FRS/GMRS Prices, Margins Plunge

Prices on FRS and now GRMS radios are plunging to record lows, squeezing margins and causing at least one supplier, Unwired, to exit the market. (See sidebar, right).

In addition, retailers are advertising the category less, due to slimmer margins, according to some suppliers who said that closeouts on last year's products are common.

"The days of 30 to 35 percent margins are gone," said Cobra senior VP Tony Mirabelli, noting that current margins can run below 20 percent.

Even GMRS radios, which sold for $69 each last year, are currently carrying price tags of $39. And BellSouth is about to lower the bar, introducing next month a 2 watt, 22-channel GMRS model 2280 at $29.95 to $34.95. The company also released a 1/2-watt FRS/GMRS 22-channel unit, model 2231, approximately 50 days ago for only $12.95 to $14.95. And BellSouth plans to introduce several other 1/2-watt, 22-channel models by July, according to David Rose, executive sales manager.

"We certainly hoped that the price wouldn't fall that quickly," said Motorola director of marketing Randy Schiff.

Both Audiovox and Cobra said they are not planning to offer similar 1/2-watt GMRS models at present. Audiovox said it "does not want to compromise performance or saleability," according to VP consumer goods, Ralph Etna.

Cobra, however, said the industry may "migrate toward that in the future as microprocessors become available," according to Mirabelli. He noted that the real issue is range rather than the number of channels. "Anyone in CB for any period of time knows the issue there is talk power, not the number of channels, and that's a very mature business."

Some suppliers are concerned that 1/2-watt GMRS units will raise legal issues with the FCC and confuse consumers. Continued Schiff, "The FCC requirement is you have to have a license on those GMRS frequencies. So if someone wants to put out those extra 8 channels at a 1/2-watt, you wouldn't have the range but you'd still have to license those frequencies.

"Also those radios can only be sold to people 18 and older. But they sell at Wal-Mart which gets, I believe from 1 to 3 million customers a day. If GMRS is at $39, someone who is 16 could afford it at Wal-Mart. So now you'll have a kid who didn't apply for a $75 to $85 license fee and who is under 18. At some point, the FCC is going to have to review the data of how many GMRS radios were sold this year and how many license fees they get. My hypothesis would be that the percentage of licenses to radios sold is miniscule and therefore the FCC ought to consider reviewing the policy."

Another key issue before the FRS/GMRS market is looming product shortages, which may impact pricing. Audiovox's Etna noted, "We know going forward there are going to be shortages or extended lead times on parts. The raw material costs in some cases are going up, and the current weakness of the dollar is impacting the cost of the components as well."

Suppliers say GMRS sales continue to thrive with Audiovox estimating GMRS at about 20 percent to 25 percent of its sales this year, up from 10 percent to 15 percent last year.