Nintendo boss Saturo Iwata has said that many quality games are suffering because retail is afraid to order SKUs in sufficient numbers.
That’s because retailers are afraid of being left with surplus stock, he argues – a problem that could be solved by increasing the space given to digital sales at retail.
“There are several issues with the current packaged software distribution business,” he told investors. “Before launching a software title, no one can precisely forecast how many units of software will sell in the market. Everyone develops and launches a software title with the hope to make it a smash hit, but when it comes to the actual sales in the market, even the most seasoned marketers cannot forecast the figures accurately.
“As a result, retailers are often left with surplus stock, which ends up being sold at a huge discount or, in contrast, software shortages could cause lost sales opportunities for retailers. With these kinds of issues becoming increasingly challenging, retailers are less willing to accept the inventory risk.
“In this situation, even when a developer has created software with high potential to become a smash hit, it is likely to fall short of its real sales potential. Or, even though a quality software title can successfully attract the interest of potential fans, making and shipping just a little more than the actual demand can lead to a big discount in the marketplace and, thus, destroy the game’s brand. We have seen repeated cases of these.”
The answer? Selling digital games in the forms of cards or codes, which take up significantly less shelf space.
“When I discussed with senior MD and GM of marketing Shinji Hatano the company’s endeavours with the POSA card to expand our digital download sales outlets to retail shops, he stressed that it would provide distributors with a huge opportunity to solve the existing issues,” Iwata added.
“A fairly large volume of Animal Crossing: New Leaf for Nintendo 3DS was sold in the form of a POSA card, which is activated only when it goes through POS registers at retailers and therefore the retailers do not have to shoulder the physical inventory risk.
“The growing sales of the POSA version of this game must have helped retailers see the business opportunity for video games with such a business structure. We therefore expect that our publishers may be interested in selling POSA cards for some titles they are publishing as download-only titles and that they will want to make more games available in POSA card format.
“Although convenience stores have limited shelf space to spare for a number of video game POSA cards, retailers with more shelf space might expand the areas designated to the video game POSA cards. They might even educate their customers who are not familiar with digital download software. We can expect to see a number of new possibilities. We expect our digital distribution to increase in importance and become an important revenue source.”