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A theory behind January's weak Wii U sales Exclusive
A theory behind January's weak Wii U sales
March 1, 2013 | By Matt Matthews

March 1, 2013 | By Matt Matthews
More: Console/PC, Business/Marketing, Exclusive

The NPD Group recently reported alarmingly low U.S. retail sales numbers for January 2013. Gamasutra analyst Matt Matthews says there may be more to that story...

As you may know, I deal primarily with hard numbers -- factual data from which I can draw conclusions. But sometimes, there's a bigger story behind the numbers, and I figure that it's important to share that with you, so you can try to draw your own conclusions.

Almost as soon as Gamasutra published my column on January U.S. retail sales for Nintendo's Wii U, I got two messages from two different sources inside the industry both saying the same unbelievable thing: The Wii U probably sold significantly more than the 57,000 units reported by the NPD Group. How much more? The figure I was hearing was that the total number sold to consumers could go over 100,000 units, nearly twice the original figure.

But it isn't so much that the NPD Group estimate was an error, I was told, but rather it didn't show the full picture.

The figure reported by the NPD Group, the sources' story went on, included perhaps 100,000 units sold to consumers -- and 40,000 or more units returned to stores. The net, then, would yield the 57,000 units reported by the NPD Group.

And the explanation for those tens of thousands of returns? The collapse of the secondary market, those resellers who had purchased Wii U systems in November and December 2012 hoping that popularity and a shortage of systems would yield a tidy profit through Christmas and into the new year. However, profiteers advertising Wii U systems on sites like Amazon, eBay and Craigslist saw their margins disappear and then chose to return their systems to retailers while their original receipts still permitted them to.

So in the end, there probably still were a minimum of 57,000 units that ended up in consumers' homes in the U.S. this January. But it's nonetheless interesting to examine how these prospectors may affect the retail environment.

Is such a thing even possible? Could the speculative market really have returned a volume of hardware that was 40-50 percent of the actual new sales in January? A quick check of VideoGamePriceCharts (which aggregates data from various resellers) shows that Wii U prices for new systems have been below retail since December 2012. And as of today there are numerous brand new Wii U Deluxe systems selling on eBay for well below the $350 retail price.

Digging deeper

Given that the original reports were based on NPD's data, I reached out to the company. Analyst Liam Callahan told me that he couldn't comment on whether the speculative market affected sales because he doesn't have access to that level of data. In order to protect their partners in the industry, the NPD Group maintains confidentiality of retailer-level data. Given my interactions with them before on issues that bordered on retailer specifics, I wasn't hopeful, but now I know there is absolutely zero probability that the NPD Group will ever talk about this issue -- even if someone there knows for sure.

Then I contacted Michael Pachter, analyst for Wedbush Securities, to get his reaction. He said that consumer returns could count and affect the net figure reported by the NPD Group, but that the very idea sounded "like some Nintendo spin" to him. And, even if total new Wii U sales were 100,000 in January, that would put an estimate of 80,000 for February -- still not a healthy number.

But what about software sales? The two original tipsters had independently pointed to software sales as evidence that the reported hardware figure was askew. That is, they hinted that total software unit sales were more indicative of a system selling 100,000 units in a month, not 57,000.

I put that question to Pachter, and his response was pretty direct: Looking at the installed bases, all three of the previous console launches were much healthier in January software sales. And we're not talking just a couple of thousand units more -- we're talking about a factor of two or more in some cases.

That's when I decided to call up a source I know who is familiar with a major retailer's sales at both a local and regional level. Without giving any indication of the tip I'd been passed, I asked the source directly about Wii U sales in January. The response: total new sales were about twice as big as the number of returns they had. In fact, it had gotten bad enough that some retailers were looking at ways to turn away people who appeared to be abusing the returns system.

So, for example, if that retailer had sold 100 systems, then their returns in January were in the 40-50 unit range. That was eerily in line with what I'd heard from the original tips.

So how do we settle this? The truth is, we probably won't ever know for sure what happened in January. Even the original sources admitted as much to me.

