Business / Corporate

Nintendo's Tokyo store isn't large enough for its fan base

Bloomberg

Just before Christmas, a trip to Nintendo Co.’s flagship store in Tokyo would have required an hour’s wait just to get in and buy a plush Mario toy or a set of chopsticks bearing Luigi’s face.

Opened in November on the sixth floor of the renovated Shibuya Parco shopping mall, the constantly packed 300-sq.-meter showcase exhibits the appeal of Nintendo’s intellectual property contrasted against the conservatism that leads it to habitually underestimate its popularity.

The long lines are a sign of the customer loyalty Nintendo’s counting on in 2020 as it ramps up mobile efforts and ponders successors for the aging Switch.

A deluge of fans — foreign and Japanese — has overwhelmed the outlet since the moment it opened. Staff said there hasn’t yet been a day without a long line of people waiting to get in, despite distributing numbered tickets before opening its doors at 10 a.m. each day. On Dec. 9, Nintendo issued a tweet asking fans to “dress warmly” as it anticipated they’d have to wait outdoors. All this is in spite of an out-of-the-way location that few would stumble into off the street.

“The shop is a new type of advertisement. Advertising has usually been a cost, but Nintendo is turning it into a profit, just as they did in smartphone games,” said Hideki Yasuda, an analyst at Ace Research Institute. “If people make a social media post saying it took them hours to enter the shop, it will have an advertising effect that can’t be measured by money.”

The line to get into Nintendo’s emporium typically overflows down a nearby staircase. Once inside, shoppers don’t get much space — it’s a compact venue for one of Japan’s biggest and most globally renowned brands. The line for cashiers snakes around the store’s inner periphery, and a tourist wearing a Los Angeles Chargers hat said he’d waited over 30 minutes just to pay.

In an email, Nintendo spokesman Tomokazu Nakaura said the company is “grateful to many people visiting every day” since the opening and “sorry to keep customers waiting.”

While retailers sometimes limit access to enhance their brand, the Tokyo outlet’s limited size suggests Nintendo has once again undershot its projections. One corner is dedicated to letting fans try the Nintendo Switch games and the Ring Fit exercise accessory. Nintendo had to apologize earlier this month for failing to keep up with overwhelming demand for the Ring Fit. In April, its consistently conservative earnings guidance was described as “mockery” by Atul Goyal, a senior analyst at Jefferies Group, and its forecasts for sales and revenue for the year are below what most industry watchers expect.

Like a Japanese version of Star Wars, Nintendo can — and does — put its brand on practically every type of quotidian item. In the store, there are T-shirts, phone cases, pajamas, cushions, notebooks, backpacks and every type of plushie in the expanded Nintendo universe. Legend of Zelda neckties and hoodies rest alongside Animal Crossing pens and pans. The latest addition to the range is a pair of salt and pepper shakers.

Nintendo said roughly half of the 1,000 items on sale are exclusive to the Tokyo venue, which is only the second of its kind after Nintendo New York at Rockefeller Center.

Like most stocks on the Nikkei, Nintendo has had a good 2019, punctuated by two big jumps in share price when Beijing twice gave assent for Tencent Holdings Ltd. to distribute New Super Mario Bros. U Deluxe within China, first for the test version and then for the final one. Its return to China, where it has had little prior success, will be a closely monitored development through 2020. One analyst predicts Nintendo could sell as many as 4 million Switches in the country by March and initial sales after the launch in December have been promising.

The challenges Nintendo faces in China will also be true of the wider market in the new year. The Switch is increasing in age, smartphones are quickly taking over as people’s preferred gaming platform, and Microsoft Corp. and Sony Corp. are both preparing new consoles for the 2020 holiday season.

“The value of IP such as Mario and Zelda is being enhanced because people from China and Southeast Asia visit the shop and see them,” said Yasuda, noting the “synergistic effect” of having a Pokemon Center and Capcom Co. store right next to Nintendo Tokyo.

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