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A Theory Behind January's Weak Wii-U Sales


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Initial post: Mar 1, 2013 12:10:56 PM PST
DVvM says:
Saw this on Gamasutra: http://gamasutra.com/view/news/187605/A_theory_behind_Januarys_weak_Wii_U_sales.php

QUOTE
The NPD Group recently reported alarmingly low U.S. retail sales numbers for January 2012. Gamasutra analyst Matt Matthews says there may be more to that story...

As you may know, I deal primarily with hard numbers -- factual data from which I can draw conclusions. But sometimes, there's a bigger story behind the numbers, and I figure that it's important to share that with you, so you can try to draw your own conclusions.

Almost as soon as Gamasutra published my column on January U.S. retail sales for Nintendo's Wii U, I got two messages from two different sources inside the industry both saying the same unbelievable thing: The Wii U probably sold significantly more than the 57,000 units reported by the NPD Group. How much more? The figure I was hearing was that the total number sold to consumers could go over 100,000 units, nearly twice the original figure.

But it isn't so much that the NPD Group estimate was an error, I was told, but rather it didn't show the full picture.

The figure reported by the NPD Group, the sources' story went on, included perhaps 100,000 units sold to consumers -- and 40,000 or more units returned to stores. The net, then, would yield the 57,000 units reported by the NPD Group.

And the explanation for those tens of thousands of returns? The collapse of the secondary market, those resellers who had purchased Wii U systems in November and December 2012 hoping that popularity and a shortage of systems would yield a tidy profit through Christmas and into the new year. However, profiteers advertising Wii U systems on sites like Amazon, eBay and Craigslist saw their margins disappear and then chose to return their systems to retailers while their original receipts still permitted them to.

So in the end, there probably still were a minimum of 57,000 units that ended up in consumers' homes in the U.S. this January. But it's nonetheless interesting to examine how these prospectors may affect the retail environment.

Is such a thing even possible? Could the speculative market really have returned a volume of hardware that was 40-50 percent of the actual new sales in January? A quick check of VideoGamePriceCharts (which aggregates data from various resellers) shows that Wii U prices for new systems have been below retail since December 2012. And as of today there are numerous brand new Wii U Deluxe systems selling on eBay for well below the $350 retail price.
Digging deeper
Given that the original reports were based on NPD's data, I reached out to the company. Analyst Liam Callahan told me that he couldn't comment on whether the speculative market affected sales because he doesn't have access to that level of data. In order to protect their partners in the industry, the NPD Group maintains confidentiality of retailer-level data. Given my interactions with them before on issues that bordered on retailer specifics, I wasn't hopeful, but now I know there is absolutely zero probability that the NPD Group will ever talk about this issue -- even if someone there knows for sure.

Then I contacted Michael Pachter, analyst for Wedbush Securities, to get his reaction. He said that consumer returns could count and affect the net figure reported by the NPD Group, but that the very idea sounded "like some Nintendo spin" to him. And, even if total new Wii U sales were 100,000 in January, that would put an estimate of 80,000 for February -- still not a healthy number.

But what about software sales? The two original tipsters had independently pointed to software sales as evidence that the reported hardware figure was askew. That is, they hinted that total software unit sales were more indicative of a system selling 100,000 units in a month, not 57,000.

I put that question to Pachter, and his response was pretty direct: Looking at the installed bases, all three of the previous console launches were much healthier in January software sales. And we're not talking just a couple of thousand units more -- we're talking about a factor of two or more in some cases.

That's when I decided to call up a source I know who is familiar with a major retailer's sales at both a local and regional level. Without giving any indication of the tip I'd been passed, I asked the source directly about Wii U sales in January. The response: total new sales were about twice as big as the number of returns they had. In fact, it had gotten bad enough that some retailers were looking at ways to turn away people who appeared to be abusing the returns system.

So, for example, if that retailer had sold 100 systems, then their returns in January were in the 40-50 unit range. That was eerily in line with what I'd heard from the original tips.

So how do we settle this? The truth is, we probably won't ever know for sure what happened in January. Even the original sources admitted as much to me.

But we can look forward to what's going to happen when the NPD Group reports Wii U sales for February. By that point most speculative resellers probably would have exited the market, and returns would have likely ceased to be a factor. If actual new sales of the Wii U had been 100,000 across five weeks in January, then after four weeks in February we could see sales as high as 80,000 units.

If the speculative reseller return theory is wrong, however, and 57,000 is really reflective of the total number of new systems sold in January (a five-week retail month), then we could see a mere 46,000 units in February (a four-week retail month), if average weekly January sales are repeated in February.

The NPD Group will report those February estimates in under two weeks. I'll be back then, and we can revisit this question.
ENDQUOTE

You know, this is completely plausible. Secondary marketeers bought tons of Wii-Us at launch, hoping the Wii scarcity issue would repeat itself, but the Wii-U was not scarce so they returned them while they still could. Some people were definitely buying a lot more Wii-Us than they were intending to use.

Posted on Mar 1, 2013 12:12:43 PM PST
Jawwaad says:
My theory. No gamez

In reply to an earlier post on Mar 1, 2013 12:16:21 PM PST
Lucanus says:
Darn YOu!!! That was going to be my exact line. :(

Posted on Mar 1, 2013 12:17:45 PM PST
Last edited by the author on Mar 1, 2013 12:18:52 PM PST
got mayo?™ says:
They are being tracked same as any other piece of hardware on the market. Really grasping at straws here.

