The Unauthorized Dealer Scam Over?

[admin]

The Supreme Court today overturned an 87 year-old anti-trust law that prevented manufacturers and distributors from setting minimum pricing for products. This change is going to dramatically affect online retailers and give consumer electronics manufacturers the ammunition they need to finally "come out of the closet" about the whole "unauthorized dealers" who sell their products at below SRP. In fact, one would wonder if the term MSRP (Manufacturer's Suggested Retail Price) will go away and instead be replaced with something akin to MMRP or (Manufacturer's Minimum Retail Price).


Discuss "The Unauthorized Dealer Scam Over?" here. Read the article.

[westcott]

I like a good deal as much as the next guy and I can appreciated the overhead some companies must carry to be an authorized dealer so I have always stradled the fence when it came to buying B stock or equipment that does not come with a manufacturers warranty.

I did buy an AV receiver that came with an aftermarket USA warranty, but, knock on wood, I have not had to use it.

So, if prices can still be competitive and I can get a manufacturers warranty, I may be more inclined to buy more B stock, knowing I get a better warranty and do not have to pay extra for a facsimile with a smaller comfort factor.

It will be interesting to see how this all shakes out. Great topic!

P.S. Has anyone had to use a USA warranty on their component(s)? How did that work out?

[darien87]

Hopefully, this will end up being a good thing. I bought my last 2 receivers, (Denon and Yamaha) online, from "unauthorized" dealers. I think it's lame that manufacturers try to not honor their warranties. But with my Denon, the seller offered a 3-year Square Trade warranty with it for about $25. The warranty was 1 year longer than Denon's and the service center was about a mile from my house. Let's see, pay $500 for a receiver that retails for $800 and pay $25 for a 3-year warranty? It was a no-brainer for me. I never ended up using the warranty, byt the way.

Both times I bought receviers, I went to my local Magnolia, where I have bought most of my gear from, to try and give them a shot at making the sale. Both times, they came down a hundred dollars or so, but they said weren't able to get close enough to the internet price to make it worth my while. Most recently, I was trying to buy a Denon 2807. I saw it online for about $700, but Magnolia was selling it for about $900 I believe. I told the guy what price I had seen it for, but that I would rather give him the business. After about 10 minutes of haggling and being told that they don't match internet pricing, he came down to about $850. But after tax, it came to $900-something. I would have bought from Magnolia if he could have done $800 out the door. I'm sorry, but $900 is 200 dollars more than 700. That's a substantial difference.

I realize that B&M stores need to account for rent, overhead, salaries and such, but it just doesn't make sense for me to pay hundreds of dollars more than I need to. Buying online has worked out great for me so far. I'll never pay retail price for anything again.

[sholling]

I see this as a great thing for integrators (who must be doing back flips out of joy) and a horrible thing for consumers. It brings an end to price competition and can lead to nothing beyond forcing everyone to pay more. It's just too bad that there is no good way to call a consumer strike for say 12 months. An 80% drop in sales would do wonders for the attitude of the industry.

What next? An end to negotiated pricing on cars? Everyone paying full list price for everything that they buy? I guess we get to write our congress critters to get this undone before we all go broke.

[Nestor]

As a health club owner with a small pro shop, I can relate to what is going on here.

During the Atkins craze, I was selling Atkins brand bars. They sold well at first, but I didn't have much of a margin on them. I did it more for a convenience to my members.

Eventually, they started to sell poorly, though the diet was still popular. I discovered the reason why: A nearby drugstore was selling at a retail price below my WHOLESALE price.

How do you compete with that???

These kinds of shenanigans frustrate retailers, who purchase products from a manufacturer in good faith, only to be left hanging, with out of date or out of style stock to unload.

From a consumer point of view, there's always the risk of an oligargarchy taking advantage of this ruling.

For the most part though, at least in the world of CE, margins are lower and I think there is more than enough competition to keep things in check.

Factor in 800lb gorillas like Walmart and I don't think there should be too much to worry about.

[HTHOLIC]

Where the average salary of Home Theater equipment, Ok people living in the United States only around $50-100k(if your married) and taxes this is a slap on the face to home theater consumers.

Distributors BUy their equipment from the autorized dealers themselves and sell it new, thats because the high volume will benefit the dealers who resell to distributors

Its a clever trick, I am not sure if the Supreme Court ruling will prevent resale.

Here is how it works:

Manufacturer-----sale price-----dealer

-----MSRP PRICE----low volume--consumer
dealer profit low

dealer profit high ------- Price between sale price and MSRP (How much the dealer purchased to have the product in stock) -------- middle price --------higher volume --------distributor (unauthorized dealer) ------ consumer.

The product in this case is new:

Some issues Manufacturer doesnt like it because they want control and might have a percentage of profits the dealer has to give them for selling it at MSRP

Manufacturer propaganda: Unauthorized dealer : Bstock products (Used products) .

Counterpoint- A reputable unauthorized internet distributor probably wouldn't stay in business for long if they advertised products as new and sold B stock. Some companies may repackage used equipment but thats uncommon.

Counterfeit goods - Okay a reputable Internet retailer rated on bizrate or whatever selling counterfeit goods, don't think so - theyll get sued, its not like buying from china or an individual.

Serial number removed? - If the product is new thats doubtful, manufacturers say that the dealer or distributor does it to avoid being traced (ie, the dealer doesnt want the manufacturer to know its being resold).

Counterpoint: Third party superior warranties have to require the serial number be there, and the product needs to be identified. Furthermore, we are buying a new product sealed in box.

damaged or defective goods- Well a credit card billing dispute with a internet retailer will resolve that, in fact many internet retailers below MSRP have hundreds of satisfied customers.

