Playstation 3 Pre-Orders: Standing in line…..to stand in line!

Looking at the calendar, it’s T-minus 122 days and counting until the release of the much anticipated PlayStation 3. If you asked me (and many others) how we felt about the PS3 last year this time, you’d probably get a much different answer than you would now (but that’s the subject of another post.) Nonetheless, I will probably be among the huddled masses standing in line to get my PS3 this November. However, right now I want to talk a bit about Sony and the process we lovingly refer to as “pre-ordering”.Flickr Photo

With less than four months to go before the PS3 is available in the U.S. (barring any delays…which could happen), somehow Sony has mandated that none of the retail or online stores should begin taking pre-orders for the system. So what does this mean? Well, where there was only one day in November last year when everyone was willing to shove aside their own mother for the chance to own the latest next generation gaming system (Xbox 360), this year we’ll have two days. Not only will people be standing in line in front of Best Buy, Circuit City and outside mall entrances for GameStop, FYE and Electronics Boutique this November….. but there will probably be a day in the next few months when the alarm will be sounded that “stores are now taking orders for PS3s” and people will probably be standing in line again… just for the privilege of standing in line in November. (My thoughts go to the South Park episode where Cartman complains about “Quick Pass” at amusement parks where essentially you stand in one line so that you can stand in another line. ) As a side note, if you register on the PS3 page of the Electronics Boutique website, they promise to send out an e-mail letting you know when the PS3 is going to be available for pre-order.

I’m ranting for a few reasons. First of all, what is the harm in taking pre-orders now if that’s the eventual plan? Give customers the opportunity to reserve the system as early as possible. As problematic as the Xbox 360 launch was (and for a number of different reasons), at the very least, early pre-ordering insured that the hardcore gamer had the system first. (After all, it’s only the hardcore gamer that foresees this problem or who even knows about the system launching early enough to be within the first 50 names to pre-order at their local chain.) Last year, those who pre-ordered the Xbox 360 early in the summer more than likely had the system at launch. In the case of Sony, they’re only creating a bigger problem. If they decide to let retail chains sell pre-orders anytime after August, I think we’re almost guaranteed to have a newsworthy event. Every local station will be carrying the story and people who don’t even intend on playing games will pre-order just because of the buzz.

So how do you avoid this scenario? (I’m glad you asked!)

This is an idea that will probably upset a few people (namely GameStop/Electronics Boutique), but I think it’s one who’s time has come. First of all, let’s establish the fact that the gaming retail stores, both online and brick-and-mortar, don’t make much money from system sales. I’m hearing it’s anywhere from five to nine dollars per system sold. Where they truly make money is by reselling accessories and games. (Which should explain why most online and even some brick-and-mortar retail stores only sell the units in a bundle.) Let it also be known that launch days are generally a big mess. Take it from me – I stood on launch lines for the Playstation, Dreamcast, Playstation 2, PSP and Xbox 360. You’re either skipping work or school at least one day. For the real hardcore masses, you’re probably camping out all night…in the cold. (And in the NYC area last November, it rained for the 360 launch……like, really hard.) Not to mention the danger associated with leaving a store in the middle of the day with a big yellow Best Buy bag among hundreds of folks who didn’t get a system because they didn’t pre-order one….and are now looking at your large $600 package with…. let’s say “evil intentions”. Trust me, it’s a really messy affair.

If you’re a hardcore gamer, then you might have noticed that in my list of “system launches” above that one modern day system was conspicuously absent…the original Xbox. Could it be that this so-called hardcore gamer missed out on a console launch? Was I just broke in 2001 or too depressed after events in September to care about gaming? Nope. I just ordered it from Electronic Boutique. Online. It was a move that I would come to question in the weeks leading up to the Xbox launch. “What if they ship it to the wrong address?” “What happens if it gets lost in the mail?” Those and a thousand other worries plagued my mind. That is, until launch day arrived. The UPS guy actually woke me up. Early 8AM delivery. Two boxes — one holding the system and another holding games and accessories. It was a neat clean event. No lines and no fuss. Which got me thinking…. Why don’t the gaming companies sell the systems….direct.

I propose that console companies sell their systems directly through a their own distribution center or directly from the manufacturer. On the surface, it seems like a crazy idea that will only upset the big retail chains. But given some serious thought, I believe that selling systems directly to customers who order them via a website or an 800 number is an ingenious idea. Here are just a few reasons why:

