Why Nintendo is NOT price gouging on the 3DS

Comment by Patrick Avenell

SYDNEY, NSW: The unveiling of the Nintendo 3DS was met with oohs and ahhs in Sydney this week, but there was one other emotion also prominent at the party to celebrate its impending arrival: hubris.

So blindly proud were Nintendo’s handpicked selection of invite winners that when the price was announced, the mutterings from these sycophants wasn’t “it’s great, I’m going to buy one”, but “it’s great, but why am I being ripped off?”

To bring those that don’t follow either gaming or currency trading too closely up to date, Nintendo announced in late January 2011 that the 3DS will cost US$250 for its consumers Stateside. In Australia, Nintendo has set an RRP of $349. Both these figures are just suggestions — retailers can charge whatever they like — but at least for the launch period these two prices should hold up. So, with the US and Australian dollars virtually the same, that means Americans are getting their 3DSes for $100 less, right? Well, not exactly.

Taking it purely on face value, yes, an American that walks into their local Walmart and picks up a 3DS will pay $100 less than an Aussie in the local Harvey Norman, but that simple analysis ignores some very important points.

Firstly, America is an enormous country: 310 million people. Even more importantly, its population is spread throughout the whole contiguous 48 states, with large inland population centres such as Chicago, Houston and St Louis right in the middle. This is important because it makes logistics a much more scalable expense. Not only can Nintendo ship more 3DS units due to the enormous population, it doesn’t have to cover exorbitant transport costs to reach isolated outposts.

Compare that to Australia. Our population is 22.5 million — that’s around one-fourteenth of the US’ — but our landmass is only slightly smaller than the mainland US states. That means an importer such as Nintendo must pay to transport product around a similar-sized area, but with 93 per cent less people and hundreds less major population centres. There is just no scale.

Now, is that lack of scale worth $100? That’s hard to calculate, but $100 is a spurious figure anyway. Let’s look at what purchasing online from a US store actually involves. Firstly, you have to pay for delivery, so let’s assume that’s a modest $15: that reduces your saving to only $85.

Then there’s the inconvenience of having to go to the post office during business hours to collect it. That doesn’t cost any money, but with post offices closing down and the staff there interminably inefficient, I reckon that’s worth another $15. Okay, so you’re saving $70.

Now here’s the real kicker. If you really are a big Nintendo fan: big enough to be singled out to attend Nintendo’s exclusive party, how are going to feel still playing your DS Lite while your less niggardly mate has his new 3DS? Whilst he’s navigating through Zelda 3D, you’re stuck waiting a few weeks for that slip to arrive asking you to go down to the post office. For a true gaming fan, that withdrawal and waiting must be worth a good $40.

So that leaves $30 in the bank account. No doubt for some people, that $30 saving will be enough to go online and take advantage of our new digital economy. For those of us who value their time, however, we’re prepared to pay a few more dollars to buy in store.

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