast for the Wii considering that the dynamics of the pick shopping periods are not the only important factors but also the elements such as economic downturns and retail sector financial health issues.