ELi5: With the news of the new xbox and ps5 coming out soon, preorders have sold out everywhere. This happens every time a new console is released but with other electronics like new cell phones this doesn’t seem to be a problem. How come?
In: Technology
Oversimplification but:
Say you have a factory that can produce 10 widgets per day. You know that there are 500 people willing to buy your widgets at $5 of profit each. It costs you $0.1 per day per widget to store any widgets you produce but do not sell.
If you make 10 widgets and immediately sell them you make $50 in profit that day and incur no storage costs. Doing this will disappoint 490 of your customers on day 1 and 10 fewer every day after that.
Alternatively, you can store up your widgets in your warehouse until you have 500 to supply to everyone who wants one, you make $2500 all in one day, that’s great you say, but then your storage bill arrives and it’s $0.1(cost per day per widget) * 245(average number of widgets in storage) * 49(number of days widgets were in storage) = $1200.50 holy crap, almost half your profit just vanished into storage costs!
Obviously, there is a balance that is needed that is somewhere between disappointment for most of your customers and storage costs, that balance is basically why there are a limited number of *any* high demand item, whether it’s a console, phone, car, or anything else.
Edit: As for why it happens *more* with consoles: the profit margins are miniscule for consoles reletive to basically any other piece of tech.
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