When A 'Win' Is A Loss, Part 2
By Steve Smith -- TWICE, 9/1/2003
We received several letters, e-mails and phone calls about our column in the July 21 issue on how several national retailers are requiring smaller CE vendors to undergo an "auction" or "shootout" to sell their products to those chains.
The overwhelming majority of comments I received confirmed that the losers in these transactions are usually the vendors. They usually sell goods at cost, or slightly above if they are lucky. Another loser is the consumer, who buys shoddy goods that were designed not to be used, but just to meet a price point. And if the consumer does have a bad experience with such products, it usually reflects badly on retailers, who are supposedly the real winners in this scheme.
As expected the subject is so volatile that all the reactions I received were of the not-for-attribution variety. Here are a few:
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"There are some factors that are helping to fuel this way of buying. The 'fuel' I refer to is new Asian suppliers. The 'I want to be a presence in the U.S.' syndrome disadvantages the manufacturer in the negotiation process. Plenty will lose money to get shelf space."
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"Very few people want to talk about these practices because they put some overseas vendors in legal danger. Where do you draw the line between an auction giving a retailer a great buy, or a manufacturer bidding so low to win an auction you could make an argument on dumping?"
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"Some retailers run their own auctions. How do these smaller CE manufacturers know that the retailer is not bidding the price down on their own? The retailer doesn't have to take the lowest bid. Retailers don't care if they put [smaller] manufacturers out of business because they feel there are always other suppliers around the corner who are willing to bid lower on the next auction."
The night of the blackout I experienced the result of a "winning" bid as a consumer. Walking to my home in Brooklyn I stopped at a well-known chain near TWICE's offices in midtown Manhattan, to buy a transistor radio and batteries.
I bought a relatively small handheld transistor radio (featuring AM/FM, a digital clock and alarm), for around $25 plus the batteries. Walking home I turned on the radio a couple of times and was comforted to learn the blackout was not due to terrorism.
When I got home I tried to turn on the radio, but the 'power' button was stuck and pushed inside the radio's plastic shell. With nothing else to do, under the glow of candlelight I opened the radio to see what was wrong. Well the 'power' button was nothing more than a poorly-molded piece of plastic with a small needle-sized point in the middle that was designed to go into the circuit board to push a switch. The button must have rubbed against my newspaper, or something else in my case, the plastic needle bent sideways.
The plastic that the button is made of, and the radio's shell, is worse in quality than, oh, the plastic used for the free toys I got in Cracker Jack boxes when I was a kid. I was able to fix the problem, but like most items made and bought on the cheap, when I put the radio's shell back together it didn't fit as snugly as it did when I bought it.
This comment, from one of the auction e-mails, succinctly describes my experience with my new radio: "Retailers are eventually going to be putting inferior product on their shelves and everyone will lose in the long run."
It will be some time before I shop at that chain again, or buy any product with that brand on it. (Hey, it's not a digital TV, but 25 bucks is still 25 bucks, especially during an emergency.) If I'm annoyed, can you imagine the reaction of a typical consumer? Multiply that a few thousand times and think about that the next time you hold, or participate, in one of those auctions.
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