Vendors Move To Stop Online Margin Erosion

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In a move that would have the Australian Competition & Consumer Commission on their backs leading consumer electronics companies in the USA including Sony, Samsung, LG and Panasonic have moved to stop the heavy discounting of their products by mass retailers.

In Australia several vendors have raised concerns that retailers are “discounting profits out of  brands” a move that has seen several retail groups report poor profits.

The move by companies including Sony, Samsung, LG and Panasonic to Unilateral Pricing Policies (UPP) from April 1 is designed to boost bricks-and-mortar retailers struggling to compete against online rivals and to help sectors such as the flat-panel TV business back to general profitability.


The Financial Review claims that under UPP rules, retailers will be warned they face the withdrawal of supplies if they fail to stick to fixed prices, a tougher standard than the current Minimum Advertised Pricing (MAP) policy, which can lead to retailers losing advertising subsidies if they undercut recommended prices.

The shift is likely to mean consumers will find fewer bargains, at least initially. But analysts are sceptical about the strategy’s chances of long-term success on anything but the hottest products and point out that rivals not taking part in UPP can undercut and force prices lower.


Wes Shepherd, chief executive of Channel IQ, which monitors online pricing for leading brands, told the Financial Times that Amazon and its marketplace of online retailers have created “a race for the bottom” as they undercut bricks-and-mortar retailers and each other.

“It’s creating a really unhealthy, unprofitable ecosystem, which is unsustainable. Manufacturers are saying enough is enough, they’ve been pushed into a corner and are coming out swinging for their brands,” he said.
The UPP rules will not address a main source of price differences between stores and websites. In many US states, online retailers do not have to collect sales tax on products sold to consumers if they do not have a physical presence.

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