It’s been more than two months since Sony’s PlayStation 5 and Microsoft’s Xbox Series S / X officially hit store shelves, and both consoles are still nearly impossible to find at major retailers. In light of these shortcomings, many future gamers have turned their hearts to scalpers. These opportunistic traders buy new systems as soon as they are available in retail (often using automated bots) with the goal of listing them immediately for significant listing on eBay or other third-party sites.
These dealers definitely take advantage of the situation and pass on the console inventory of players who might otherwise get the systems at the suggested retail price from the manufacturer. Some recent comprehensive analyzes of online listings suggest that retailers are only responsible for a small amount of all sales of new consoles in the US. Even in a world without scalpers, the current demand for the PS5 and Xbox Series S / X will be much higher than the current stock.
Run the numbers
Self-described Oracle Data Engineer Michael Driscoll did the bone-chilling work here using Python scripts to scrape eBay and StockX for every successful listing that sells a PS5 or an Xbox Series S / X. His analyzes of these resale markets offer a fascinating depth into the details of second-hand console sales, and we recommend reading it in full. But key figures suggest that about 146,000 PS5 consoles (and about 110,000 Xbox Series S / X consoles) have been sold on the two resale spaces since the launch of the systems in November.
Driscoll’s indirect, rough estimates from other resale markets such as OfferUp and Facebook suggest that 60,000 to 165,000 more PS5 consoles will be resold online elsewhere after their original retail purchase. By all accounts, Driscoll estimates that the resale market represents 10 to 15 percent of the (also very estimated) 2 million PS5s sold so far in the US. The percentages involved for the Xbox Series S / X are a bit smaller, but they are in the same series.
Again, a 10 to 15 percent decrease in the number of PS5s available at the retail price is nothing. It represents hundreds of thousands of people who were unable to place retail orders, and according to Driscoll’s analysis were forced to wait or pay median sales prices that reached a peak of 260% of the MSRP. This is not an excellent situation for everyone involved except maybe for the scalpers.
At the same time, the numbers suggest that the scalpers are not the overwhelming factor preventing retailers from keeping these new systems on the shelves.
Imagine there are no scalpers …
Imagine for a second you were transposed into the karmic driven world of Earl. Imagine for a second you were transposed into the karmic driven world of Earl. In the world, based on Driscoll’s analysis, from 200 to 300,000 more Americans so far could buy a PS5 at the MSRP from $ 400 to $ 500. Again, this will be good news for everyone except the prospective scalpers (who no longer exist).
But what then?
For the PS5, however, the core problem is not scalpers. It is that there are far more people who want to buy a PS5 than there are existing PS5 consoles in the world.
Even with the supplies allotted to Sony’s MSRP, there would still be hundreds of thousands of potential customers for a PS5. I know that because customers here in the real, scale-saturated world are currently willing to pay an average price of 160 to 200 percent of the MSRP (according to Driscoll’s calculation) for one of the thousands of systems available at a retailer. . The only way this happens is if the total demand for the system still exceeds the total supply (which includes the many resold systems that have already made it into the hands of players in this case).
By contrast, resale prices for the PS4 currently sit at a median of between 70 and 90 percent of MSRP, according to Driscoll’s analysis. This is what happens when retailers have a lot of stock to meet demand. For the PS5, however, the core issue is not one of scalpers. It is that there are far more people who want to buy a PS5 than there are existing PS5 consoles in the world.
In one sense, nothing could be less surprising. Even the Wii U, which ended up being a big flop for Nintendo, has seen widespread sales and second-hand comments in the weeks surrounding the launch. The nature of the console cycle with more than a year (and early adoption by gamers) means that there is almost always enough pent-up demand for new hardware to take into account everything a console manufacturer can deliver right around launch.
The question for each system launch then is how long the situation will last. For the Wii U, supplies were easy to find on store shelves within two months of launch. On the other hand, the shortages lasted for years, leading to the widespread (and active denial) belief that Nintendo deliberate withholding Wii supplies to create a kind of self-sufficient artificial demand that made the system look more popular (or something).
Just make more?
In the case of the new consoles of 2020, it looks like the supply constraints will last at least a few more months. Microsoft’s head of investor relations, Mike Spencer, recently told The New York Times that the Xbox Series S / X will be limited to at least June. And AMD, which is delivering chips for both the PS5 and Xbox Series S / X, also said that the supply restrictions will last until the first half of 2021. “We did have some restrictions on the offer as we ended the year,” said AMD CEO Lisa Su.
Can’t these manufacturers of chips and consoles just increase production to meet the intense demand faster? Theoretically they could, but logistically it is not always that simple. For example, limited stocks of raw materials and suitable production facilities can significantly increase the marginal cost of increasing production rates. In any case, it is difficult to make that kind of change on a double; contracting with new manufacturers and supply lines is a complicated process, especially if you do not see the excess demand coming.
Increasing production capacity above the current baseline is also not without risk. By the time you incurred the cost and effort to drive consoles faster, total demand may have decreased, allowing you to keep the bag with increased expenses and warehouses full of hard-to-sell products. If you keep stocks steady, on the other hand, you have less risk, and those potential players will still do so. eventually get their desired consoles (unless of course they change their mind or go with a competitor).
In addition to increased production, Microsoft and Sony could only increase the price of their consoles, bringing in the extra revenue from an apparently grim fan base. From a PR perspective, however, it would be really bad in a world where hardware prices only drop over time. Retailers sometimes try to perform a similar trick by forcing customers to buy hardware as part of an expensive bundle.
So yes, when it comes to console shortages, scalpers are definitely part of the problem and offer an easy scapegoat when the store shelves are empty. But the bigger reason for the shortage of new consoles is the years of pent-up demand that the console makers are unable to (or reluctantly) satisfy as quickly as the market wants. As with every launch of the console, the only way to avoid the second-hand comments of scalpers is to just be patient.