Despite a favourable response from consumers, the much anticipated launch of Xbox 360 has been marred by shortages and mass merchants using the consoles as loss leaders, according to All Interactive Distribution software buyer, Ryal Irwin.
While independent retailers were furnished with a fair proportion of the $40 million worth of pre-sold consoles, he claimed the sub-distributor was only able to secure about half of the quantities ordered by the smaller independent resellers it services.
"Overall the launch has been really positive, but the little independent stores are struggling to compete with supply shortages and mass merchants conducting day sales that trash prices," Irwin said.
"A lot of our resellers are effectively sold out and waiting for new stock. We knew how high demand was going to be but we were short from the launch and for the next couple of weeks we only expect to get product in a drip feed."
Principal distributor, Ingram Micro, on the other hand reported no such shortages in securing product to sell into the mass merchant channel it supplies.
"The pre-sales figures were all in line with expectations and Microsoft has worked hard to give us the pre-allocation we required given very high global demand," director of product management, Lorraine Cowan, said.
Nonetheless, Irwin said savvy independents would have anticipated the shortage and ordered in excess of what they actually expected to sell.
"It's like this with all console launches," he said. "A lot of the independents know what's coming and order double what they'll need knowing they always get half of what they order."
Although Irwin expects the shortages will dissipate as demand slows, he is concerned the independent channel will miss out on sales during this all-important initial phase.
"There's no doubt the first six weeks are the high-point of the sales. After that, the market is going to slow down," he said.
With its capacity to operate as a Media Center extender, the Xbox 360 has been widely touted as a driver of digital home entertainment systems in the same way its predecessor brought DVD players into Australian homes. However, at this stage Irwin said sales patterns indicated the machines were being purchased strictly as games consoles.
"We are seeing very high sales on games and additional controllers, which seems to suggest the early adopters are only really thinking of the machine as a games console at this stage," he said.