The next two months are undoubtedly the most critical hardware release season in the video game industry in the past decade. But for some reason, the big players in the interactive entertainment field seem unable to solve the simple problem of providing consumers with a simple and direct way to pre order their products.
So, when apple, Samsung and even Facebook's virtual reality maker oculus and other companies find out how to manage consumers' expectations correctly and sell new devices easily, why are large, experienced and well funded large companies like Microsoft, Sony and NVIDIA suffering a series of losses in hardware pre-sale in 2020?
We still don't know how many devices these companies plan to sell, how many quotas they allocate to each retailer, or how much inventory they plan to replenish any time this year. present
Although these big brands have been selling products for decades, they have established long-term retail partnerships, and have supply chain management expertise and massive data sources to try to predict consumer demand and manage global inventories. But that doesn't seem to be enough for game makers and chip giants like NVIDIA to solve the problem of product sales. While consumers are so excited about their products, companies do poorly.
Pre purchase disaster
Even after seeing Sony suffer setbacks in the pre-sale of the PS 5, Microsoft experienced a similar dilemma on Tuesday. Although Microsoft has made full preparations for fans in advance, and has made appropriate time arrangements for the advance purchase of Xbox series X and Xbox series s in the fan area, many mistakes and other problems began to increase when the pre order page went online.
NVIDIA's new graphics cards appear to have been snapped up with software by scalpers and sold new products, forcing NVIDIA to manually review orders to ensure they reach legitimate customers. We may see a similar rush when the ps5 and Xbox go on sale in November.
Didn't expect it?
But Sony's statement ignores the fact that retailers are not replenishing the console inventory in large quantities, suggesting a lack of transparency in the process. With record demand, companies like Microsoft and Sony can easily implement a lottery system or any other way to ensure a fairer pre order process. Or they can allow retailers to disclose how many game consoles they have and other ways to help manage consumer expectations.
Apple, for example, informs users when it will ship, say in a few days or weeks.
The main problem may be dysfunctional incentives. Competition in the video game industry is so fierce that even big companies like Microsoft and Sony are beginning to signal to investors, analysts and consumers that a product is selling well and it is almost impossible to find a source.
For these companies, instant sales is a positive marketing strategy because it means demand is higher than supply, and they don't have to worry that the products they produce will not sell on store shelves or in retailer warehouses.
Creating an illusion of scarcity also helps to create excess consumer demand, which is not intended to completely limit the number of people who can buy products. A brand like Nintendo, whose long-term scarcity is at the heart of its business model, can stimulate interest by suggesting that it may be difficult to find a product in the coming months or years.
Lack of incentives
We have seen many times that Nintendo would rather produce one less product than produce more or try to predict demand accurately, even for flagship game consoles like switch or nes and SNES classic.
At the same time, retailers see it as long as they can sell everything. During the frenzied pre-sale peak period, as long as their website can barely cope with the rush of consumers, they have little incentive to repair the website or try to adopt digital queuing mechanism.
Gamestop, the world's largest retail retailer of video games and entertainment software, has tried virtual queuing strategies in Xbox pre-sale, but smart bystanders find that there is deception. Gamestop tells consumers not to refresh the page in case their server crashes. But at the same time, the site's automatic scripts refresh every 30 seconds.
Next, what they need to do is make the most of the situation. When people constantly view or visit physical retail stores online because they don't know when to ship, every time it's an opportunity for retailers to promote other products.
In addition to the maladjusted incentive mechanism, there is also a lack of communication. We do not know novel coronavirus pneumonia, or how many games are being produced by these companies, or whether they are more or less than the last game or graphics card, or whether the problem is caused by improper logistics and planning, or there are deeper reasons, such as supply chain barriers and manufacturing and distribution delays caused by the new crown pneumonia epidemic.
Lack of expected information
We don't know if these companies or retailers anticipated what happened last week, or whether they were as surprised as they were trying to apologize on social media.
Ideally, this would be an easy problem to solve, just as apple has simplified the process of selling as many iPhones as possible each year. But the video game industry doesn't have much of a plan to solve this problem, and it's not clear whether these companies are willing to try.