The gaming industry is being shaken by a drastic shift in user demand, and Nintendo along with B&M game stores has taken a hit.  Sales of the Nintendo 3DS hand-held console, which comes with a no-glasses 3D gimmick, have dropped significantly in spite of strong early demand. The Japanese firm sold only 710,000 3DS in Q2 compared to more than four times as much in Q1.

Nintendo Wii and DS sales have also seen a serious decline.  3.04 million Wii units and  3.15 million DS units were shipped in the second quarter of 2010, compared to only 1.56 million and 1.44 million, respectively, this year. This resulted in some bad news for investors.

From WSJ:

“Sales of Nintendo Co.’s most important new gaming device have plunged since its release, the company said Thursday, prompting the videogame pioneer to slash its profit forecast and scramble to deeply discount the gadget to revive sales.

“The company cut its profit forecast for the year ending in March by more than 80%.”

Not a moment too late, Nintendo shared opened 20 percent down and closed at 12 percent less than yesterday at  ¥12,290 on the Osaka Securities Exchange.

The reason behind’s the company’s plunge is fairly obvious. Amidst this market-wide shift competitors Sony and Microsoft have been quick to adopt, and managed to hold on to their customer bases of (mostly) hardcore gamers. Nintendo however is not exactly targeting the hardcore gamer audience but rather the more casual users; the ones that moved on from $30-$40 Nintendo games to  much cheaper or even free iPad apps and web-based titles such as Angry Birds.

The Japanese gaming company has seen its core offerings decline pretty drastically throughout the past few years, and put its hopes in the 3DS to boost its sales. Now it changed its focus to the upcoming Wii-U showcased back at E3: a combination of a tablet and a gaming console that offers motion-sensing gameplay, and does not have to be connected to an external display.