By Lisa Johnston
New products on display at the American International Toy Fair, held in N
NEW YORK – CE merchants are hoping that the recent pricing restraints put in place by manufacturers will hold through the holidays, and that Black Friday promotions will be limited to pre-planned events.
But given the ongoing softness in the core video category, dealers, distributors and buying group executives are fearful that any unforeseen inventory buildup could trigger a price war that would wreak havoc with margins and move Super Bowl sales into December.
The good news, said Bill Trawick, president and executive director of the NATM Buying Corp., which represents independent big-box chains, is that manufacturers are still putting out promotional roadmaps for the holidays, “so everyone gets a deal while protecting a fair amount of margin for retailers.”
But Trawick was alarmed by a number of pricing violations over the July 4 holiday period, which left unchecked could portend greater havoc in the fourth quarter.
“MAP and UPP have helped hold margins, and it has certainly been a much cleaner market,” he told TWICE. “But we saw some issues over July 4 that we were concerned about. Will the vendors put some teeth into it, or will they overlook it and allow the cracks to get a little deeper for the next event?”
Dave Workman, president/CEO of ProSource, the BrandSource CE division, hopes it’s the former. “No one wants to return to the lawlessness of a few years ago, when manufacturers were letting dealers duke it out,” he said. “That would be throwing in the towel.”
But ProSource dealer member Bob Cole, president of Bob & Ron’s World Wide Stereo, a premium Philadelphia- area A/V and installation/integration business, is already anticipating what he called “the usual nightmare.”
“Everyone says they hate it but so many participate,” he said. “It’s driven by the manufacturers, allegedly to drive traffic, but that’s clearly all gone sour. Some regionals now guarantee back stock [as an amends to bait-and-switch ploys] which pretty much guarantees people will buy the loss leader, taking the buyer out of the market. It’s madness, and it is so strong in CE because our products are in demand and so visible.”
Cole said he will continue to remain above the discounting fray, and will once again run the chain’s annual “Laid Back Black Friday” promotion.
“I have no interest in adding to mine or anyone else’s volume and not make any money,” he said.
Distributor Fred Towns, president of New Age Electronics and Jack of All Games, has taken a contrarian view of Black Friday, and is looking forward to a disciplined weekend that will also serve as a launchpad for new products.
“Black Friday promotions will be controlled, as the margins aren’t what they used to be years ago,” he argued. “Many retailers are using Black Friday promotions to introduce new products for Q4 that are difficult to get, such as the new gaming consoles or new technology introductions. Retailers are no longer using it as a means to give away traditional products.”
Regardless of how the pricing picture plays out, D&H Distributing senior sales VP Jeff Davis believes Black Friday will continue to be big. In fact, “We expect this to be the biggest year ever for Black Friday and Cyber Monday specials,” he told TWICE. “There are definitely a lot of offerings planned from the vendor side, but Black Friday specials will be as diverse as the end-users are. It’s all about driving traffic.”
Merchants also anticipate that the pre-Black Friday hoopla, which has recently begun as early as Halloween, will start even sooner this fall. “Early promotions are a symptom of business conditions not being up to snuff,” said ProSource’s Workman, who expects Black Friday-level pricing to “rear its head” by Labor Day.
Warren Chaiken, president/COO of national CE and majap distributor Almo, agreed that some in the industry will “jump the gun for competitive advantage,” but acknowledged that the stakes are high.
“Black Friday will still make or break everything,” he said.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.