The Coveted Sellout Situation

Toymakers Tinker With the Balance of Supply and Demand

Almost every year, some new toy skyrockets in popularity right before the holidays and starts to sell out, sending panicked parents scurrying to find the must-have gift of the season. And for the toymaker, as shoppers have long suspected, it's not a bad thing.

It's happening right now to the Disney Mix Stick: a $50 MP3 player aimed at pre-teens. Walt Disney Co. has been struggling to keep up with demand, and retail chains such as Target have few left and don't know when they'll get more. It's been on back order for weeks at many Web sites, including Disney's. Mix Sticks are moving briskly on eBay for up to $80.

"People are looking for products they can't find," said Linda Wisser of Toms River, N.J., who found a cache of Mix Sticks at Target, bought a couple for her kids and a few extra to sell online. "People are bidding on them left and right."

Disney's Mix Stick has become the quintessential sell-out product: a nightmare for parents but one of the best-case scenarios for a manufacturer. What toymakers and retailers fear most these days isn't having too little to sell, it's having too much because leftovers get marked down and eat away at profit. So manufacturers and retailers are being increasingly conservative in their demand estimates, knowing there is little down side.

"A sell-out situation is the best problem you can have," said Chris Heatherly, vice president of Disney Consumer Electronics. "You know that it was a success, you know you can sell more, you know you can make more. The only problem is you didn't capture as much opportunity as you had. But you can hold your head high and say that you won."

Retail experts say the buzz generated by a sell-out product is incredibly valuable in a market saturated with marketing messages.

"It says your product is wanted," Heatherly said.

Moreover, experts say, today there is even less to lose when a product disappears before the holidays because the season doesn't end on Dec. 25 anymore.

"If something does develop buzz, if you're unable to put it under the Christmas tree, people will just go out in January with gift cards and Christmas money and buy one," said Phil Jackson, vice president of marketing for games, interactive and youth electronics for Mattel Inc.

Mattel has its own new consumer-electronics product aimed at pre-teens, a digital video camera called the Vidster, which Jackson predicted a month ago "will be gone before Christmas." It's still in stock.

If you don't have a pre-teen, the Mix Stick probably isn't on your radar screen. About half the size of an iPod, the Mix Stick comes in colors such as pink and purple and silver and has a dial in the shape of Disney mouse ears. It can hold about 60 downloaded songs and play little cartridges loaded with Disney music, which are sold separately.

But the Mix Stick's best feature, Heatherly boasted, is the $49.99 price tag. That made it possible for many parents under siege from their 8-year-olds to satisfy the incessant iPod requests -- without laying out a C-note.

"I wasn't about to spend $100 on my kids for an iPod, which they're going to lose in three weeks," Wisser said. "But $50 I can stand."

Even by mid-November, when stores were more regularly being stocked, Heatherly was confidently predicting that the Mix Stick would sell out before Christmas. It's not a subtle marketing ploy. The fact is, consumers want what they can't have.

And it is precisely because the toy can't be found that demand skyrockets to such unfillable levels.

Social psychologists say the desire to procure something scarce is a deep-rooted human instinct. Some academics argue that it is a remnant of the natural-selection process in evolution, rewarding those who hoard scarce resources along the way, said Philip Mazzocco, a social psychologist at Ohio State University and author of the forthcoming book "The Psychology of Scarcity."

"Initially it might be securing a fruit tree or productive hunting ground," he said. "Today it can be applied to Xbox or Cabbage Patch Kids."

But more complex and modern reasons motivate shoppers, too, Mazzocco said. Something that's hard to find becomes a status symbol, and owning something scarce gives people a way of asserting their individuality without alienating themselves from the crowd.

"Especially in America, we really have this drive to be special, to be different, and one of the ways of doing that is to own a scarce commodity," he said. "Especially for a little kid, before you have your own personality developed, you define yourself as 'I'm the kid with the Xbox.' "

Toy business insiders speak about the sell-out product in an almost reverential way. It's like the dream of superstardom by an aspiring actor: It has its drawbacks, but it's the goal nonetheless.

"Obviously we don't want a ton of these in stores on December 26," said Robert Atkinson, vice president of investor relations for Limited Too, a children's clothing chain that carries some holiday gifts, including the Mix Stick.

Atkinson said the popularity of the Mix Stick has conveyed hipness to the chain and generated traffic as the hunt intensified. "If we get people to come into the mall and check to see if we have it, we may be able to sell them an alternative," Atkinson said.

Toymakers and sellers are not cavalier about limiting availability because selling out too early can mean significant lost sales. But Heatherly didn't lose too much sleep over this calculation. He said people in the building at Disney were "running over one another trying to get the preproduction samples." It was a good sign, but he still didn't adjust his demand estimates.

"You've got to be careful -- retailers get impatient if you can't replenish them," Heatherly said. "At the same time, I think everybody likes to see something successful to that degree."