But we can look forward to what's going to happen when the NPD Group reports Wii U sales for February. By that point most speculative resellers probably would have exited the market, and returns would have likely ceased to be a factor. If actual new sales of the Wii U had been 100,000 across five weeks in January, then after four weeks in February we could see sales as high as 80,000 units.

If the speculative reseller return theory is wrong, however, and 57,000 is really reflective of the total number of new systems sold in January (a five-week retail month), then we could see a mere 46,000 units in February (a four-week retail month), if average weekly January sales are repeated in February.

The NPD Group will report those February estimates in under two weeks. I'll be back then, and we can revisit this question.

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John Gordon
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Very interesting theory! Seems to make sense to me.

Joe Zachery
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Pachter Nintendo Spin! This is the guy in a matter of 5 days has said Nintendo is doomed because of the Wii U. Then 5 days later said Nintendo is not in trouble because of their stock pile of money. I really wish you guys wouldn't go to this guys for quotes. It's like the New York times asking the AVGN, Annoyed Gamer, HopHipGamer, or Sean Malstorm of some insight.

Any the Wii U had no new games released during January simple as that. We have seen with other systems with a lot of games. That people are just not jumping aboard the home console market. The rather spend their money on something else. If the Vita had huge numbers then I would very worried. As we can see that system that also has has no new games. Is also not selling out at retailers.

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Well the word has been echoed that the Wii U sold horribly in the month of January, and there is no way that Patcher would backtrack on any position he has taken thus far. So even if this was not true as the article may suggest it still won't make up for the echo chamber of people who used this information to spread the Nintendo is Doomed story. This is why its always better to be accurate than first.

Bob Johnson
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Hehe. ...Think I posted this explanation in a comment to a previous article.

February will indeed clear some of this up.

Overall though remember it is a marathon. As time goes on the system will accumulate titles - mostly first party ones and it will get updates and surely the price will drop some.

Then it will look more attractive.

Never going to be a AAA western console. But should earn its niche amongst fans and family and gamers who get everything.

Wayne Beck
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The Theory definitely makes sense. I suppose better than expected February Sales will be the closest thing to proof we can get. I did, personally, find it odd that Software Sales for Wii U in January put it at a ridiculously high attach rate. There was definitely a massive number of scalper Wii Us on the Web in December, despite Nintendo managing to restock Stores every three days or so.

Will be funny to see the comments from Nintendo haters if this turns out to be true.

Cal Brun
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Returned units have to show up at some point. If we are talking about the Ebay types, they are holding until Christmas in the hope of a sales spike, and those returns would be netted into the January numbers.

While 40,000 units seems like a lot, it wouldn't surprise me, given the demand for the Wii in 2006.

I'd like to compliment the author on a well researched article. I agree with Michael Prachter (this is a first, I think!) that the sales numbers still wouldn't be great, but Michael really gives away how biased he is when he describes it as "Nintendo spin".

As a CFO, if returns aren't being reported separately by NPD, then the returns hit January sales, and I don't see any spin in this at all.

Carl Chavez
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You have made a hypothesis, not a theory. Your hypothesis is interesting, though.

Mike Jenkins
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The standard definition of theory is not the same as a scientific theory.

Kevin Clough
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Very interesting explanation. If there were lots of returns in January, it is possible they were from regular people returning the console rather than speculators. I don't know of anyone who even bought the Wii U so I wouldn't know whether there were many people who bought it and returned it after being unhappy with it.

Chris Hendricks
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That thought occurred to me as well... one would hope that the returns were only from speculators.

Frank DAngelo
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Dem flippers. Hope they learned their lesson. :P

In all seriousness though, I think the console is selling poorly just because their isn't much reason to buy a WiiU. I DO want a WiiU, but I see no reason to buy one till we get Pikmin 3, the next Mario Galaxy, or a new Zelda. Only once Nintendo has some of it's core titles out, will we see the system start to sell nicely. I mean, all they got now is Mario Bros WiiU which isn't a huge advancement over it's DS counterparts. In fact, I would argue Super Mario 3ds was a significantly better game. The rest of the current titles are just multiplatform games that gamers have been enjoying on ps3/xbox for awhile now. Plus, ps3 and xbox still have a lot of momentum going in the console world. Nintendo was bold trying to have a sellout just on technology alone, but with no games to back that tech up, it backfired on them.

