Sony in Internet 'Price-Rigging' Rumpus

[Suhit Gupta]

<div class='os_post_top_link'><a href='http://www.channelregister.co.uk/2005/11/15/sony_variable_pricing/' target='_blank'>http://www.channelregister.co.uk/2005/11/15/sony_variable_pricing/</a><br /><br /></div><i>"Sony and other manufacturers have been accused of asking online retailers for 10-15 per cent more for wholesale electronic goods than they charge their traditional counterparts, The Times reports. This "dual pricing" strategy - designed to narrow the price differential between net and high street - was allegedly initiated by Sony and quickly adopted by other suppliers. Big-name retail chains have exerted pressure on the CE giants at a time of falling high street sales in the face of cut-price internet offers. Online retailers have naturally cried foul and will meet today to decide whether to "name and shame" the guilty parties. Sony already faces Office of Fair Trading (OFT) and European Commission examination of its pricing strategy."</i><br /><br />Firstly, dude, what the hell is going on with Sony? First the DRM debacle and now this? I didn't think they were this evil! Secondly, I guess I am not quite so surprised. What I just can't figure out is why big companies like Sony aren't more ethical? I mean they already price gouge on every product and accessory that they can. Argh, maybe I am the naive one here but it just pisses me off when I find out that big companies employ tactics like these.

[Damion Chaplin]

What I just can't figure out is why big companies like Sony aren't more ethical? I mean they already price gouge on every product and accessory that they can.

What I can't figure out is why we even expect big companies like Sony to be ethical. Because we want them to be? Based on history (price gouging on every product and accessory) why would we expect different? Our entire western civilization is based on capitalistic gain. If you own nothing, you ARE nothing. If you are rich or powerful, you are everything you need to be. Sony is just following suit, trying to be the latter and not the former.

And even then, Sony is really about a 6 on a scale of 1 to 10 in evility (with Google being 1 [not evil] and GE being 10 [uber-evil]).

Sorry. I'll stop now. :wink:

[Felix Torres]

1- This may or not be legal east of the atlantic but on these shores it isn't. More, the major online retailers as a whole have a lot more pull over here.

2- There actually is a business issue at stake: b&amp;m retailers tend to handle more customer warranty issues than the average online vendor, who (except for DOA/infant mortality cases) tend to shift support cals (and costs) to the manufacturer. Not enough to justify a 15% differential, of course...

3- Actually, that 15% quoted in the article is an interesting number. I have seen reputable reports that name-brand vendors set HDTV MSRPs and wholesale prices to allow themselves a 16% profit margin and retailers an extra 30% margin *after* discounting and operating costs. (Yes, 46% of the retail price of HDTVs is pure profit.) By comparison, PCs and accesories usually sell with margins of 5-15% max. Online vendors can thus undercut local retailers by 20% and still make a healthy profit.

4- By jacking up the wholesale price on the online vendors Sony and co hope to close the price gap between the channels *and* increase their margins. Which, in Sony's case, goes to make up for the loses they incur in the rest of their highly unprofitable electronics business.

5- Any atempt to apply this strategy to HDTVs in northAm would be, amusingly, suicidal because there is a price war going on and quality second tier vendors are driving prices down across all retail channels and any attempts to prop up retail prices this way would only drive more sales to the leaner, meaner competitors.

Basically, Sony is a dinosaur under siege in all markets by leaner, more agile competitors (Apple, Microsoft, Syntax, Samsung, LG, Dell, HP, Westinghouse, Polaroid, etc) and they desperately need to maximize revenue to justify their bloated organizational overhead and they are resorting to desperate measures.

The impact of these measures is being felt now, but the fatal mistakes were made months and years ago. Crippling an emerging distribution channel to protect an older, less efficient chanel is a classic screw-up (object lesson: Encyclopedia Britannica) and it merely highlights just how desperate Sony is right now.

This is hardly the end of it...