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Change Is Never Easy

3/26/2012 09:35:00 AM

Changing business strategies is never easy. It can cause friction and generate mixed feelings.

Just ask brick-and-mortar retailers who lauded recent manufacturer plans to unilateral pricing programs (UPP) and channel-management changes, only to find out it may hurt them too.

The new rules come at a time where retailers that are brick-andmortar based have upgraded, or are beginning to upgrade, their websites and online presence to compete against Amazon.comand many others.

But these same independent retailers said they are disappointed about rules - at least in the LG Electronics and Panasonic policies - that punish those who use eBay or other third-party marketplaces to sell products. Other major vendors look like they may follow, so this will be the way the industry does business, at least for the balance of the current calendar year.

Independents have learned how to use their marketplaces effectively and said that the ban with online marketplaces will only hurt, and not help, vendor efforts to increase profitability.

Dave Workman, executive director/COO of the Progressive Retailers Organization (PRO Group), told our senior editor Alan Wolf that cutting thirdparty markets won’t help. “Based on past history, when legitimate, authorized dealers are removed, they’re replaced by unauthorized sellers who only accelerate the race to zero.”

This is a sensitive subject for Workman and PRO because the group partnered with eBay in January to develop dealer-specific stores, so he thinks it is a traffic engine that doesn’t sell products and is supportive of minimum advertised pricing (MAP) policy.

George Manlove, president/CEO of Vann’s, who’sVanns.com has been a pioneer of CE online sales, told Wolf, “In the end, the consumer will tilt the scale one way or another.”

That may well be true, and I’m not sure if anyone from the outside is in position to judge how much these highly visible, valuable CE retailers will be hurt by these new policies.

What’s good about this situation is that brick-and-mortar retailers are becoming more aggressive and savvy online. And retailers support the UPP policies, even if they don’t like the marketplace restrictions.

The statements on the record of support for these new UPP policies by LG Electronics, Panasonic, Sony and Samsung - and maybe other well-known vendors -illustrate the change in mindset when it comes to sales volume, profitability and market share in this industry over the past few months.

Of course, talk is always cheap, especially when you are talking pricing in the CE industry.

And, in the case of Sony, the products under its UPP program involve 140 SKUs out of thousands, but they are “premium products,” Sony Electronics’president Phil Molyneux said earlier this month.

Many of these new programs begin April 1. It won’t be easy getting used to. But it is a start, and it will be interesting to see how all of this will play out in coming months.

This column originally appeared in the March 26, 2012 print edition of TWICE.

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