Xbox 360: B & M failure?

fatherofcaitlyn

fatherofcaitlyn

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Shortly before the Xbox 360 launch, I saw an article here touting the Xbox 360 as an online retail success.

It can't argue with the article. Every retailer sold all of their preorders and more.

In the online world, not having stock doesn't matter as long as the retailer has the customer's money and said customer is willing to wait for the product. The key to the online success is that the retailer has the customer's money.

However, is the Xbox 360 a B & M failure?

I've been to several retailers (Wal-Mart, K-Mart, GS, GC, Radio Shack, Meijer's, Sears and Best Buy) since launch. At each location, I asked two questions:

1. Have you received any more 360s in since launch?

2. Will you be receiving more 360s before Christmas?

Unanimously, the answer to 1 is no. The answer to 2 ranges from no to supposedly/maybe.

In the B & M world, not having stock does matter because most retailers don't take the customer's money without delivering a product immediately. The key to the B & M failure is that the retailer doesn't have the customer's money.

Some might argue that the lack of availability of consoles is a sign of success, but I disagree.

Consoles are just bait. Neither retailers nor manufacturers make any real profit off of the console. The profit is made from games and accessories.

Sure, a controller or DVD remote will retain its value for quite some time, but what about games like Perfect Dark Zero or Kameo?

Will they sell for $49.99 in January? March? June?

All Xbox 360 launch titles are rotting on retail shelves. They simply aren't going to sell until the customer can play them. Very few people want to spend $50 or $60 on the equivalent of a paperweight.

I contend the Xbox 360 will be a B & M failure for 2 reasons:

1. Retail space dedicated to the 360 will not generate profit until consoles are readily available.

2. People will not buy a lackluster title for full retail price months after its release.

I suppose this question remains: How do we track the success or failure of this launch?
 
I guess it depends on what time period you are using. Isn't the launch usually classified as 45 or 90 days from the day it launches.
 
The thing is they should have alloted less systems for the Japan launch. I know thye want that market but they need to be realistic it just isn't going to work there. And mistake me if I'm wrong but aren't we the biggest market now? They could have slid an additional 100,000 to 200,000 consoels our way and sold mor eof those games.
 
I think you are confused. Retailers DO make money off of a console whether the manufacturer makes any money or not.
 
I don't really see any games that i really want for the 360 and I still got it but waiting because my Gamestop only received 12 of them and i was number 15. They say i might get it either today or next tuesday. I just hope xbox 360 gets better games other than racers and fps. I mean i want to see great RPG's in there and also Strategy games, also i want to see great games like god of war, devil may cry, bujingai the forsaken city. I think the first x box was lacking in a lot of genres and even though they are number 2 i don't see them going anywhere unless they fixed those areas.
 
You must live in the boonies or something, because I don't know what stores you're talking about. Every store around here, and ones that I have heard about elsewhere, have recieved more units since launch. Maybe not many, but atleast a couple. Best Buy for sure is getting more before Christmas, and I'm pretty confident that if they told you they weren't or possibly might they just were annoyed with all the people asking for them.
 
[quote name='greendj27']I think you are confused. Retailers DO make money off of a console whether the manufacturer makes any money or not.[/QUOTE]

I'm sure retailer make a good $10 off of each console, but they make $10-$20 off of each title.

So, the margin on the premium console is 2.5% and the margin on a game is 20-40%.

Granted, retailers make a killing on USED consoles, but next to jack on NEW consoles.
 
[quote name='fatherofcaitlyn']I'm sure retailer make a good $10 off of each console, but they make $10-$20 off of each title.

So, the margin on the premium console is 2.5% and the margin on a game is 20-40%.

Granted, retailers make a killing on USED consoles, but next to jack on NEW consoles.[/QUOTE]

Stop just making things up. If you think that manufacturers only make $10 on a high ticket item like that you are crazy. No retailer would add any item to the planagram if they are only going to make a 2.5% margin.
 
[quote name='greendj27']Stop just making things up. If you think that manufacturers only make $10 on a high ticket item like that you are crazy. No retailer would add any item to the planagram if they are only going to make a 2.5% margin.[/QUOTE]
they will because they wont be able to carry games if they dont carry system. They make little or no money on system but they can make that back through games.
 
I thought games were bought at or about $42 for a $50 retail game... The console losses (unless its N) money on consoles and the store makes a small margin in relation to its inventory cost on a system..

Ideally they woudl carry games, accessories and used stuff to create the most margin...
 
I remebered when the PS2 launched and they were none available until after christmas and no one called that a failure.

It is way too earlier to classify the 360 as a failure.
 
