OP
OP
- Thread starter
- #11
I have always argued against the concept of artificial scarcity, even as far back as the NES Classic Mini when it launched in November 2016 in the US. I still remember the claims that Nintendo shipped very little to build demand while stockpiling for December and then... that's when the payoff occurs.
On November 2016 in the US, the NES Classic Mini shipped 196k units. Then in December 2016, the NES Classic Mini shipped 223k units. A total of 419k units for the year of 2016 during the holiday period in the US.
The December shipment was only 13.7% higher than the November shipment. That doesn't look like a successful strategy of artificial scarcity to me. They didn't stockpile units to flood the market in December to get the payoff from artificially building demand.
That reminds me, I also criticized the neoclassical economics model of the Supply and Demand Curve.
Anyway, if you've been reading my threads, then you probably have more knowledge of capitalism than before. You've already experienced its effects, but you probably did not have a way to be able to articulate it.
So, let's go over again why artificial scarcity is nonsense. Important to note that while there may be some company that does this such as the company behind the Cabbage Patch Dolls mentioned in the OP, I will explain why it doesn't even make sense as a strategy to make money under capitalism.
The concept suggests that a company artificially limits the supply of its (retail) product to build consumer demand, then the company fulfills that demand by distributing the rest of their supply which is supposed to be the payoff.
When a company launches a product in short supply but has high demand, what happens usually? Scalpers. People who make a profit by reselling the product to someone else at an inflated price. This is economic rent; they haven't done anything to make the product worth 100% or 200% more than the retail price, the consumer product ends up being treated like an asset like housing, but it's more like Bitcoin where the Bigger Fool strategy is used, you have to find someone that is a bigger fool than you to purchase the product off you for more than what you bought.
Why is it a Bigger Fool strategy? One simple reason, the consumer product gets restocked in the future, you just have to wait to purchase it from retail. Even now with software there's the option of buying a digital version of the game if you couldn't get a physical copy.
That was from the consumer side, what about the company? They don't benefit from scalpers reselling their products at inflated prices because they don't get a share of the profit. Companies make money by selling things and they don't make money from people reselling those things.
Next, when a product isn't in stock, what happens? You lose potential customers. Someone that would have bought your product on impulse changed their mind since your product wasn't in stock. There's no guarantee you're getting that customer back because your product isn't necessary to live.
Another reason why artificial scarcity is still nonsense. If I wanted to make more money, then I would raise the prices of the products that people want. I wouldn't let my product be scarce that people couldn't buy it. I would just raise the prices and then announce, "Oh uhh... We had to raise the prices of the NES Classic Mini to $500 because uhh... inflation, yes that will do." then I announce at the next quarter results to shareholders that the company profits are breaking historical records.
The fact that I mention inflation should clue you in on how a capitalist makes money, they need to make a profit and raising the prices of your product makes more sense than limiting the supply so that people can't buy it.
Here's another thing I need to mention again, monopoly rent. It's a form of economic rent where a company that has a monopoly in a market can raise the prices of their products/services far above what their cost is that it goes from making a profit to making rent i.e. extracting wealth. What is the consumer going to do, go to a competitor? What competitor?
Even better, there's the oligopoly. It's like a company having a monopoly but instead of one company, there's a few and they all prevent new competitors from appearing which results in monopoly rent as well.
You need to see from the perspective of the company why it doesn't make sense to use artificial scarcity, and any company that uses artificial scarcity for retail products simply doesn't understand how to make money under capitalism.
On November 2016 in the US, the NES Classic Mini shipped 196k units. Then in December 2016, the NES Classic Mini shipped 223k units. A total of 419k units for the year of 2016 during the holiday period in the US.
The December shipment was only 13.7% higher than the November shipment. That doesn't look like a successful strategy of artificial scarcity to me. They didn't stockpile units to flood the market in December to get the payoff from artificially building demand.
That reminds me, I also criticized the neoclassical economics model of the Supply and Demand Curve.
Anyway, if you've been reading my threads, then you probably have more knowledge of capitalism than before. You've already experienced its effects, but you probably did not have a way to be able to articulate it.
So, let's go over again why artificial scarcity is nonsense. Important to note that while there may be some company that does this such as the company behind the Cabbage Patch Dolls mentioned in the OP, I will explain why it doesn't even make sense as a strategy to make money under capitalism.
The concept suggests that a company artificially limits the supply of its (retail) product to build consumer demand, then the company fulfills that demand by distributing the rest of their supply which is supposed to be the payoff.
When a company launches a product in short supply but has high demand, what happens usually? Scalpers. People who make a profit by reselling the product to someone else at an inflated price. This is economic rent; they haven't done anything to make the product worth 100% or 200% more than the retail price, the consumer product ends up being treated like an asset like housing, but it's more like Bitcoin where the Bigger Fool strategy is used, you have to find someone that is a bigger fool than you to purchase the product off you for more than what you bought.
Why is it a Bigger Fool strategy? One simple reason, the consumer product gets restocked in the future, you just have to wait to purchase it from retail. Even now with software there's the option of buying a digital version of the game if you couldn't get a physical copy.
That was from the consumer side, what about the company? They don't benefit from scalpers reselling their products at inflated prices because they don't get a share of the profit. Companies make money by selling things and they don't make money from people reselling those things.
Next, when a product isn't in stock, what happens? You lose potential customers. Someone that would have bought your product on impulse changed their mind since your product wasn't in stock. There's no guarantee you're getting that customer back because your product isn't necessary to live.
Another reason why artificial scarcity is still nonsense. If I wanted to make more money, then I would raise the prices of the products that people want. I wouldn't let my product be scarce that people couldn't buy it. I would just raise the prices and then announce, "Oh uhh... We had to raise the prices of the NES Classic Mini to $500 because uhh... inflation, yes that will do." then I announce at the next quarter results to shareholders that the company profits are breaking historical records.
The fact that I mention inflation should clue you in on how a capitalist makes money, they need to make a profit and raising the prices of your product makes more sense than limiting the supply so that people can't buy it.
Here's another thing I need to mention again, monopoly rent. It's a form of economic rent where a company that has a monopoly in a market can raise the prices of their products/services far above what their cost is that it goes from making a profit to making rent i.e. extracting wealth. What is the consumer going to do, go to a competitor? What competitor?
Even better, there's the oligopoly. It's like a company having a monopoly but instead of one company, there's a few and they all prevent new competitors from appearing which results in monopoly rent as well.
You need to see from the perspective of the company why it doesn't make sense to use artificial scarcity, and any company that uses artificial scarcity for retail products simply doesn't understand how to make money under capitalism.