The hottest Christmas gift this year wasn’t entirely new; it was a collection of videogames from 30 years ago. The NES Classic, released by Nintendo on November 11th, can play thirty NES games from a selection of their all-time greatest hits and it is an extremely affordable $60. Hearing about something and then actually being able to obtain it are entirely different matters, though. Nintendo once again left children disappointed and scalpers extremely pleased by failing to meet the demand for one of its products. Those familiar with the Nintendo brand can certainly remember that this isn’t the first Christmas that they have underestimated demand. Launches of the Nintendo Wii and Amiibo figures were met with massive shortages and disappointment as well. Nintendo uses shortages to guarantee a sell-through of their product and for that reason they are genius.
The cultural phenomenon known as the Nintendo Wii arrived in 2006 with a huge splash and scarce availability. It wasn’t only that one Christmas either, the product was in so high demand that scarcity continued for over a year. The Wii wasn’t readily available in stores until May of 2008. Nintendo insisted that they were increasing production of the hot product, but obviously not at the capacity that would satisfy the incredible demand. The system became a hot commodity on eBay where re-sellers would typically sell the console for double of its MSRP price of $250.
Nintendo would have another hit product, but it was far different than what they normally sell. They decided to enter the toys-to-life genre with the Amiibo. These toys could connect to videogames and add additional functionality to the titles. The Amiibos would tap into Nintendo’s large library of characters, offer functionality across many different games and systems, and alongside one of Nintendo’s most popular titles—Super Smash Bros. Perhaps more than their limited purpose, fans and collectors were interested in the product since it would be the first time many of these characters received a toy of any kind. They manufactured more than enough Mario figures since Nintendo knew he would sell, but less popular characters like Wii Fit Trainer quickly became difficult to find. Supply problems were further influenced by retailer exclusive figures that would only be available at specific stores. The $13 dollar toys were fetching $70 or more on eBay and consumers who wanted to collect all the characters certainly had a rough time of it. They did something right though because Amiibo still exist where Disney Infinity was discontinued.
Consumers don’t have to look much farther than a basic supply and demand graph to understand Nintendo’s philosophy. As supply of a product increases, demand of said product decreases. They applied this to their previous product launches for the Wii and Amiibo and there’s likely every reason to think they will continue it for the upcoming Nintendo Switch. Nintendo understands that at this very moment, the NES Classic is a hit product. It is inexpensive, features a terrific bargain of quality games, and is cute to boot. It’s the perfect Christmas gift to give that thirty-something that has everything or wants an uncomplicated way to relieve gaming’s heyday. Nintendo has production plants working on creating these consoles, but they also know that after Christmas these units will be far less desired, so why should they increase production only to be left with extra units. A sell-through of product is good for Nintendo—it looks good to their investors and the free advertising they are getting from their product being scarce is phenomenal. They are in the business of making money and there’s little doubt they are making plenty with the NES Classic.
Nintendo is actually able to cover up some of the flaws inherent with the NES Classic by creating demand through scarcity. It is by no means a perfect product, as there have been complaints about controller cord length, the troublesome way users must reset the console to switch games, and compatibility with certain television sets. While no console is perfect, these negatives are overshadowed by the sheer demand of the unit. The Wii and Amiibo lines also had their many flaws, including a lack of compelling software, limited usage, and little longevity. All three of these products promised significant new ways to play videogames, but delivered little more than their original premise. A successful product is dictated by how the initial launch turns out. By that mark, Nintendo usually knocks anticipation out of the park regardless of quality.
Limited supply comes with limited damage. Nintendo expected the Wii’s successor, Wii U, to be a big hit. They were able to meet all their sales targets at launch and while the console would never sell as many units as the Wii, Nintendo never really saw that much damage from the significantly lower sales. According to USA Today, “Nintendo announced that it sold more than 425,000 units in November  —and more than 1.75 million systems (Wii U, Wii, 3DS, DS) in the U.S. [NPD analyst Liam] Callahan noted that Wii U sales generated 21% more revenue than the Wii launch in November 2006.” Nintendo were well within their target for Wii U’s sold, and even though demand was lower, they never manufactured enough units to have damage to their bottom line.
While Nintendo might be satisfied with the way the NES Classic is selling, consumers are once again frustrated with the company. When Nintendo announced the NES Classic over the summer, plenty of gaming websites reported high interest in the console. Polygon and The Verge said the console dominated their traffic charts in July. The only problem was that Nintendo didn’t really plan on supplying very many units regardless of anticipation. Three months ago, the product was up for pre-order on Target’s website unannounced and only for a brief period. Since then there have been no other ways to pre-order the system. Launch partners such as Amazon, Wal-Mart, and Best Buy all listed the product, but said it was unavailable until launch day. A cursory drive around town on November 11 showed that there were going to be many disappointed customers. The local Best Buy had about 40 units for the 80 plus people that lined up before opening. Target had received about 10 units for their crowd of over 60. Demand has consistently surpassed supply, leaving many to stand in the cold without obtaining a NES Classic.
Since the launch last month, there have been countless stories and guides about how to obtain the tiny console. People have resorted to frequenting Reddit groups, checking inventory at retailers, and using bots to buy excessive amounts for reselling. Just like the Wii and Amiibo, re-sellers are buying the NES Classic in bulk in order to make some extra money this holiday season. At one point the average for the $60 console was $250 on eBay, making a sizable profit of four times over the original price. Nintendo is leaving money on the table by perhaps not charging $100 for the system, although demand would certainly take a hit if it wasn’t such an affordable gift. Nintendo has decided to live within the margin it deemed a success and although they could seemingly be making more money, they rather not take that chance.
Actually getting a NES Classic this holiday season was unlikely given the fervor for the product. The scarcity Nintendo has created has increased the value in many people’s eyes. Remember the NES Classic offers little more than the accessibility of playing thirty year old games on current televisions. The Wii offered an entirely new way to experience videogames and the Amiibo allowed Nintendo fans to collect figures of their favorite characters. They had functionality that was new and exciting. That being said, Nintendo had made something old seem new and exciting again with the NES Classic. Although their methods for achieving this incredible press and excitement might suggest they aren’t acting in the best interest of the consumer, Nintendo is using their business savvy to maximize profits. They are continuing the same strategy that they’ve used on all their product lines. Whether or not that product is a huge success, Nintendo will not have saturated the market with consoles that will be returned. When their competition are producing far too many consoles and offering steep discounts, Nintendo has been able to play by their own rules. That is where the genius lies in their plan to control supply. Families might be disappointed this Christmas, but Nintendo won’t be. They have been doing this a long time and know exactly what they are doing by managing scarcity. The NES Classic will likely be available in plentiful numbers come early 2017. Then supply will far exceed demand, but Nintendo will be sufficiently pleased.
Max Covill is a freelance journalist and columnist for Film School Rejects. He is the co-host of the ItsthePictures podcast. His bylines include Playboy, Movie Mezzanine and more. He tweets @mhcovill.