I recently received a promotional email from a large Internet-based retailer that shall for the moment remain nameless (cough! Amaz-ahem!) As I was considered to be a high-volume "Prime" customer, this online retailer wanted to offer me a 30-day trial of their their premier store-branded consumer electronics product, an electronic book reader which retails for $360. If I liked the product, I could then return it in 30 days, money back guaranteed.
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Now, as it turns out, recent industry scuttlebutt has yielded information about the next-generation version of the same product, which according to my own sources will likely go on sale after the holiday season.
One would think that with the news of a new version of this product appearing next year, that this well-known online retail store would significantly drop the prices of the existing model in order to move the current stock and remaining production run for the holiday season. The thing is, there doesn't seem to be any sign that this is their intent, if their "Prime" customers are only allowed to play with it for 30 days and then pay full retail.
The danger of this sort of behavior, particularly right when the holiday shopping season is about to go into full swing, is that this retailer is likely to induce an unintended Osborne effect that will be greatly amplified by fears of a slowing economy and drastically reduced holiday spending.
If a new model really is in the offing for early 2009, the reasonable thing for this store to do would be to introduce at least a 25 to 40 percent price cut in order to increase product adoption and drive sales of more e-books.I don't want to pick on this company in particular, because lots of consumer electronics manufacturers are in the same boat, all which have a glut of current stock sitting in the channel not moving and have new models of their products announced for the holidays. The smart manufacturers have already taken steps to mitigate a poor holiday season by making major pre-holiday price cuts in their existing products, such as with Microsoft and the XBOX 360. Others such as Nintendo, Sony and the aforementioned Internet retailer remain stubborn.
The next several weeks are going to be critical for many companies that manufacture and sell consumer electronics luxury items such as video game consoles, cameras, HDTV units and other pricey gadgets, as well as durable goods in general. If the price cuts on these expensive toys don't materialize, we could very well see significant financial losses that could easily translate into a retail collapse and massive store failures that will echo the calamity in Wall Street from last month, especially if people are banking on "waiting until after Christmas" to take advantage of post-holiday sales.
Do the electronics manufacturers need to take drastic steps to move product for the holidays? Are you taking a "Wait until after Christmas" stance with your holiday shopping? Talk Back and let me know.