EXCLUSIVE: A Sydney consumer electronics retailer who quit running a shop front operation in favour of an online store claims that the industry is “rife” with price fixing”.
His comments follow the battle between Digital Cinema and Amber Technology who recently admitted to SmartHouse that they wrote to JB Hi in an effort to restrict supply to Digital Cinema who are both an online retailer and shop front operator.
Steve Lees, the CEO of Wicked Digital claims that mass retailers are putting pressure on distributors to control the supply of goods to online retailers. As a result of this he has resorted to becoming a distributor of overseas goods that are not sold via the mass retailers.
He said: “I have lost count of the phone calls from suppliers saying something along the lines dealer X is complaining about your pricing for product Y, can you change your pricing”.
He claims that some distributors have openly threatened him after discovering that he was selling branded products cheaper than a lot of mass retailers.
Lee, who ran a shop front operation for six years, said: “We have had to put up with practices by distributors which by any other name is price fixing, this industry is rife with this type of activity”.
He also claims that suppliers are engaging in tiered pricing structures in an effort to put him out of business.
“Recently we got a new price list for a major brand that we sell. We noticed we no longer enjoyed the same margins as had previously been extended to us. The distributor admitted that as we were offering a 10 per cent discount on their products to our customers through our web site, that they would reduce our margins and hope we would not notice”.
Lee claims that late last year the distributor for a major brand of headphone changed its margin structure to those dealers who had an online presence.
“The margin was almost halved, online retailers were told that if they ‘behaved themselves’ in terms of pricing, they would get a rebate”.
Wicked Digital no longer stocks the headphone brand which is now being sold by mass retailers like JB Hi Fi and Harvey Norman.
Lee said that he used to sell brands such as KEF, Marantz, Tannoy, Usher along with several other sound brands. “We lost most of those brands the day we closed our physical store and went online only,” he said.
He claims that most distributors of consumer electronic products in Australia are adverse to dealing with online retailers.
“We became one of those nasty online resellers, the scum of the industry. At least that is how online resellers are seen by the distributors”.
He said: “It is illegal to ask a retailer to change their pricing; it’s also illegal for a retailer to ask a distributor to tell another retailer to change their pricing. Proving it is also difficult. We know it exists in this industry, and I for one, have had enough of being told what price we can sell to our customers for, or how we can sell it to them, be it in store or via the web”.
“Consumers want to buy online. Unfortunately distributors don’t see this because they are trying to protect the Australian market for their mass reseller customers. Time and time again they have continued to put their heads in the sand by ignoring the growth in online. The most common response from a distributor is that a customer wants to be able to come into a store and speak to an ‘expert’ about their needs and to be able to ask questions about the product before they buy, and online cannot do that”.
“The stupidity of that statement is staggering. Consumers are buying online because they want to. They like the connivance that online shopping delivers for them. Consumers research their purchases online, reading independent reviews and blogs with comments from real users, long before they start looking to buy online”.
Recent research conducted by SmartHouse reveals that consumers in most cases don’t trust retailers like Harvey Norman or Bing Lee. They also don’t trust vendors. What they do trust is buyer’s comments on web sites and independent reviews by media sites.
“What we are doing is setting ourselves up as distributors for Hi Fi and consumer technology gear. During the past 12 months we have secured brands such as Atacama, ATC, Bel Canto, HRT, CEntrance, M2Tech, Devilsound, Aaron (Germany), Maverick Audio and this week, Audio Art Cables, Dayens and Xavian. By buying directly from the manufacturer, it allows us to sell to our customers at prices that are on par with the pricing of overseas markets, and that is the way it should be”.
He added “The upside is that we have managed to secure some of the finest products, quality products from all over the world including Europe, Japan and the USA and our customers are benefitting from this”.
