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Pricing, Channel Changes Are Applauded


A recent spate of vendor-driven unilateral
pricing policy directives to better manage lowball
retail sales and price promotions of higher-end
TVs and other home entertainment products were met
mostly with applause by observers from a broad swath
of the CE industry.

Companies including Samsung, Sony, Panasonic
and LG Electronics each announced changes to minimum
advertised pricing (MAP) programs, online-retailing
policies and/or distribution programs in attempts
to bring profitability back to product lines as manufacturers’
ledger sheets see more and more red ink.

In several cases, manufacturers have broadened existing
unilateral pricing policies (UPP) that give retailers
with directed sales floors guidelines both on how
to sell and how much to charge for their products.

Retailers at the recent Brand Source and Nationwide
Marketing Group meetings applauded the
changes as well as distributors who were
questioned by TWICE.

Addressing a question on the moves at a recent
DisplaySearch Flat Panel Display Forum Dennis May,
hhgregg CEO, said that some clarity on the issue was

“I think the manufacturers are trying to take steps
to bring some discipline to the marketplace, so the
consumer, the dealer and the manufacturer have some
clarity on the value proposition,” May said. “I think you
are going to see continued changes, as it relates both
online and in brick-&-mortar, from the suppliers. We
are going to see more structured pricing strategies.”

May said the likelihood for long-term success of the
actions was unclear, at this point.

“We are in a wait-and-see mode. Obviously we are
very curious because this potentially could have a very
big impact on the industry. But I think it’s too soon to
say what impact it is going to have. I think it is interesting
that the manufacturers are taking steps to try and
bring some preservation to their profitability. Obviously
it’s been a tough year for them.”

Paul Gagnon, NPD/DisplaySearch North American
TV market research director, said moves to shore up MAP program enforcement and to set clearer restrictions
on selling high-end goods online are probably
over due.

“Profits really are in the toilet now, and the vendors
really need to find a way to prevent the cascade of one
retailer going discount and then everybody following
all the way down the same path. We saw what happened
at Black Friday [last year],” Gagnon said. “The
reason it’s all happening now is that corporate profits
have to improve – stat, if you are going to survive. From
a market share sense things aren’t going to change
much anymore but from a dollar sense things have to
change. The TV market is a problem.”

Tamaryn Pratt, Quixel Research principal, said UPP
requirements and online retail restrictions have been in
place by a number of vendors for a while.

“Sony and Mitsubishi have both quietly had a UPP
type policy for at least a few model series, so these
tweaks are not really new,” Pratt said. “However as the
industry leader, Samsung has really led the course this
year and while it is early on, it appears their leadership
role has had a strong effect in the manufacturer community.
It makes a lot of sense to designate specific
TVs as leader products and use the balance to shore
up margin. It is good for the manufacturers and good
for the retailers.”

Pratt pointed out the cannibalization in the CE industry
is an anomaly in the business world. Yet, UPP
practices are nothing new to the consumer packaged
goods (CPG) or car industries.

“It has always been insane that TVs are almost “given
away” at the end of the year or during holidays and
promotions, and those prices then become close to
the new selling price moving forward,” she said.

Newly structured pricing policies can be effective
if upheld and closely monitored, Pratt said, but programs
in the past have often been abandoned after
vendors or retailers started to see a slip in unit share.

“If a manufacturer loses unit share, they might get
nervous and retreat versus bite the bullet for overall
profitability. The second tier players are going to cause
the most pain because they had so little margin in their
products from the beginning and might even gain
share,” she observed.

“Amazon doesn’t have much choice except to play
ball,” Pratt continued. “They will need to promote free
shipping and/or tax free status of products (in most
states) and hope that is enough to keep their customers

Pratt said policies that lay down clear ground rules
for affiliate program sales eliminate the “muddled waters”
that have led to their growth.

She said the timing of programs will have the added
benefit of establishing necessary guidelines for the
sale of forthcoming next-generation TV technologies,
like AMOLED sets.

“The CEDIA/custom dealers are dying for protected
TV model lineup products. They can sell the exclusive/
sheltered product while others sell the leader
and open product lines,” Pratt said. “This will take the
dealers back to the beginning of flat panel days, so
they can re-gain support and trust just as AMOLED
TVs begin to roll out.”

Pratt added that “there won’t be a significant number
of AMOLED TVs sold in the next two to three years
but they will come, and hopefully both manufacturers
and retailers will still remember their battle wounds
from the LCD TV run up.”

Some other TV manufacturers who have yet to impose UPP policies of their own are watching the recent
activity closely.

Jim Sanduski, Sharp Electronics strategic marketing
VP, pointed out that Sharp offers its high-end Elite TVs
through directed sales floors, but has yet to impose
UPP or online third party reseller sales policies on
Sharp Aquos branded goods.

“We are supportive of the efforts of manufacturers
and retailers to bring profitability back to the industry,”
Sanduski said. “At the end of the day, manufacturers
are losing billions of dollars, and can’t make any profit
from the TV category.”

He added, “We are closely monitoring what some
of our competitors are doing in that area and will be
looking to adopt similar measures.”

Meanwhile, LG Electronics sales and marketing senior
VP Jay Vandenbree said his company would not
impose unilateral pricing practices, while acknowledging
recently taking steps to curtail third party reselling
of higher-end LG TVs through online “marketplace”
sites, like Amazon or Sears.

“What we have done is 180 degrees in the opposite
direction of a unilateral pricing policy,” Vandenbree
told TWICE. “We don’t think we belong in between
the buy/sell relationship of the retailer and the consumer.
We don’t think the manufacturer has the requisite
skills to be a retailer.”

Instead, LG implemented an extension to its Internet
sales policy that prohibits retailers from selling
LG 5700 series TV models and higher as third parties
through online marketplace sites, like those run by
Amazon, Sears and others.

LG will continue to allow retailers to sell products on
their own Internet sites, he said.

“If you go onto some of these marketplace sites today
you see a listing of a lot of prices and a lot of retailers,
and that’s all that’s there, and we don’t think that
helps brands, technologies, retailers or consumers,”
Vandenbree said.