  1. We all order items online. Amazon, Buy.com, eBay, Woot!, etc. I’m amazed at how many “HSN” or “QVC” boxes I see the mailman unloading and delivering to on my block. Mail order is the answer.
  2. It makes an attempt to stopping “system scalpers” (folks who buy ten systems just to sell them at a 200% markup on eBay.) By Sony taking orders directly, they can insure that there is a one system per customer limit. They can even cross reference different orders against a database (to prevent people from creating orders under different names.) Sure folks are going to use ten different addresses if they really want to scalpe, but it seems like a better solution.
  3. It prevents corruption from within retail chains. It seemed like no matter who I spoke to in November, somebody had a cousin or uncle who worked at Target or Circuit City that was going to insure that they had a unit. Retail management took steps to prevent this from happening, but guess what — it happened anyhow. I even heard stories of managers on the side making a profit from taking $100 or $200 from customers for the right to buy a system. (That’s right — just a ticket. They still had to pay $399 for the system). This doesn’t happen if Sony is taking the orders and sending the systems.
  4. No lines. Self-explanatory.
  5. Savings in shipping costs. The Xbox 360 is rumored to cost Microsoft $500-650 to produce. Sony will certainly be losing at least $200 on each system sold. (It’s the economics of gaming — systems are sold at a loss and money is made back on accessory and game sales). With all this money lost, perhaps they can save a few dollars by eliminating one “hop” in the shipping process. Instead of shipping from Asia to a distribution center or to Best Buy, ship directly to the consumer.
  6. No bundles. OK, maybe Sony might make gamers buy a bundle, but certainly nothing like the ridiculous packages that EB and GameStop are selling! The lowest bundles for a $399 Xbox 360 were about $600 after they packaged two games, wired controller and several other useless accessories. No more! Sony should sell the system and offer the option of buying games and accessories. I see an order page with checkboxes for accessories and games.
  7. Establishes a relationship with the owners. Here’s a benefit for Sony. No longer do they have to estimate based on retail sales how many unique customers they have. They’ll have a database of who bought a PS3 on an accurate, in-house system. No more filling out of registration cards. The system is mapped to the person that ordered it. (Of course there will have to be room for edits if people move, buy systems for their children, etc.) But this brings me to point 6….
  8. Sets up customers for possible returns. We know all too well that first generation systems are plagued with problems. Systems damaging discs….systems overheating, etc. Right away Sony knows exactly when the system was purchased, if it’s still under warranty, etc.
  9. In the event of shortages, a systematic method exists of predicting when customers will have systems. How much negative press did Peter Moore and Microsoft have to deal with in the shadow of thousands of angry gamers and pouting kids who didn’t have a system at launch. Worse than this, they had no idea when they would be getting a system. Microsoft wasted money having systems flown over from Asia and still heard the cries of upset gamers because the shipments went to a retail unit other than their own. If Sony owns the PS3 waiting list, I’m sure that even with uncertainty around manufacturing times, within a few weeks Sony can tell you via e-mail when your system is scheduled to arrive. I think it also avoids the problem that many people in less populated ares experienced of their stores not getting new shipments. In the scenario of Sony shipping systems, it doesn’t matter where you live, when you’re next in line, you’ll receive your system.
  10. Future sales opportunities. This ties in with number 6. After the dust has settled and most of the world that wants a system has one, Sony is sitting on this database of PS3 owners. Why not cross promote? Send everyone a free subscription to PlayStation magazine? Send the demo discs free every quarter? The bottom line is that this is an opportunity for Sony to extend themselves to gamers in a very crowded gaming market right now.
  11. Decrease in negative launch day press. As many negative stories as I recall hearing last year around scuffles and fights in Best Buy lines and robberies, sadly I expect to hear as many if not more this year. This is a much higher profile launch than the 360 — “the new PlayStation!”. And while the higher costs of the PlayStation ($499-$599) may lead some to think that the lower income end of the market might be scared away by the high price, I think the value of the system will bring huge numbers out. Distributing a system via a direct distribution system eliminates all of the negative press and images of fights in malls — at least related to the system. Gaming has enough negative press already. Do we need another story about a child being choked out for his PS3?

I could easily write several other reasons why I think this is a good idea, but I’m sure you get the point. Perhaps there are better solutions? Offer them as a comment to the page. I’d love to hear them. Regardless of what alternatives we agree are best, I think it’s safe to say that anything is better than the current system of console pre-ordering. The gaming press needs to offer this idea to Sony (and possibly even Nintendo for the Wii.) It’s an idea whose time has more than arrived.

Image courtesy of Flickr.com. http://www.flickr.com/photos/dalangalma/65816645


6 Responses to “Playstation 3 Pre-Orders: Standing in line…..to stand in line!”

  1. 1 Jeff T
    July 20, 2006 at 3:51 pm

    Distributing direct could also allow Sony theoretically to lower the price a little. No longer would that very small percentage($9 or so) of the price have to go the retail store. Allowing the retail stores to just sell games for a while.

    Retail Distribution also can hurt Sony’s relationship with the retail stores, stores love it when they get pre-orders and on launch day news of lines spreads throughout the tv and papers. Retails stores love selling those expensive warranty plans also.

    In my opinion shipping to customers directly on launch day wouldn’t save much money. Shipping in bulk is way cheaper than shipping individually. At my job I see what it takes to fill Purchase orders and ship goods which are made at factories in foreign countries, I won’t go into what it would take to alter that process with a individual distribution model.

