Xbox One: Shortage or Clever Marketing Tactic?
As long as I get one, I don’t care.
Every 7 or 8 years, you tell yourself the same thing: Preorder the next Xbox, and sell it for 3 times the value upon launch (muahaha!). And every 7 or 8 years, you fail to do so—hearing claims that there won’t be a shortage this time around. But lo and behold, when the new generation of awesome finally arrives—it happens: SHORTAGE. Every. Single. Time. (Bah!) And now you’re left with no Xbox One to play with or sell (cue tweet about first world problems). So what are you to believe? Is there really a shortage pending or not? Is it all some genius marketing tactic that you fall for time and time again? And most importantly, why am I asking you so many questions? Let’s put our hipster reporting glasses on and figure this out together.
According to history…
In 2005, the Xbox 360 launch was plagued with manufacturing problems due to chip yield issues. Remember the whole ‘red ring of death’ fiasco from overheating? That couldn’t have been in Microsoft’s plans. So yes, a shortage is a possibility—because of hardware hurdles.
And that could be a legitimate reason for a supply constraint this time around. Making sure all the components are manufactured properly is clearly a high priority for Microsoft. They certainly don’t want to make the same mistake twice, especially when it’s been reported that the built-in Blu-ray drive and Kinect’s camera module are both the cause of production problems right now. There’s even a rumor that they’re having yield issues with eSRAM.
I’m still skeptical though.
Fool me once…
See, a common marketing tactic to increase demand (or at least give the illusion of increased demand) is to limit supply. That way, there’s a huge spectacle surrounding the product. This happened with the Nintendo Wii in 2006, making it the most sought after product of the holiday season. In the mind of consumers, a scarce product is a worthy product.
And wouldn’t you know—Microsoft corporate vice president Phil Harrison hinted at preorder shortages just a few months back, setting the stage for a holiday season shopping frenzy.
“Inevitably, there will be situations where demand outstrips supply. Pre-orders have been unprecedented.”
The numbers seem to support this statement though—with the Xbox One selling out at Best Buy for the Day One edition, and Amazon halting orders on their end.
Then again, Microsoft could be creating an artificial shortage—even with preorders—to win marketing points. But if that’s the case, aren’t they saying adios to profits? And I don’t just mean hardware-wise. The truth is, most of the money is actually made from software sales. So not having enough systems at launch hurts Microsoft twofold.
So which is it?
In the end, it looks like there’s a mixture of both scenarios at play. Launching a next generation gaming system is a complex manufacturing feat to manage without running into inevitable problems in the supply chain. At the same time, marketing makes the world go round—and without a clever tactic or two, any product launch would be lackluster.
The moral of the story? Manage your supply chain well so that you can fulfill demand, while dropping hints that there may be shortages for the sake of creating buzz. Done and done.
You can take your hipster reporting glasses off now. Oh, they’re your normal glasses?
Well, this is awkward…
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