Mike Griffin
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From personal experience striking up job/game-related conversations with lite gamers, it's clear that there's still a weird Wii U perception issue in some cases.

Some folks don't rightly "get" what the Wii U is, and many presume it's just another SKU of the Wii.

In fact, before I corrected him, a friend of mine said, "Why do I need a touchscreen controller for my Wii? I have an iPad already. All we ever used the Wii for was Wii Sports and Tiger Woods, and my wife plays Wii Fit."

But, you see, it's actually totally different/new hardware, and plays new games, and it's high-def (you do recall that your Wii was not HD, right?), and the touchscreen is actually a controller to play games remotely, and...

"But it's still basically a Wii, right?"

To which I clarify, "Sure, but it's the next-generation version. It's sort of like a 1.5 version of a PS3 or Xbox 360 with options they don't have."

"Do I need one?"

"Well, not really. Not right now. Hard to say going forward. If you like Nintendo's games, maybe."

It would be far more entertaining to give the Wii U a huge thumbs up and recommend it to anyone who asks the 'gamer guy' for an opinion on it, but I just can't do that this time. Not yet. And that's pretty rare and unsettling for a new Nintendo console, which I'm usually stoked to recommend.

I hope they sort this out before it gets too late for a comeback (I.e., Holiday 2013).

wes bogdan
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Well i look @ my gamepad wondering why ninty didn't put the analog sticks under dpad down and b which would've been a superior design to what feels like a supersized duke pad. It would've been better with a real touchscreen and built in wifi so you could roam the house still using the wii u. Oddly ninty left out toslink so no $300 astro/turtle beach phones expect on ps4 and Xbox next. Plus the darth of games released why wasn't lego city released for Christmas meanwhile wii u is hosting f-zero,balloon fight and super metroid while we wait on wind waker HD.
Never. Before were pepple not able to simply plug n play,3 HOURS LATER and some were still waiting to play with power!!

Am i sure ninty will come through as ALWAYS yes but how long must wii all wait and would wii u get lost in the nextboxes war this november..quite possibly

wes bogdan
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Without their fuel read metroid,mario or zelda the wii u is just a brick but release pokemon and everything changes.

wes bogdan
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Does anyone else think ninty might do a controler s redesign of the gamepad as it seems to waste lots of space if balance was a problem put the dpad and face buttons where the sticks are then the sticks could be in the middle rather than the bottom or @ least do it with the pro controller though i have to wonder how gameplay would be effected as most wii u games will have gamepad specific features like scan environments,item/weapon wheels,maps in games like metroid and zelda and a pro pad would be like using a regular standardized pad where u must use select and a game like lego city might not provide for the standard pad and push select to scan environments.

There should be a usb to toslink or wii sd digiport to toslink adaptor sold for $19 so we can get full private surround in our games,after all they made a wii-hdmi adaptor that plugged into wii sd digiport so why not?!

wes bogdan
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I'm expecting a pokemon wii u game where you can wirelessly send pokemon from dsi,3ds to the wii u game which would open up many online posibilitys provided ninty gets Nintendo network up and rolling.

Things nn still should accomplish before November would be allow all games registered to club nintendo and systems which also have a nn id to both upload/download saves which would also help when gba hits wii u for cross play or do they plan on charging me even though i have the ambassador games another $5 for zelda,metroid, or mario kart as my 3ds should be able to upload save progress to wii u and dl progress from it or just put a ninty cloud out so i can play my games without starting over on wii u which would also protect 3ds saves from loss as any regestered system you own can redownload the games and saved progress.
I see nothing wrong with the cross play-save idea outside of ninty themselves being so far behind and very conservative.

Robert Swift
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Wii Fit users simply are not the kind of customer who feel the need to upgrade to the next generation. And most of them don't even know about it. There is also much more other stuff around to buy instead. That's why the Wii U will sell worse than the original Wii.

The Wii U sales will primarily reveal how many 'core Nintendo game fans' are still around.