    Individually either the customers will have to pay for shipping or Sony, then you have the possibilty of your product getting damaged during individual shipment, who’d pay for that? Did anyone purchase insurance? Also let’s say Sony ships out 500k units for launch day, that’s a whole lot of UPS or FedEx trucks driving around and carrying and delivering these boxes along with their regular deliveries. And that is not taking into account those areas in countries where you just can’t deliver to because they may be in the middle of nowhere, it would be nice not to have to get up off the couch and drive to the store but it won’t be possible for all. Launch day is the day everyone one wants to get their system and play it on, I don’t think if 500k people would really be able to get their systems on launch day. Dell, Gateway and Apple provide mail order purchase and I’m sure they have ways of handling large individual orders so maybe it’s possible.

    Lastly, distributing directly, would take away the excitement and limit press opportunities for Sony. Yes the customers would be happy if they all got the systems on time but then where would be the news coverage, the buzz, the camping out the time when fanboys get to show what a fanatic they are, the wonderful stories on how some dad braved the lines to get their kid a system, the interview from the first guy who bought the system on Regis and Kelly.

    I tried not to add my 2 cents on this but I couldn’t resist as this is an area(technology) and subject I have been passionate about all my life and is also in my line of work. I understand these are your thoughts but you left the comment button on for a reason, so I hope you take my comments in good spirit. My comments are not meant to challenge it is to compliment your article with further insight. You’ve probably thought of the issues I brought up while you were writing anyway.

  2. July 20, 2006 at 8:50 pm

    Hey – Come on! Me take them bad? Comments are here for a reason. Keeps the post from being one sided. (Or just plain inaccurate.)

    I thought about the shipping problems it might present. It’s true that logistically it might be difficult to ship on a single day. But I lived life for a full year as a Project Manager doing laptop and printer rollouts to anywhere from 1200 – 4000 sales reps over the course of a week. With the discounted rate you’d receive, the cost would even out. The company we supported had almost 1/3 of cost to ship a multi-function printer than normal cost. (And the printer was probably bigger than the PS3…but not by much.) This is taking into account the cost of drop-shipping the units in the U.S. first. These are just the projects I managed — one of our partners (who we contracted to help if it was beyond our capacity) had a capacity of shipping completed laptops (if we made the changes at the facility) of 9K units a day. I think it could happen.

    While it might not be realistic to consider shipping in one day, shipping over the course of, say, two weeks would be realistic. Yes, people would riot and complain, but I think given all of the problems there will be on Nov 15, it’s probably the better option. (“OK – didn’t get my system on launch day, but at least I know it’s coming on Nov 22 based on the e-mail.)

    I hear you on the limited press opportunities. That would be tough to create the buzz. But given the 360 robbery and death last year and the fact that this system costs even more, I pray that we don’t see any more deaths or even any robberies.

    Last thing I didn’t mention in the last article (as not to make it any longer) was the fact that all of the retail units have pretty much lost their credibility by doing a piss-poor job of managing customer expectations. They do the worst thing you can do — blame it all on the company. (In November last year all I heard was “Hey – it’s Microsoft’s fault. They lied to us.”) I think if you contract a company to do this properly you’ll have a much more friendly staff of phone support folks who can handle problems. No more of this:

    “Thank you for calling EB, where you can trade in 15 games and get a pre-order towards the purchase on Madden 2007…this is Sherry how can I help you?………No we didn’t get any systems in…… No, I don’t know when we’re getting them in…… Did you pre-order? ……..OK, what’s your name? ……….(16 minutes later)….. Uh, sir you’re 341 on our list…… Excuse me? What does it mean? Well, it means that it’s going to be awhile before you get your system. ……Trust us ….we’ll call you as soon as it’s your time.”

    And the experiences vary. I’ve had some positive experiences, but never again will I work with GameStop. And from what I hear Best Buy isn’t much better. Too much “digging through boxes in the back”. These people make $10 an hour. This is a golden opportunity to make money. Too much potential for corruption.

    (I’m getting on a rant again.) Let’s just say that I’m one of the people who has been fortunate enough to take the day off each launch day and to somehow through the grace of God alone, get a system. And stil, given all of the cons of shipping, I’d still see so many more advantages to putting the customer first by having a system where those who were 210 were actually number 210 to order a system. Not number 6 in Topeka, Kansas and 231 in Sacramento, Cali….and you just know that that Microsoft/Sony is going to get more systems to California, where the press speaks louder, than the poor guy in Topeka who might even spend more on games. It’s a broken system and it’s time for a change. Let’s hope someone will take the lead and innovate towards a solution to this broken process.

  3. 3 Rich
    September 25, 2006 at 3:13 pm

    It’s all about the profit and the hype boys! Sony makes tons of money from sales of the first two playstation systems, and the long list of games that came with it. $600 clams is alot to shell out on gameday, but then again, when you look at some of the footage on an HD set…holy crap that looks sweet!

  4. March 6, 2007 at 8:47 am

    I am in a virtual line for the UK PS3 launch by preorder PS3 at http://www.pre-orderps3.co.uk

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