Electronics brands fight back on price

03 April 2012

NEW YORK: Major electronics manufacturers such as LG, Panasonic, Samsung and Sony are joining forces to battle against the heavy price cuts on their products implemented by US retailers.

According to the Financial Times, these firms and other players in the sector will introduce a Unilateral Pricing Policy, which could result in gadgets and appliances being pulled from retailers selling them at rates below a fixed amount.

This marks a step away from the current Minimum Advertised Pricing model, whereby chains can see manufacturers slash or cancel the ad subsidies provided to retailers not meeting certain price levels.

Last month, Sony Electronics US established set prices for 140 offerings within its portfolio, ranging from television sets to cameras, in an effort to counter the destructive effect of promotions.

"In the US, the outlook for the consumer electronics industry isn't too rosy: the market here is very focused on volume," he said.

"It's been more about the special offer of the week than the value of the product," he added. "We talked to leading retailers and said we would like to take a leadership position and work with you for the betterment of the industry."

Wes Shepherd, chief executive of Channel IQ, the online pricing intelligence service, argued the rise of Amazon and other internet retailers, which would also be subject to UPP, has proved highly adverse.

"Everything's becoming commoditised online and it's been a downward spiral – companies are realising they need to wrest back control of their brands," he said.

One problem still facing bricks and mortar retailers is that their digital rivals are not required to collect a sales tax on some products in many US states, usually supplied a price advantage of 6% to 10%.

Jim Willcox, senior electronics editor at the Consumer Reports, suggested that while UPP may "level the playing field" somewhat, the ultimate goal could be to encourage buyers to opt for more expensive lines when in stores.

"Sony and Samsung are bringing in UPP for products where features can be explained on a sales floor and hopefully the customer can be convinced to step up from a basic product that has low margins to a product with more features that offers higher profitability," he said.

Jonathan Johnson, president of Overstock.com, the online retailer, believes this move might help firms focusing on strong customer service, but added UPP could yield "limited effectiveness" in implementation beyond "hot products" like Apple's iPad tablet.

Data sourced from Financial Times; additional content by Warc staff