Stolen goods- Well if you buy from a company whos in business for a decade and their profitable they wouldnt take a chance.

Bottom line: The manufactuers are using scare campaigns to avoid people purchasing from distributors.

Important note: If you have a rebate that requires both a receipt and the serial number it may make since to go with authorized dealer. However, some projectors only require valid UPC CODE.

[trivee]

As a custom integrator, with a retail location on a fairly busy street, with salesmen, and programmers and techs, and 5000sq feet showroom, there are alot of costs, and overheads. From payroll to floor planning, the cost is HIGH to have the stuff the AV geeks want to buy. So with things as they are now, the have an unfair advantage! And what is that advantage you say? Lower cost of being in business. And the kicker is that with out the B&M stores (brick and mortar) displaying these TV's, DVD players, Projectors, Subwoofers, Speaker packages, Touch panels, and etc.. How would you know which one you like? or which one sounds the best, or what color matches your trim, or whatever the 'what if' or 'does it' happens to be. How can you tell if YOU like how it sounds or how it feels...... THIS IS THE UNFAIR PART OF ALL THIS!

A lot of the online 'real' stores adhere to the brands policies, have a large client base, AND have lots of employees! Those things that you can call and ask questions, get recommendations from? There is a advantage to have a professional person around!

Its very frustrating when some one comes into your store and you invest time into this client, and he ends up saying will you match such and such online store, because its XX% cheaper. I mean its like saying I'm worth nothing, or the assume I'm making money on the www.com sale!? We don't make money unless we sell it to you, and if we don't make a certain amount of money when we do, we are at risk of not maintaining a profit level thats high enough to stay in business.

We want to have prices that are good and aggressive, and fair, however we need to make a bigger percentage than the guys that can deal on volume, or that are small time middle men in the basement making there 10-15% while still in their underwear...............

Basically, the deal is this, Internet has very heavily effected two things: 1 the way a consumer can gather his/her knowledge and advice, and 2: the price has been driven down a lot, in some cases enough to destroy some of the best brand names in the business, because PRICE became the number one selling factor........

Just like when polk went mass market by signing an agreement with Circuit City, or when Infinity has 4-5 different lines , one for each of the major retailers (which one was the real infinity?)

We all want to be fair, but when the playing field isn't , its very hard to not cry the blues and try to get something done with it.

Some examples:

Bose is the best selling speaker in the world, and they price fix, and they probably make the most profit per item as well. They also keep on growing, and are by some considered the model of which many brands (both in AV and out) would most like to be.
M&K speakers and subwoofers we in my opinion, one of the best sounding speaker and subs in the business. American made, built well and worth every penny (look at the amount of bose on ebay and then try to find a M&K product on there) the closed their doors this year because the couldn't stay price competitive because of the mass move to china, and they wanted to stay American made. Sad story
Apple computers, have always been expensive, but at same time worth every penny.
PC (not in all cases) have been forced into a price war, mainly because there are too many companies in the business, so they work on miniscule margins and are constantly making a cheaper quality machine filled with the latest gear, or are going out of business or being swallowed by one of the bigger companies.

Last thing, lets get off our asses and start to demand a few things of ourselves.......
Buy better stuff, and look for American/Canadian and or Japanese products (shooot anything but Chinese! Moving all manufacturing to China will come back to haunt us). note: Japan is also suffering heavy from the Chinese industrial revolution, their economy is tanked like ours.

When you go to an AV shop, remember he or she is real, there to help you, and simply that costs money, and he or she will earn the money if you are respectful to the game. Please don't even go to an AV shop and audition speakers or receiver or theater chairs, or TV's, I say this because, how are you going to hear them, or see them, if you research and buy online....
All speakers sound the same online, all receiver sound the same online, and those theater chairs, they feel awesome, right? feels like your on your office chair, or the couch don't they? Oh and one last thing, The brand X HDTV projector for 999 looks awesome on your 19" lcd screen , that you bought online!

----sorry for venting there

[sholling]

Many years ago I had a fairly successful photography studio. Although I had a good enough reputation to pull in some of the upper crust from as far as 100 miles away, my bread and butter were the local poor and middle class. When I first got started the poor part of town was really the only place that I could afford to pay the rent, and because it was historically one of the most profitable niches it all worked out very nicely. When K Mart came out with it's 99 cent specials half of my business dried up over night. Should Kodak have stepped in and said that nobody could sell 8x10 photos for less than $50 in order to prop up the mom and pop studios? Of course not. Neither should the CE manufacturers. It's called healthy competition. Times change and business models evolve.

[MDS]

It's interesting to me to hear the experience of those that live it day to day. Here is my perspective as a consumer:

I'm the type that usually has decided on exactly what I want when it comes time to buy. If I have gotten good advice or great service, I'll pay the few extra bucks to 'reward' those that offered outstanding service or just generally were interesting to talk to and maybe taught me something I didn't know..BUT it's difficult to pay a large markup for the exact same thing offered elsewhere.

Off topic example but I've been looking for new living room furniture for awhile. I have a decent relationship with one of the salesman at the RoomStore as he has helped me negotiate a return and exchange for something I bought and was then dissatisified with.

Now I see that the couches I think I want are also stocked by RoomsToGo - at $200 or more less PER unit. It would save me nearly $600 or more to buy the exact same thing from RoomsToGo instead of the RoomStore. Should I waste that much money just because the salesman at RoomStore is a good guy and has been helpful in the past?

[kgbagent]

Should I waste that much money just because the salesman at RoomStore is a good guy and has been helpful in the past?

That's a very interesting question that I think all consumers can relate to. Even more interesting would be the the response of your helpful salesman if you lobbed this question at him.