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.

Price Gouging is Never Right

A colleague and I were chatting the other day about price gouging. Particularly, the way things have gotten so expensive in Las Vegas during the annual Consumer Electronics Show. You no doubt pay more for a flight to Sin City (or any other destination, for that matter) during the days of such a big show then you would any other time of the year. Why? Because airlines know that people from around the world will be traveling there in the thousands. Hotel stays also creep up in price: you might end up paying upwards of $300 for a room that would cost half that any other night. (On New Year's Eve, for example, even the most basic hotel room in Vegas will run you five-hundred smackers!) And do we really need to pay US$10 for a watered-down, half-glass of vodka and cranberry at a cheesy hotel bar?

Of course it all comes down to the basic principles of supply and demand. The more coveted a product or service is by the masses, the higher the price of said product might rise. I've seen nasty examples of this on several, isolated occasions. Anyone who lives in Toronto and tried to buy a bottle of cold water during the sweltering hot summer blackout a few years ago knows exactly what I mean ($5 for a 250 ml bottle, anyone?)

This got me to thinking: is price gouging rampant everywhere? Rather, more specifically, is it rampant within the consumer electronics industry?

In the CE industry, it seems that the situation is exactly the opposite, especially when it comes to big-ticket items. It's no secret that companies like Toshiba and Sony took a hit in order to sell products like first-generation HD DVD players and Playstation 3 at the prices they did. And we all know what severe price erosion is doing to the flat-panel TV industry.

But when it comes to many smaller-ticket items, the gap between cost and sale price is exponentially wider. However, this isn't exactly price gouging: manufacturers and retailers need to make a profit somehow, right? And just because a product might cost X to manufacturer, we all know that plenty of people involved in between the manufacturing process, and the point the product arrives in your hands, need to get paid somehow.

Of course every Tom, Dick, and Harry will have felt, at one time or another, that he's paid what he thinks is "too much" for something. But there's a big difference between perception of price, and actual price "gouging" of the customer.

Needless to say, before you buy into anything, whether it's a product, vacation package, or service, do your research. If you're planning a vacation, investigate times, other than the obvious seasonal differences, when prices usually rise. For example, heading to any city when there's a big trade show or festival won't be your cheapest bet! And always make comparisons before forking over your dough.

As for the water story, it was only select gas stations that were gouging customers who strolled in with sweat dripping off their foreheads and dry mouths, dying for a drop of cold aqua. But charging $5 in a situation like that is just wrong, no matter how you slice it.

[Photo: www.freedigitalphotos.net]