GameStop expects the Switch to be hard to find through 2017

The successful launch of the Nintendo Switch earlier this month is already creating retail shortages and steep markups on the secondary market. Now, major retailer GameStop says it expects those kinds of shortages and nearly instant sell-through of shipments to last throughout 2017 in its more than 7,000 retail stores.

"The demand is incredibly strong for this [Switch] column," GameStop COO Tony Bartel said in an earnings call yesterday evening. "As soon as we get into our stores, it's out within hours. We anticipate that we're going to be chasing supply this entire year."

CEO Paul Raines said elsewhere in the call that the retailer's initial shipment of Switch systems sold out in two days and that "multiple replenishments since the launch... have sold out in hours." Bartel added that "there is tremendous demand for this, and we just don't know how high it is because every time we get it out in our stores it's literally gone."

Beyond the system itself, though, Raines noted that the average Switch buyer at GameStop also bought 5.5 related products (including both Switch games and accessories) along with the system. "They're picking up anything they can," Bartel said. The Legend of Zelda: Breath of the Wild, specifically, has an "almost one-to-one attach result," Bartel said, meaning practically every Switch customer also picks up a copy of the game.

The GameStop executives predicted continued supply issues for the Switch while also acknowledging a recent report that Nintendo is planning to double its production of the system for the upcoming fiscal year—from 8 million units to 16 million units worldwide. Raines said that GameStop was being cautious in projecting the effects of any production increase, partly because it didn't know how many units would be allocated to its stores. "We really don't have an aggressive forecast built in here, and we've learned with Nintendo through the years not to do that."

Switch a bright spot amid drooping sales

Still, the excitement for the Switch within GameStop was palpable throughout the earnings call, with Raines saying early on that "the Switch has provided a dramatic lift in traffic in-store and has real potential to be Wii-like in its ability to expand the gaming category from core to broad audiences." That's a bold comparison, considering that the Wii remained hard to find at US retailers for years after launch and went on to sell over 100 million units worldwide.

GameStop EVP and President Mike Mauler said upcoming Switch software, including "a couple more [games] I think that hasn't been announced yet," should help maintain initial hardware demand in the coming months. "There is some good third-party publishing support on the Switch, which we really hadn't seen with Wii U either, and that will drive demand," he added. Raines continued the comparison to the Wii U, saying that the Switch "feels a lot more broad and [has] a lot more movement associated, and we think that's going to be a broader feel."

The sales success for the Switch comes at a crucial time for GameStop, which saw game hardware sales plunge 29 percent, physical software sales drop 19 percent, and even venerable pre-owned game sales dip nearly seven percent in the fourth quarter of 2016. For the full year, global sales for the company were down over eight percent from 2015 and profits were down over 12 percent.