Microsoft responds to stock horror…

Peter Moore recently admitted to MCV that Microsoft have found the logistics involved in a worldwide launch more difficult than expected (MCV 14/09). As a result of the problems posed, many retailers have reacted angrily to their surprisingly low initial hardware allocations.

“We did say we’re going to be tight on day one, but people should think about this over a longer period than the first weekend,” Microsoft’s UK regional director Neil Thompson explained to MCV.

“Despite what some people are saying, we absolutely are going to replenish before Christmas. I could make the whole world or the UK wait four months or I could satisfy some of the demand on day one. That’s what we chose to do. You’re damned if you do, you’re damned if you don’t.”

Thompson also issued a thinly veiled attack on Sony’s PSP, which is still subject to severe shortages nearly two months after launch. “People are not going to be out of stock for six, seven or eight weeks as they might have experienced with some previous consoles,” he continued. “I think as we head into 2006 stock levels will be reasonably healthy and retail will do a great business.”

Although there are exceptions, the standard indie allocation of the console appears to be four Premium bundles and two Core bundles, leaving many retailers wondering if it is wise to spend heavily on 360 software and accessories if they don’t have hardware to accompany them.

“It looks like a lot of people are going to be disappointed until the New Year,” Asda’s music and games buying manager Nick Chilcott expalined to MCV. “After last year’s disaster it was important to get things right this time round. It’s hard to make a song and dance about it if you haven’t got the stock.”

Thompson, however, is keen to emphasise that the 360 is not the only option for retail this Christmas. “I think retail will have a great reason to drive traffic into their stores,” he added. “But if they don’t have 360 stock for whatever reason they should be looking at how they can cross-sell the original Xbox platform because there’s lots of opportunities there.” However, as our story (below) shows, the trade is already now calling for a price cut on the original Xbox to kickstart hardware sales.

… as retail calls for Xbox price cut

As Xbox 360’s launch draws ever closer, retail is increasingly concerned that Xbox will underperform this Christmas without a price cut.

With Microsoft putting its focus on the new 360, retailers have questioned the appeal of Xbox at its current £100 price point.

“Pricing activity on Xbox would definitely help,” said Asda buying manager for music and games Nick Chilcott. “Any price cut would stimulate demand, which wouldn’t be a bad thing as Xbox is perhaps not performing as we’d like.”

The pressure to drop the price of the console has increased thanks to the apparent surplus of machines, as one leading retail source explained to MCV: “Microsoft have got more Xbox’s than they know what to do with – Gem have been calling us week in, week out trying to offload them.”

Independent retail is similarly concerned for the future of Xbox. “The value of Xbox will inevitably go down when 360 comes out,” said CEX marketing manager John Cronin. “When you can pick up a second hand slimline PS2 for £88, it’s no surprise.”

Official distributor Gem is nevertheless confident that the console will maintain a lasting appeal. “Microsoft is committed to making sure the Xbox will continue to sell,” Gem MD Paul Donnelly told MCV. “There are promotions out there at the moment and there are some further promotions being put together. Clearly 360 is going to be in huge demand, but Xbox will be purchased by a different kind of user.”

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