Imagine launching a product that everyone desperately wants. In a perfect society, fair distribution through traditional supply & demand economics, moral treatment of fellow human beings, and a complete state of law & order would be in full force.
But we don’t live in a perfect society. And in the case of the Playstation 3 just as with high-demand concert ticket sales, people are willing to go to extreme legnths to get a console – even so far as to wait overnight in the rain just to get one. Even in Japan, a country known for it’s high employment rates, stricts guidelines of law & order, fair & orderly queuing, and ethical treatment of the indigent, when it comes to the hardcore economics of the PS3’s supply & demand, all walls fall to the mighty yen.
Now apparently, Japan’s launch was noted by an article in Kotaku has being "marred" by the hiring of Chinese Nationals many of which were apparently homeless, to wait in line to get a console and turn it for a profit though the cooperation of coordinating "auction bosses" who orchestrated the mass purchases through these people.
SONY’S FAULT? I’M NOT SO SURE.
To be blunt, I’d be the last person to defend Sony. They’re a competitor and I’m not gonna sit around pity the economic troubles they’ve gone through. But in the same vein, I’m not going to piss all over them for the wrong reason. I think it’s sad that people – any people, not just the homeless – have to wait in terrible conditions to obtain something as luxurious & unnecessary as a console.
But the truth remains: The mere fact that people are WILLING TO DO THIS is an indication of how high the demand is for these consoles. And with high demand, comes extreme levels of effort. Everyone knows this. Sony’s just putting out a product. And if people are willing to wait in line for days… willing to brave the cold & rain… willing to hire people to do the waiting for them… willing to push, shove, and otherwise fight for the product, then who’s fault is that really?
These Chinese Nationals that they talk about that are "poor" and "homeless" are getting paid hard cash for waiting in line by supposedly "unscrupulous Japanese businessmen", to which I say hogwash. Would those men have jobs otherwise? Sony created an opportunity, the businessmen put up money for the investment and hired these Chinese Nationals to wait in line effectively sharing in the PS3 resale profit, and the Chinese folks spend their time making money for their efforts.
I see nothing wrong with this – the folks that cry about this need to get out a little more and see that the world is filled with opportunity if you choose to see it that way. I don’t believe you’ll hear any of these Chinese whine about getting cash for their services.
And besides – this happens all the time in the US. In Hawaii, now housing projects start building up and there are "completion dates" upon which people can go up to the model house and purchase a house at the builder’s set rate. What many people do is hire students, retirees, out-of-work individuals, to simply sit in line all day… all night… for weeks on end, just for the opportunity to buy one of these new houses, on the premise that once they buy the house at the set rate, they’ll be able to flip the house at market rate, which in Hawaii is usually double the original price. Does this sound familar?
People that blame Sony for "building a compelling product", one so in-demand that it causes bizarre behavior, are for the most part simply fooling themselves. The problem doesn’t lie primarily with the manufacturer: The problem is mainly with the point-of-sale.
WHAT’S WRONG WITH THE POINT-OF-SALE?
If the stores themselves were smart, they’d go WAY out of their way to make the line-waiting experience palatable. Free coffee. Heaters. Literature. Coupons. Discounts on food across the street at a local diner or better yet, a food vendor on site for the night. Something to show that they give a damn. If you’ve ever waited in line for tickets to a concert, or for seats to a highly anticipated basketball game, or for the opportunity to purchase a game console, you know that if a store were to show they understood our plight, well goddammit, they’ve have my heart and even if I didn’t get a console, at least I didn’t have as wretched an experience as the guys that waited in line at the Circuit City across town.
But your local electronics store is run by grown up versions of Beavis & Butthead. No seriously – these guys and gals couldn’t find their way out of a paper bag. I’ve waited in line for Xbox360’s twice now (yes, employees have to go through the same ordeal as everyone else) and both times were excruiating experiences that rivaled my old days in college when I would camp outside of the basketball pavillion for good floor seats to the game against "Duke" or "North Carolina". Cold, wet, windy, harsh, no bathrooms, a lot of posturing, and not a lot of guarantees.
These stores had management that not only didn’t do anything to help folks out as they sat outside their business residence waiting for the opportunity to "be a customer", they basically perpetuated the problem by not immediately telling the people in the back of the line that "WE GUARANTEE THAT YOU WON’T GET A CONSOLE. DON’T WAIT IN LINE." Instead they would say, "We can’t guarantee that you’ll have the opportunity to get a console" instead of squashing the hopes of these individuals.
The fact is, if they undersell – THAT’S NOT A PROBLEM. If they oversell – THAT’S A PROBLEM. It’s very simple. But they constantly choose to sell a FUZZY number of consoles, giving some people unqualified hope and that’s just not right. Meanwhile, the store gets publicity through the line of people that wind around their parking lot, all freezing in the cold, all hoping desperately for just one console for themselves or their kid.
And by the way: It’s also the store’s fault if things get out of hand. Violence, crime, and law-breaking… of course these are all ridiculous outcomes of these highly coveted product releases. But is that Sony’s fault? Heck no. It’s the store’s premises… the store’s sale… the store’s customers… it’s the store’s responsibility to ensure that sales are done in an orderly fashion and that customers don’t get mugged in their parking lots for their consoles.
SO REALLY? SONY’S NOT AT FAULT?
Well, I didn’t say that exactly. The problem is that people wait in line at the point of sale (Bic’s Cameras, for example… or Best Buy in the US) but that there’s artificial ceilings in play, enforced by the sellers & the manufacturers.
Sony sets a mandatory price on consoles of $600 so stores have to sell them for $600 – no more, no less. Consequently, one store can’t differentiate themselves from another in the same way that one car dealership can differentiate themselves through not just better service but better prices. The the consumer, Best Buy looks just as good as Circuit City being that prices are the same everywhere for a PS3.
Some try to differentiate themselves in other ways. Gamespot for example will sell consoles through bundles only, meaning that in order to get a console, you have to get it with 4 console games, and extra controller and some other gear at a price far higher than $600. Some folks don’t want to buy this much product and that’s their choice – but it lowers demand to the level of supply that exists.
HOW DO WE FIX THIS?
This isn’t rocket science. The concert ticket folks have dealt with this problem for years and there are tried and true methodologies for dealing with "scalpers".
- PRICE VARIATION
Allow store to vary the price of consoles. Take eBay out of the picture. If the price varies with the market, then no problem! Supply & demand, right? If Michael’s parents can’t afford the price – TOUGH. That’s economics. People don’t have a right to game consoles… just the equal opportunity to buy them at market rates.
- ENFORCE BUNDLES
Make bundling mandatory. This is similar to price variation except, now the consumers get more for their buck… they just have to fork out more bucks at one time to get one. Can’t afford it? Well TOUGH. Again, Econ101 – Supply & demand.
- STAGGER RELEASES
Wanna know how to stymie a ticket scalper? Release them at random intervals. No schedules, no known quantities. Simply one day, a store might get 40 units… then two weeks later 5 units… then 3 days later 60 units. If people believe there’s a possibility that stores might get one "any day now", then they’ll believe they have a choice instead of paying outrageous mark-ups that the scalper uses.
You’d like to buy one? Fine. Drivers license or Passport required please. That’s right. Some form of unique ID. Oh yes, and only one per customer… WORLDWIDE. Is that fair? Damn right it is. Would it end scalping? Not necessarily but it would sure as hell slow it down. When 50% of all units are going to eBay resellers, selling consoles 1 per person is a darned good way to slow things down.
Here’s the full article: