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11.22.09 Artificial scarcity by Matt Worley Almost every year around Christmas there is a list of the "hottest" toys. I haven't seen one this year, but I know there will be some toy out there everyone thinks they have to get a child of a certain age. These toys always sell out quickly and then are put up for sale at highly inflated prices on eBay, newspaper classifieds or other secondary marketplaces. A black market is, in effect, created because someone said this toy is THE toy. And if you don't get it your kid will HATE you. Maybe there isn't a "hot" toy this year. Maybe everyone has come to their senses and realized a talking Elmo or a game system controlled by a wand isn't the key to your child's heart. But if you eat Eggo's for breakfast every day, you might have to find your nearest black marketer and buy some out of the back of his rusting late model car's trunk. Beware everyone, America is running out of Eggo's! And just a day after that stunning announcement, we hear there might not be enough pumpkin pie filling to go around for Thanksgiving. This is not my America! Next thing you know there will be lines around the block for the really nice toilet paper. I was at the grocery store yesterday and there was plenty of pumpkin pie filling. Crates of the stuff. I didn't check the Eggo's, because, really, who cares? If all you eat is Eggo's, I feel a cuisine change is in your future. Even if there isn't a shortage of frozen waffles in your area, you need to throw a few days of oatmeal into your diet cycle. The official explanation for the paucity of Eggo's in some frozen food sections is a flooded manufacturing facility. Hey, this might be completely true. But is it necessary to create a run on Eggo's? It's all marketing. It's all fake. Shortages of this kind happen all the time. Outages at plants, strikes, unsafe cooking equipment, swine flu and other disruptions cause a rise and fall of inventory. And, because of the free fall in our economy over the last year or so, most companies have stopped producing as much as they used to. They want the inventory to get low. You can charge more if there is a limited amount of anything. New car prices are remarkably higher now than they were a few years ago. Why? Are the cars better? No, it's because car dealers got rid of their excess inventory thanks to the Cash For Clunkers promotion. This also, by the way, created a rise in used car prices because all those "clunkers" were destroyed instead of being loaded into used car lots. Earlier this fall, a little horror movie was marketed to great success in a similar way. They began showing the movie (shot for between $11K to $16K depending on the report) called Paranormal Activity at just a few theaters in midnight shows. And then told people to DEMAND the movie be booked in their theaters. It was the scariest movie of all time! And Halloween is right around the corner! And movie theaters weren't going to let you see it because they hate showing movies everyone wants to see! Guess what, Paramount, who bought the film for $350K, already had it booked in your nearest theater. They just used a slow roll out and everyone's own paranoia (I can't be the only one not to see this!) to hype the thing like it was the second coming of the Rocky Horror Picture Show (or, maybe closer to the mark, The Blair Witch Project). Movies are booked into theaters months in advance. And Paramount isn't some fly by night film company, they made the Transformers movies, for flicks sake. Interestingly, I haven't heard one regular person tell me I should see the movie. But it's made over $60M. That's a pretty good profit. When he talked about the movie, the head of the studio praised his marketing staff--not the people who made the movie for less than Clerks or the ones who bought it for the studio. So when you hear in the week after Thanksgiving that Christmas is only going to happen for a limited time this year (December 25th...and maybe the 24th, too), keep your money in your wallet. Christmas cheer lasts the entire year.
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