Appliances: will we just be order takers?

The owner of Rugby Fitted Kitchens Trevor Scott wonders how long it will be before appliance makers sidestep the internet pricing trap by selling direct themselves

I make no claims to fully understand all the ins and outs of the whole Ultra Finishing debacle that saw them fall on their sword and accept a massive £786,668 fine from the CMA.

Not least of all because I don’t retail bathrooms and so have been somewhat protected from the almost universal carving up of bathroom pricing on the internet.

While I have to agree with some other pundits that retail price fixing is simply illegal and therefore the fine is justified, I do have sympathy with any manufacturer endeavouring to maintain the perceived market position of their products by, if nothing else, price.

Let’s consider a mid to high-end appliance manufacturer who has allowed their best-selling oven to be carved up on the internet and sold, let’s say, at £350, compared with £900 from its nearest competitor. Does anyone truly believe that the discerning consumer is going to be drawn to the £350 oven in preference, purely based on price?

Personally, I think not. The consumer will want to know why it is so much cheaper? They will smell a rat and not believe it is just good value for money, but that it must have been used. And so the manufacturer’s desired market position is forever damaged.

But what the internet has now achieved, and I firmly support this, is to drive the price of the aforementioned oven down to a more acceptable £799 and the manufacturer’s market position is still secure.

This has meant that we, as retailers, have been squeezed, but not so much so that selling appliances has become a complete waste of time. This is good for the consumer and bearable by us the retailer.

However, following on from the CMA judgment, I do wonder how many expensive lawyers have been re-engaged by major appliance brands to revisit their ‘selective distribution’ agreements and make sure they are safe from the probing eyes of the CMA?

After all, only last month we had a little spat in this very magazine when Steve Scogings of Stellisons questioned why he, as an electrical retailer, should not benefit from the same terms as kitchen specialists?

It was a fair question and one that was easy to counter, but it does leave one thinking how much longer it will be before manufacturers resolve this problem of multiple trade price lists once and for all and become retailers themselves?

Miele has already trialled this concept in Scotland, although it has now stopped, after retailers said they didn’t like it. And rumours abound that another major brand is about to launch a direct retail concept in the very near future.

Manufacturers would put display appliances into showrooms free of charge, but still retain title. We have all moaned about the cost of displaying appliances. So that’s good, surely?

In exchange, the retailer will be expected to attend product training, hold cookery demos and wax lyrical about the merits of their chosen brand partners.

The retailer will simply take the order and payment via the manufacturer’s own portal, who will then arrange delivery and maybe even installation. This is certainly so in the case of the replacement market, but perhaps not so in the case of a new kitchen installation. The ‘retailer’ won’t have to store the appliances, do any VAT admin or deliver them, resulting in considerable cost savings. So that’s good too, isn’t it?

In return, the manufacturer will pay retailers a monthly commission. They will even still receive their annual and promotion period on and above target rebates – which we all do now. So, potentially it’s win-win all round, isn’t it?

Ah, but what level will the commission be set at? Maybe 10%? Not enough, I hear you cry. If it’s 10% of the internet carved-up price of £350, then that’s not a lot. But what if it’s 10% of £799? Which it could be, because the manufacturer is now the retailer and therefore able to control his own selling price. Think about it, that’s staring to sound quite attractive, isn’t it?

Remember, if we continue to allow the internet to drive prices down, then 10% of sod-all will still be nothing and we won’t want to display appliances at all. But the manufacturers need their products on display, so this is a possible, if not probable, way of squaring the circle. Watch this space…

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