Nintendo angered some diehard Nintendo Fans this morning with the announcement via its Nintendo World Store in New York that pre-orders for the Switch would be available in limited quantities following the launch presentation on January 13.
Gamers expressed outrage and claims of “artificial demand building” came thick and fast. The theory is that Nintendo is creating demand for the console by intentionally making it hard to purchase. Such practices aren’t uncommon: in his book Console Wars, author Blake J. Harris details how the Sega executives encouraged retailers to order more consoles than they knew they were able to produce with the intention of creating a greater sense of demand with customers.
That’s not what is happening with Nintendo Switch.
At Nintendo’s October 2015 investor meeting, the company explained how it expected to ship 2 million Switch consoles by the end of March. Many were perplexed at this number because it seems kind of low for a major console launch. But that number is only low if Nintendo were to launch the console on, say, March 1. If Nintendo launched Switch towards the end of the month — like on March 24 — it would mean the company expects to sell that many consoles in the span of a week or so, which would be a huge success.
Nintendo also said of Switch production that it was ready to scale up to units the factory produces to meet demand, should it exceed the initial shipment of 2 million.
In any event, what all of this means is that Nintendo is poised to pump out 2 million consoles into the marketplace in March. From all the data we have, that’s 2 million consoles to cover the entire global market (assuming they’re aiming for a worldwide simultaneous launch). This is a set number: Nintendo doesn’t need preorders because it knows how many consoles it has to sell in March.
It’s true that traditionally preorders would happen as a means to inform the manufacturer of how much stock it requires to meet demand prior to launch. In those cases, you could expect to have much earlier knowledge of the product. Nintendo Switch was revealed on October 21, 2015. Its price and release date will be announced later today (Friday, January 13, 2016). While it’s impossible to know how long the logistics of increasing supply will take, one can assume that it would take weeks or months, not hours or days to arrange such a surge in expected demand.
It’s for this reason that Nintendo Switch preorders will be limited. The goal of preordering then, in this case, is not to tell Nintendo how many consoles it needs to produce, rather, tell it how many consoles it needs to send to specific stores. This will, of course, mean that some locations, such as those in rural areas, may receive very limited units so as to make it harder to find sitting on store shelves immediately following launch, the most eager customers in the busiest locations will be satisfied first.
It’s not ideal, but Nintendo doesn’t have much of a choice at this point. Wii U didn’t exactly fly off shelves, and the Nintendo 3DS launch was marred by bad press and slower than expected sales. It makes good sense for Nintendo to be conservative with first-run allocations.
The bigger challenge is whether or not Nintendo can indeed quickly resupply retailers following the initial launch. My analysis of the situation suggests that the Switch console will indeed launch towards the end of March, thus making the wait for replenishment much shorter. Nintendo may have pre-planned to ship 2 million consoles in March, but we know nothing about its intentions for April. If it does take two-three months to figure out the logistics, then it’s an intelligent move on Nintendo’s behalf to announce the release date in January.
Coupled with the fact that Nintendo’s financial year starts on April 1, it paints a picture of stock sell through being much more beneficial and important to Nintendo in April rather than March.
What all this means is this: Nintendo has figured out that it needs 2 million consoles to make it through March (again, suggesting a late-March release date). April and beyond will see a far greater number of units enter the market. So while you may need to wait if you miss the pre-order bus today, you’ll be waiting a couple of weeks at the most which to many is far easier to endure than, say, the PlayStation VR unit which after three months (and at twice the expected cost of the Switch) is still struggling to fill pre-orders.