Pioneer, HCG Set Policies On Web Sales - Twice

Pioneer, HCG Set Policies On Web Sales

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BY STEVE SMITH & JOSEPH PALENCHAR

The presidents of Harman Consumer Group (HCG) and Pioneer Electronics USA, respectively, took considerable time during recent press briefings in New York to outline their e-commerce sales policies.

While HCG's Gina Harman provided more detail than Pioneer's T. Asano, the message was similar: Both do not want web sites to sell product just based on price. And whether explicit, such as in Asano's remarks, or implied, as in Harman's overview, the message is that they want to protect their existing brick & mortar retail base.

Statements from HCG and Pioneer came a month before Sony, which strenuously objected to Amazon.com selling transshipped product, announces its e-commerce sales policy.

Asano said that Pioneer allows its authorized dealers to mention products and provide product descriptions on their web sites, "but we do not allow the actual selling of product over the Internet, unless they receive special authorization." E-tailers can qualify to become authorized to sell Pioneer product on their sites "if they follow our pricing policies."

"On many sites," explained Asano, "consumers are just buying based on price. We have to protect our dealers." Circuit City and Crutchfield have received authorization from Pioneer, "but consumers have to pick up product at the store."

Infinity and JBL brands are under agreements that enforce a MAP pricing policy and "obligate sites to a form of merchandising" that doesn't stress price, HCG president Harman said.

Harman maintained that "if you stay out, then only unauthorized sites will sell it [electronics]."

HCG's Internet policy includes the September 1 launch of an extranet for HCG's dealers and remaining two-step distributors' representatives, and the simultaneous launch of an HCG-operated site that sells closeouts, B stock and slow-moving merchandise.

HCG's e-commerce policy allows all current SKUs in the three brands' home audio selection to be sold by authorized sites as long as the site and the brand agree on a merchandising plan for the SKUs, said Harman. But in coming months, HCG's policy will become more restrictive.

HCG-authorized web sites include amazon.com, Circuit City, J&R Music World, 800.com, One Call and Crutchfield, which operates the only web site authorized to carry HCG's car audio products. Closeouts are authorized for sale at onsale.com and auction site ubid.com. "We'll continue with one or both prior-season sites" when HCG begins selling closeouts on its own site, Harman noted.

HCG's criteria for authorizing a site include a seven-day, 24-hour toll-free customer-service number staffed by people who can "make legitimate comparisons to other products on the site," she said. Other requirements include multiple shipping options, online order tracking, the highest level of credit card security, and 24-hour e-mail response. Sites that violate minimum advertised price policies will be shut off and won't be reinstated until they prove they won't violate the policy, Harman added through a spokesperson.

Asano pointed out that except for Circuit City and Crutchfield, all Pioneer product being sold online has been transshipped by distributors or retailers. "We have been fighting [transshipping] for many years, but it seems to be legal in this country."

He said that if a distributor signs an authorized contract with Pioneer, or a retailer signs a similar deal, "they have to show us who they are selling to. With distributors we can legally defend ourselves and stop shipping them." But in many other cases, said Asano, Pioneer couldn't stop transshipping, due to the way the law is written.

HCG has clearly drawn a line concerning transshipping. Harman early this year terminated most of its home audio and car audio distributors. To discourage people from buying from unauthorized sites, said Harman, HCG's web site will flash the words "dealer not authorized" when a consumer links from an unauthorized site to Harman's site.

For all the discussion of e-commerce, Pioneer's Asano asked the question, "What products can be sold effectively on the Internet? Can step-up items, high-ticket items be sold on the web? Are plasma TV or digital TV Internet items? Portable products, phones, audio can be sold. Others are selling them, but they are still protecting their brick & mortar dealers."

Harman said that as of January 1 all Infinity home audio products being launched in coming months will be excluded from online sales as part of a strategy to "develop relations with specialists" for "the new Infinity." Older Infinity products will still is available for online sales, however.

In the future, she added, "we will wall off select SKUs" based on the "complexity" of the product and the need for some products to be demonstrated. Select SKUs in Harman Kardon's new fall line -- namely Signature series products and higher-end A/V receivers -- "will perhaps be withheld from the Internet" to "protect the profitability" of the products.

JBL's new Northridge and Studio lines will be available for web sales, "but certain products might not be in subsequent introductions," Harman said. She also didn't rule out the possibility of developing products whose only distribution would be online.

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