US ‘price fix’ to assist A/NZ retailers?

In a move which could have a positive impact on local retailers, a range of leading CE and camera brands in the US have chosen the same date, April 1, to introduce a new price-setting regime called a Unilateral Pricing Policy.

Companies such as Sony, Samsung, Panasonic, LG, Canon, Nikon and even Pentax are reported to have taken a leaf out of the Apple pricing manual in introducing a UPP for their products.

Given the US wholesalers are able to enforce the UPP with heavy-hitting online retailers who sell into the Australian and New Zealand marketplace, such as B&H and Adorama,  the price differential between local retailers and the offshore marauders could be further reduced.

An extensive report in the Financial Times says the wholesalers are threatening to withhold supplies from retailers if they sell products below a fixed minimum price.

This would appear to run counter to the resale price maintenance, anti-cartel and restraint of trade laws if attempted in Australia. Fosters came under scrutiny in Australia when it temporarily withheld beer supplies from Coles and Woolworths early last year, and was only able to legally do so while the duopolists were selling leading brands such as VB under cost as loss leaders.

Previously, US retailers operated under a Minimum Existing Pricing (MAP) policy, where advertising rebates could be cut if retailers dropped prices below a nominated MAP figure.

The aim of the UPP, said the Financial Times report, is to curtail ‘showrooming’ – consumers checking out products in store and then going online to purchase from discounters.

US bricks-and-mortar retailers deal with a market scenario which will resonate with their Australian counterparts – internet retailers regularly do not collect state sales tax from purchasers in other states, which can translate into a discount of from 6-10 per cent. The UPP will do nothing to close this gap.

As in Australia, the collapse of both margins and now volume in the television category has been a body-blow to both CE manufacturers and retailers, and seems to have been the catalyst to stop the ‘race to the bottom’ online retailing has provoked.

US retailing giant Best Buys has been losing market share to online competitors and announced the closure of 50 of its ‘big box’ stores last week, along with a sharper focus on smaller stores that specialise in personal devices rather than whitegoods and browngoods.

No-one is sure whether the move to UPP will work. It requires all the leading players to co-operate (staunch free-marketers might say ‘collude’) and for both online and conventional retailers to maintain discipline. It also delivers an opportunity for second tier brands to improve market share.

US analysts expressed doubt as to whether the UPP regime would hold over time, with one saying that it would only work with high-demand products such as the Apple iPad.

 


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