What VGcharts is showing for each week in February seems in line with another 50k unit month in the US.

Posted on Mar 1, 2013 12:21:01 PM PST
Uncle Ulty says:
"And the explanation for those tens of thousands of returns? The collapse of the secondary market, those resellers who had purchased Wii U systems in November and December 2012 hoping that popularity and a shortage of systems would yield a tidy profit through Christmas and into the new year. However, profiteers advertising Wii U systems on sites like Amazon, eBay and Craigslist saw their margins disappear and then chose to return their systems to retailers while their original receipts still permitted them to."

This part of the article says a lot about the WiiU reception at launch. I believe Jawaad can attest to this as well.

In reply to an earlier post on Mar 1, 2013 12:22:54 PM PST
DVvM says:
VGChartz numbers are almost entirely fictional. The real numbers come from NPD. VGChartz will just go back and adjust their numbers after the NPD numbers come out, like they always do.

In reply to an earlier post on Mar 1, 2013 12:23:56 PM PST
MrFoxhound says:
tl:dr

Posted on Mar 1, 2013 12:24:40 PM PST
Lyrick_ says:
VGChartz is wholly unreliable and should only be used for entertainment purposes.

I wonder what the Software sell through was in January, from the article it sounds pretty healthy for only 57K moved systems.

In reply to an earlier post on Mar 1, 2013 12:27:24 PM PST
Last edited by the author on Mar 1, 2013 12:27:56 PM PST
DVvM says:
Never claim to be proud that you don't want to read something.

But since you did, the theory is that that since the NPD number is net sales (i.e. total sales minus returns), that the 57,000 number from the NPD is actually 100k or so sales, minus a whole lot of returns since speculative resellers bought a lot of Wii-U units at launch and had to return them in February in order to get their money back.

In reply to an earlier post on Mar 1, 2013 12:28:30 PM PST
MrFoxhound says:
Seems like someone didn't see who I was directly replying too.

In reply to an earlier post on Mar 1, 2013 12:29:25 PM PST
DVvM says:
Ah, my mistake. In that case... heh.

Posted on Mar 1, 2013 12:33:31 PM PST
I choose to think that the dead spirits of Nintendo employees inhabit the consoles and dissuade people from buying them.

Posted on Mar 1, 2013 12:40:30 PM PST
Gameresq says:
I remain unconvinced that this is a disaster for Nintendo. It is far too early, in my estimation, to call the Wii U a failure. When the big titles come, as I strongly suspect they will, I anticipate sales will ramp up to healthier levels. The delays in "launch window" games have been damaging. Still, I firmly believe Nintendo will recover aptly.

Posted on Mar 1, 2013 12:40:43 PM PST
Last edited by the author on Mar 1, 2013 12:43:42 PM PST
John Galt says:
Did they ever find those 7,000 Wii U's that were stolen in December? I wonder what an impact that made.

In reply to an earlier post on Mar 1, 2013 12:45:17 PM PST
MrFoxhound says:
It worked out better for them since they weren't going to sell anyway. It's not everyday you get a 7k unit write off.

Posted on Mar 1, 2013 12:46:27 PM PST
d00med?

In reply to an earlier post on Mar 1, 2013 12:49:24 PM PST
Last edited by the author on Mar 1, 2013 12:51:40 PM PST
got mayo?™ says:
Then they were pretty spot on last month...because they tracked precisely what NPD reported all weeks combined.

Besides, what does it matter if its 48k or 58k a month? Its selling poorly the same and this is the largest market for the hardware.

In reply to an earlier post on Mar 1, 2013 12:50:12 PM PST
MrFoxhound says:
$80 price cut and 16 Ambassador games, please!

In reply to an earlier post on Mar 1, 2013 12:51:09 PM PST
Lucanus says:
Why? So you can buy a unit for the second time, love it for a few weeks. Trade it in and turn around and hate it?

In reply to an earlier post on Mar 1, 2013 12:51:47 PM PST
MrFoxhound says:
Keller, why so serious?

In reply to an earlier post on Mar 1, 2013 12:52:07 PM PST
got mayo?™ says:
Keller has a point...haha

In reply to an earlier post on Mar 1, 2013 12:52:47 PM PST
DVvM says:
VGChartz retroactively changes their numbers in order to agree with the official ones. This is the only reason they look good.

In reply to an earlier post on Mar 1, 2013 12:54:15 PM PST
Last edited by the author on Mar 1, 2013 12:56:56 PM PST
Lucanus says:
I'm not. Just giving you a hard time my friend. No hard feelings, it is Friday and I couldn't help myself. :)

Joking aside, I do believe the system needs a price cut and current owners should get $50 worth of free downloads.

In reply to an earlier post on Mar 1, 2013 12:55:24 PM PST
Gameresq says:
I would be very pleased with another Ambassador program. The last one netted me a great many hours of fun games.

In reply to an earlier post on Mar 1, 2013 12:56:59 PM PST
DVvM says:
We probably won't get a price cut until this fall, since Nintendo probably plans on cutting the price about the time that the PS4 and NeXtbox come on the market, a la "why spend $400+ on the other gamebox, when you can spend $250 on ours?"
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Discussion in:  Video Games forum
Participants:  14
Total posts:  29
Initial post:  Mar 1, 2013
Latest post:  Mar 1, 2013

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