[quote name='flybrione']I remebered when the PS2 launched and they were none available until after christmas and no one called that a failure.

It is way too earlier to classify the 360 as a failure.[/QUOTE]
Agreed, I think everyone is just upset they don't have their 360s yet.
 
I think the main dissapointement with this launch is the fact that there was no "must have" title that launched with the console, like halo was with the first xbox. I think they wanted to get the system out for christmas and after the first of the year the system will be readily available and that there will be a couple gams that will be must haves.
 
[quote name='gtguru']You must live in the boonies or something, because I don't know what stores you're talking about. Every store around here, and ones that I have heard about elsewhere, have recieved more units since launch. Maybe not many, but atleast a couple. Best Buy for sure is getting more before Christmas, and I'm pretty confident that if they told you they weren't or possibly might they just were annoyed with all the people asking for them.[/QUOTE]

No, I don't think it would be that he lives in the boonies by any means. I live in a very large market here in Grand Rapids, MI. There hasn't been a single store here that has had any 360's since launch. And this is coming from stores that had quite a high number of systems at launch (Best Buy, Target, Meijers, Gamestop, Circuit City)
 
I have never ever heard from anyone that retailers make off consoles something that cant easily be rounded down to ZERO.

The OP has an interesting point though. Might be fun to kick the idea around but in the end its not going to go anywhere.

If they sold more 360's, MS potentially loses more money off the bat, depending on whose estimates you believe.

Furthermore, it builds hype. People want what they cant have. Its sold out, not just because of short supply, but because everyone supposedly wants one.

They did make a mistake sending so many to Japan, they shouldve sent half or even a quarter that.

But the people at MS know a LITTLE bit about business decisions, so therse a good chance they made the right one. Not enough to actually make any money the first go. But some people believe that they are actually trying to make money. Some people however, dont.
 
Shelfspace during the holiday season is very valuable, and if stores are wasting shelf space on games and accessories for a system only a tiny fraction of gamers have, they wont be happy.
 
[quote name='greendj27']Stop just making things up. If you think that manufacturers only make $10 on a high ticket item like that you are crazy. No retailer would add any item to the planagram if they are only going to make a 2.5% margin.[/QUOTE]


he is actually right, on xbox private retailers made from $6-$10:cry:
 
Margin on a Core system is 3%, premium is 4%.

Have you never heard the phrase "Make no money on the razor, but on the razor blade"?
 
Got off the phone with a GS employee several hours ago, here's roughly how the conversation went.

Me: Do you have any Xbox 360s for sale?

GSE: No, we'll probably have some at the end of February or the beginning of March.

Me: Wow, really? Have you completed your preorders?

GSE: We're filling the second batch of preorders. We might have them complete in, I don't know, in a couple of weeks. Are you on the list for a preorder?

Me: I honestly forgot , but thanks for the info.

Translation (assuming the GSE wasn't blowing smoke up my butt): GS won't have 360s available for the general public for weeks or months.

Now, here comes the part of the post everybody hates: the mathematical example.

Let's say I purchased 100 premium consoles for $380 each (5% margin) and 100 games for $30 (40% margin).

I have $38,000 tied up in consoles and $3,000 tied up in games. That's $41,000 total spent.

Come launch date Microsoft delivers 25 premium consoles and 100 games.

Much to my amazement, each console buyer purchases 2 games with his/her console.

So, 25 consoles at $400 each and 50 games at $50 each are sold.

I've recovered $10,000 in consoles and $2,500 in games. That's $12,500 gross revenue.

$12,500 minus $41,000 equals a loss of $28,500.

Is this a permanent position? Probably not. A profit can be seen when the rest of the consoles arrive.

Of course, that profit shrinks when an extra month or three of store rent and employee wages are needed for waiting on the rest of the consoles.

And there's lost profit from the 50 games that rotted on the store's shelves and had to be reduced in price in order to move them. And there's lost profit from not being able to order more games to sell to buyers because consoles weren't available.
 
I'm inclined to agree with everything you say - in addition it kinda boggles my mind that M$ would shortchange themselves like this - yes, demand is high but M$'s marktet supply at the moment is near zero - so they're not maximizing the profits they could be generating

I know they don't want to have extra consoles laying around but it seems really stupid to me to have a limited quantity on shelves durring the busiest shopping month of the year. Come 2 months from now when 360's are available again, people will be paying off their credit cards from Xmas from buying something other than the 360. Honestly, you'd think.

Andyou're right on the preorders - theose stores got left out in the cold on this one also in the respect that the EB/Gamestops are making two groups of customers angry - those who preordered and won't get it until after Xmas and those who come in looking to buy it only to be told that they're not goingn ot be in stock b/c prorders get them first.

