Friday, December 12, 2008

Price Hikes Expected for '09

It sounds like marketing hype, but there really is no better time to shop than right now. Not in terms of the economic situation, of course. But in the long run, product pricing is at such a low point right now that there's nowhere else for it to go but up.

As mentioned in the previous post about the flat-panel market, these low, low prices simply can't continue in the interest of manufacturers, distributors, and retailers all looking to turn a profit and sustain a successful business operation. Not surprisingly, some Canadian manufacturers and distributors are already sending out perfectly-composed notices to dealers advising them that pricing will be increased next year due to the economy, and the current exchange rate. Some have added surcharges anywhere from 10-20% on products.

"Our expectation is that Canadian consumers will begin seeing higher prices at retail after the holiday season on many popular items," comments a representative for an audio/video manufacturer who asked not to be named. "All this means is there will be no better time to buy during the next few weeks, and that there is no more waiting any longer for the best deals."

Others have echoed this very statement, pointing to the fact that vendors have been "eating margins" lately just to keep price consistent. A spokesperson at a major digital camera manufacturer says he expects to see prices increase upwards of 20% on replacement cameras.

"Major categories are at thier lowest prices," confirms a spokesperson at Future Shop. "For example, pricing has dropped 17% for 40-inch TVs since September."

Indeed, I've seen evidence of manufacturers/distributors intending to increase prices by as much as 13% as of January '09.

One independent dealer claims that big-box stores have a "glut of inventory" that's resulting in the incredible price slides we're seeing in the marketplace right now.

"To combat this, retailers should try and hold the line with regards to pricing, and manufacturers should look at streamlining distribution to help the deflation of the perceived value of their products," he opines. "It’s easy to widen distribution when there are no issues with demand. With the decreased demand, production should be cut back, distribution tightened, and allow profits to flow. At this point, there is a state of panic that includes vendors sitting on too much inventory, big box stores doing the same, pricing sliding to zero, and the buying public listening to the media and simply not spending. If production decreases, and distribution decreases then perhaps there is a chance for the industry to weather the storm."

And weathering the storm is all we can hope for at this point. But the paradox we're in certainly doesn't make things easy on anyone, including the consumer. On the one hand, you should spend now because pricing, especially on big-ticket items, simply won't get any more attractive. But on the other, it's risky business to start handing out money frivolously when we're uncertain about just how long it will take for the economy to turn around. From a manufacturer and retailer perspective, they want you to buy now (how else can they get rid of this back up of inventory?) but they also want you to buy later when product is at a higher price. A healthy balance needs to be achieved. Right now, it's just a matter of figuring out how to accomplish one.

Bookmark and Share

No comments: