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Panasonic, LG Stop Third-Party Marketplace Sales

New policies designed to increase prices and profit

February 27, 2012 By Jeff O'Heir

Panasonic and LG are instituting a policy that will prevent retailers from selling select TVs through third-party online marketplaces. The move should help stabilize prices, increase margins and protect independent CE dealers against cut-rate Internet sales, industry insiders said.

LG will enact its new policy next month with the rollout of its 5700 series, followed by the release of other high-end 2012 models, said Jay Vandenbree, senior vice president of LG's home entertainment sales and marketing. Panasonic confirmed that it will enact a similar policy but would not provide further detail. The policies, in general, are designed to prevent retailers from selling higher-end TVs through third-party marketplace platforms, such as those run by Amazon.com, Sears, Best Buy and, in LG's case, eBay.

"(LG's authorized) retailers can sell online, but they can't list on a marketplace site, which is just a pricing competitive site," Vandenbree said. "Everybody can still sell online, but not as a general flea market. This kind of resolves the downside of the Internet, while embracing the upside."

The marketplaces, dealers and buying group executives said, have become a platform where authorized and unauthorized retailers essentially compete for the sale of the lowest price TV. The practice has greatly eroded pricing and has helped to strip what little margin is left on TVs.

"It has allowed retailers to vie for the 'buy button' and drive prices down," Jim Ristow, executive vice president of Home Entertainment Source, said at the HES Brandsource Summit this week in Orlando, Fla. "Overall (the new policies) will be very good for the channel."

The move is part of continuing efforts by TV manufacturers to figure out the right online sales strategy and, in some cases, to slow the losses many have suffered in their TV businesses. Sony and Samsung, for example, are rolling out a unilateral pricing policy that will set the price for higher-end 2012 TVs across all channels, including online and national accounts.

"A lot of the vendors view third-party marketplaces as one of the primary points of instability in the market," said Dave Workman, executive director of the PRO Group. "It's a harvesting channel that doesn't create any more business. Instead, it creates this 'race-to-zero' mentality, and the manufacturers said 'Well, we're gong to stop it.' You get 10 retailers in the 'buy box' and it's like a Dutch auction. It's a bid to 0."

 

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