My solution: Microsoft should open their own eBay store. :D
 
Sony is going to have the exact same problem at launch that MS did. I am shocked at how little anyone remembers about the PS2 launch. I don't see nearly the demand, outcry, press or attention being given to the 360 three weeks after launch that the PS2 received.

You can't produce 3,000,000 of something to be available on day one of launch. It's just not possible. The race for console supremecy doesn't begin until the 10 millionth unit is sold. Everything up until that point is an automatic sale anymore. There are enough enthusiasts out there that, like most of us, that will buy every console that hits market.

No retailer is going to bail on the 360 because they can't get stock this Christmas. Even people that don't get a 360 at Wal Mart when they show up do their grocery shopping, pick up a few items, get their oil changed etc. The more accurate concern/criticism is that specialty retailers like Gamestop, EB, Game Rush etc. are getting hosed because they were counting on the attached accesories, game trade ins and games to increase bottom lines. That just isn't going to happen.

There aren't many people that purchased all their 360 games and accesories and are still waiting for a console to play them on.

BTW, the early attach rates from NPD indicate that nearly 4 games were sold for every 360 on the market. That's crazy. You're talking about a $700+ average ticket and that doesn't include accesories. Retailers aren't going to bail on $700+ ticket items..... ever.
 
I guess I should state that I was talking to a GSE in Louisville, KY. Louisville certainly isn't the biggest, smartest, cleanest or the best in any area city in America, but it is certainly not podunk.
 
[quote name='joevan']My solution: Microsoft should open their own eBay store. :D[/QUOTE]

:lol: That sounds a lot like GQD to me.

Then, a Microsoft employee could post all of the "great" Xbox 360 deals which would invariably turn up in game stores a month or two later for 2/3 the price.
 
[quote name='greendj27']Stop just making things up. If you think that manufacturers only make $10 on a high ticket item like that you are crazy. No retailer would add any item to the planagram if they are only going to make a 2.5% margin.[/QUOTE]

Yes they would and do. The money is on the accessories and games. Carrying the console is just a requirement to sell the other stuff.
 
The thing is, I haven't seen a ton of games and accessories just sitting on store shelves either. I think a lot of people are buying these in anticipation of when they finally find a console so I really don't think it has had a significant impact on how B&M's are seeing the launch as a success or a failure.
 
FYI, Microsoft forced some companies to pay for consoles, games and accessories up front and in full.

These companies were counting recouping those costs quickly by selling the consoles they paid for.

Said companies can't buy other products such as new NGC, Xbox or PS2 games and accessories.

So, Microsoft is not only bloating their shelves with products that won't sell, but is also preventing them from putting products on their shelves that will sell.

I can't wait to see the bottom line for companies such as GS, GR and GC for this quarter.

They're going to have to keep the books in the crockpot for a week to get all the red off of them.
 
[quote name='shipwreck']The thing is, I haven't seen a ton of games and accessories just sitting on store shelves either. I think a lot of people are buying these in anticipation of when they finally find a console so I really don't think it has had a significant impact on how B&M's are seeing the launch as a success or a failure.[/QUOTE]

Here's the closest I could get to some numbers on games sold:

Number PDZ manufactured (700,000):

http://www.next-gen.biz/index.php?option=com_content&task=view&id=1662&Itemid=2

Number of consoles and PDZ sold (in UK) (70,000 and
 
Got done reading through the "360 Launch Fails in Japan" thread.

Damn, that's funny!

In Japan, the consoles are rotting on shelves.

In America, the games and accessories are rotting on shelves.
 
I bet the US can surely eat a couple hundred thousand units before X-MAS...


releaseing so much in Japan was a lost... est. 130,000 units... even something like 50,000 units woudl be enuff for them...

everywhere I go to, I see shelves loaded w/ 360 games & acessory... but no hardware...
this whole worldwide lanuch things has been... crazy... maybe they should of stick with 1 region at a time like sony...
 
[quote name='greendj27']Stop just making things up. If you think that manufacturers only make $10 on a high ticket item like that you are crazy. No retailer would add any item to the planagram if they are only going to make a 2.5% margin.[/QUOTE]

I'm curious, what do you think retailers are paying for the consoles (core or premium)?
 
Speaking for my CC alone, the accessories are selling average at best and the games have not been touched. I probably have 30 copies of Condemned, 20 copies of Kameo and 25 copies of PGR3 that are doing nothing but collecting dust. Lesser numbers for the other titles but they're all just sitting there. People who already have their systems aren't buying anymore games (yet).
 
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