analysis

Nintendo Doesn't Have An Amiibo Problem, But It Doesn't Mind That You Do

by Mike Futter on Jun 01, 2015 at 04:02 AM

Ask any Amiibo collector (or former enthusiast) and you'll likely hear the same things. They'll tell you that the process for pre-ordering and acquiring new releases is broken. Nintendo isn't producing enough to fill the supply chain. Things need to get better.

As a consumer, I wholeheartedly agree. I've almost stopped collecting them. I couldn't help but pick up the lone Girl Inkling Amiibo that was available alongside my Splatoon purchase. I did turn down Pac-Man, though.

Retailers have dropped the ball. GameStop [Disclaimer: GameStop is Game Informer's parent company] saw a meltdown of its point-of-sale system on pre-order day. This led Toys R Us to stealthily put its exclusive character up for order in the middle of the night. The ire Toys R Us incurred led Amazon to save itself with a scheme that saw individual characters up for sale at very specific times.

None of these plans are ideal, and with so much demand clearly evidenced, you might be wondering why Nintendo doesn't just push more into the channel. The answer becomes apparent when you look at things from the corporate perspective.

Nintendo doesn't have an Amiibo problem, customers do. More importantly, Nintendo isn't motivated right now to solve that problem for people who are shelling out money as fast as they can when new figures are released.

I won't go so far as to suggest that Nintendo is unaware of the scalping issue that's faced the phenomenon. Rather, it's not a primary concern from the corporate perspective. 

Nintendo is on the road to financial recovery, and diluting Amiibo value by flooding the supply chain might as well be killing the goose that laid the golden egg. Collectors who are now buying every single figure immediately (because that's their only chance), might be more conservative if they know Shulk, Greninja, Ike, Rosalina, and Robin will be available any time they decide to buy.

Right now, Nintendo is pushing nearly all (if not the entirety) of its stock to retailers. That means that 100 percent (or close to it) of Amiibo expenses are immediately recuperated as revenue. There are no inventory-holding costs that linger as expenses.

This isn't just "not a problem" for Nintendo. It's the ideal manufacturing scenario. 

Further, Nintendo has shown that it is willing to issue different versions of the same characters. It need not push a second run for figures right now. 

Many players can't access the Amiibo features in these games due to scarcity.

Instead, the company can simply wait until those characters appear in a new game, and release the same limited supply with the same functionality in a new sculpt. Diehard collectors will still want them, and the company's conscience is clear about making compatible figures available for a second time.

At some point, interest will wane. Collectors will move on to other items and those who want to use the figures in games will write off those functions rather than suffer the process of securing figures.

That's when Nintendo can move into its second phase for the product. We'll start seeing slightly more of the most common characters at retail. Nintendo would also be wise to initiate some kind of "Club Amiibo" subscription plan.

Other collectible sites use a subscription model that helps set manufacturing expectations. Club Matty, Mattel's site for collectors, has offered year-long subscriptions for Voltron, He-Man, The Real Ghostbusters, and other classic figures lines.

For the consumer, subscribing is a security blanket. You provide a down payment and on a regular period throughout the year, your credit card is charged and the next figure shows up at your door. 

For Nintendo, that revenue goes on the books as a short-term liability called "deferred revenue." That's money that has come in, but for which related services or goods haven't been provided. (This is also how publishers recognize money paid for season passes before all the included DLC has been released.) Still, it's guaranteed money, and after the hassle of getting the first 20 or so figures, I am confident there would be widespread interest.

With DeNA building a system to replace Club Nintendo (and more), a more robust store and capacity for fulfilling subscriptions could be in the cards. Just don't expect Nintendo to start implementing these convenience options any time soon. Remember, the company doesn't have an Amiibo problem yet, and it won't until you kick yours. It's not going to start raining Amiibo figures until interest begins to dry up.