Artificial Product Scarcity

daniel-chen-217770 Note: Culturewaves has previously written about the concept of the “Mark-Up Economy” here.

Usually when we think of scarcity it points to a fundamental economic problem of never having enough of something. Marketing a product’s scarcity can create artificial demand—which sometimes gives it more attention than simply allowing a plentiful number of the product to sit on store shelves. Pair that with social media exposure, mentions, and comments, and you automatically create a situation that can essentially sell your product as soon as stores restock their shelves.

A notorious example: last November, Nintendo released a retro miniature console version of its NES called the NES Classic Edition. It was well hyped and sold out immediately, while second and third shipments were just as hard to come by. Nintendo ultimately and unexpectedly discontinued production and announced plans to release an SNES Classic this August. They did, and surprisingly shorted their production again, causing an online mess of website crashes and unsatisfied consumers unable to fill their digital carts in time. Many thought Nintendo would have learned its lesson the first time around and stocked enough to meet demand. Those who are, perhaps, more jaded, think they are doing this on purpose to create artificial scarcity.

Lest you think we are picking on Nintendo, they aren’t alone. The whole movement toward limited time offers creates scarcity. Companies such as Legos, Supreme (a clothing company), even the one day exclusives offered by Krispy Kreme, are all working the trend.

In an unexpected twist, Nintendo has recently announced plans to re-release the highly sought-after NES Classic “again” early next year. While there’s excitement around a second chance to buy, there are also thoughts and worries about another round of shortages.

The fears are fueled partially by scalpers—some of who make their own purchases through automated means. They then mark up the price further, relying on consumers who are ready to overpay for a product that, in Nintendo’s case, relies heavily on nostalgia and availability. Olive Garden’s Unlimited Pasta passes, which sold out in seconds this month, are already being offered on eBay at a higher price, but still a bargain for those who will use the benefit.

There is something inherently in this idea of scarcity that marketers sometimes try to tap into in order to sell a product. Consumer psychology is all about getting into that unconscious territory where people are being directed to make purchases for subconscious reasons they are not always aware of, whether it’s nostalgia, comfort, or looking for a bargain.

Millennials have grown up with artificial scarcity and tend to accept it as part of the business of buying. It feeds into the driver of “I want it now” and, at the same time, promotes the idea of having something not everyone else can get. We’ve trained ourselves to not want to fail, and artificial scarcity plays into that as well.

The reason the scalper market exists is, despite having to overpay for access, it means we didn’t fail. The hype behind the product and its availability is creating an unintended black market based simply off of “want.”

We can make more sense of this in food, where warehouse storage space is short and consumer attention spans shorter, and limited time offerings get people to think about a brand in a new way. Seeing it move across all sectors, though, makes us wonder: are we accepting artificial scarcity and the resulting market manipulations? Or are we ready to call it what it is and pass on the brands that can’t fairly accommodate demand.

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