Scarcity Principle vs. Under-served Demand – A Disney Tale

I want to take some time to talk about some business principles and how those principles can relate to operations at Walt Disney World.  Those two principles are the scarcity principle and under-served demand.  They are two topics which sound like the same thing but actually quite different.  The scarcity principle is when there is a limited supply of an item and there is high demand for that item resulting in a supply-demand mismatch.  Under-served demand is when there could be more supply added to the supply-demand curve but is not for various reasons.  How does this relate to Walt Disney World?

Last night was the first night of Mickey’s Not So Scary Halloween Party.  My twitter account was getting reports of items that we selling out after the first day.  This is a case of under-served demand.  A classic case of scarcity principle is shown in the new Dis Dining Agent.  This “service” scoops up open reservation slots and resells them to customers of the “service.”  Disney can not add more reservation slots but they can order more merchandise.

The subject of under-served demand is easy to solve but Disney, for some reason, refuses to do so.  This has happened in numerous cases.  Off the top of my head, I can think of last night, the opening of Trader Sam’s at the Polynesian Village, D23 Expo, and the 2014 Villains Party as examples of under-served demand.

Line for Villains Unleashed Merchandise
Line for Villains Unleashed Merchandise

The line for merchandise during the 2014 Villains Party was over two-hours long.  This line finally got shorter when most of the merchandise was bought.  The D23 Expo had many examples of limited edition merchandise runs of 1,000 and lines that were over 1,000 people long.  There were items on eBay only minutes after Trader Sam’s opened and items at Trader’s Sam sold out quickly.

This under-served demand forces those who were not able to purchase an item at the event to move to sources like eBay to find that item.  On eBay, the value of the item is usually, if not always, marked up from its original price.  Customers should not have to pay more for item because Disney was unwilling to produce a larger run of an item and are forced to re-seller sites like eBay.

Under-served demand is an easy problem to solve.  Produce more merchandise to match supply to the demand.

Scarcity Principle is harder to solve because increasing supply is not option.  In the case of dining reservations, Disney can’t add more reservations without expanding the restaurant.  Dining reservations are just like tickets to a popular Broadway show or sporting event.  Supply is restricted.  As a result, third-party vendors start to creep in to make some money off of the limited supply.   It has already happened in the sporting world.

Like in the sporting world, there are legitimate and shady vendors to obtain the limited supply.  In the sporting world, there is StubHub which is a legitimate reseller site since people are selling their tickets to customers.  Sometimes, they sell for profit but they do risk selling for a loss.  There are also ticket scalpers who purchase available tickets and then resell them at a higher cost.

This is happening now in the Disney world too.  There are some sites like Disney Dining Buddy and Disney Dining Scout who charge a small fee to constantly search for open reservations that meet a customer’s request.  To me, there is no harm in this services since they are search for open reservations.  People don’t have the time to look for open reservations all of the time so they are paying someone or something to do so in their place.

However, Dis Dining Agent works like a ticket scalper.  They take open reservations and make reservations under fake names.  They, then, re-sell that reservation to customers for a fee (a larger fee than what Disney Dining Buddy and Disney Dining Scout charges).  To me, this is just plain wrong.  They are taking a reservation out of the system and then re-selling that reservation for a fee.  Disney said that “they are looking into the issue.”  This is not enough.  Disney should be stopping this in their tracks.  This is just as bad if not worse than people who scam people with fake tickets, Disney vacations, etc.  Dis Dining Agent is, in my opinion, a fraudulent service and it’s buyer beware if you “buy” a dining reservation from this service and have the reservation declined when you arrive for the reservation.

We will return to a more fun topic tomorrow with the second part of Day 2 of Adventures in Disneyland.

Thanks for reading!

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s