Panasonic

What’s UPP? More HDTV Makers Join a One-Price Program

February 27th, 2013 · 20 Comments · 3D HDTV, 4K Flat Panel, Connected TVs, News, Plasma

Samsung F Series 2013

A disturbing new trend is sweeping across the TV industry, and it affects what kind of deal you can get on your next television. It started with Samsung, which in 2012 announced a Unilateral Pricing Policy (UPP), which legally permits them to set the minimum price its dealers charge for HDTVs. The program covered all the mid- to high-end models in its 2012 line. Sony jumped in with its  version they call “SURE” pricing. It affected all but their entry-level models. LG soon instituted is own online unilateral pricing program.

For 2013 nearly every Tier 1 brand – Samsung, LG, Sony, Sharp and Toshiba – have decided to go with their own minimum price program, leaving only Panasonic to allow its dealers to set the selling price or permit negotiation with a potential TV purchaser.

All the details and what you can do about it, after the jump.

Ins and outs of UPP

If a dealer sells you a price-fixed model at a discount, he risks a temporary halt of shipments from that vendor. Repeated violations could lead to the dealer to lose all rights to sell that company’s product. So how do you get a better price on a UPP model? You can’t, since dealers can no longer price-compete. All the stores in your area will have the same price.

Your alternatives:

a) Get an end-of-year deal on a 2012 HDTV, as many vendors have dropped UPP for end-of-model-year close-outs.

b) Shop for a 2013 Panasonic. They will begin shipping new models over the next few weeks.

c) Settle for a Tier 2 brand (Vizio, Philips), or a Tier 3 brand like Sceptre, Westinghouse, TCL or Coby
. They’ll be less expensive than the top-tier TVs, but generally won’t have the performance of the name brands either.

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Timing is Everything

Products go through a life cycle. Most Tier 1 brands begin shipping their 2013 models in early March and continue through April/May. This year the exception will be the 2013 UHD (Ultra High Definition or “4K”) models, as these aren’t expected until mid-year or later due to panel and chip availability.

When a TV first appears on dealer shelves it’s always at its highest price of the year. Here’s an example: The 2012 Samsung LED LCD model  UN55ES8000 was first offered by Amazon on Feb. 20, 2012 at a price of $3400. Around March 15 the Amazon price dropped to $2897.99. In May it dropped another $200. At the end of June it dropped again to $2497.99. Early August it dropped another $200, then it popped back to $2497.99 until around Thanksgiving when it hit $2397.99. Fast forward to this week. It is now in closeout-mode, off UPP, and is selling for $1854.56 from Amazon direct. This is 46% off its retail price. We checked out a number of other UPP TVs with similar patterns, released in the mid March to mid April time frame, then holding price until late June to early August, with the next drop around Black Friday. Their lowest prices were also when they entered “closeout mode.” If you are looking for top picture quality and a brand you can trust, stick with a Tier 1 TV. While the dealer selling prices are controlled by the vendor, TV margins are generally only in the 15-25% range. There can be occasional price drops through dealer incentive programs like instant rebates. Since the selling price is the same for all authorized dealers, pick the store with the best policies and most knowledgeable sales people. If you choose Amazon direct they will not collect the sales tax (except CA, TX, KS, KY, NY, ND, PA & WA) possibly saving you hundreds.

Another alternative are derivative models. These are TVs that are very similar to a company’s main series televisions, but may lack one or two features (like one less HDMI input, or no Internet streaming) but will cost less. They will have a slightly different model number. Make sure you check the box and manufacturer’s website for the full list of features. You will find these Tier 1 derivative models at the warehouse clubs such as Costco or BJ’s and some regional dealers.

 

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20 Comments so far ↓

  • gumbypoole

    As someone that has been in and around this industry at the retail and wholesale level for the past 33+ years I see another aspect to it from those listed already.
    Yes, it is important to keep the brick & mortar stores in operation – as long as they bring a value to the equation. Circuit City went out because they lost their purpose as much as from price competition. Same goes for all the other shuttered retailers out there.
    No one is making money in the TV business except maybe Samsung. They have grabbed the industry by the short hairs like nothing I have seen in my long career. Sony and Sharp are bankrupt. Toshiba, Panasonic, and other once proud names are teetering on the brink of extinction. Hitachi, NEC, Pioneer, etc have all left the business. Even American companies like RCA and Zenith that dominated early on are gone for good. Who do you think paid the money to develop that 1080p flat screen HDTV you are watching? China Inc does not innovate or develop new technology for the most part. They are good at being directed to build product based on other companies designs and research. Samsung and to an extent LG are about the only companies that are still investing in true R&D, and have the money to do so.
    Keep worshiping at the altar of “lowest price is all that matters” and watch innovation and more jobs go by the wayside. That leads to uniform mediocrity.

  • Chuck Daly

    UPPs will be bad for consumers who could care less about HDTV performance and reads consumer reports for TV advice. For consumers that believe TVs should get better every year, and cares enough to want to see the TV before purchasing, will see benefits from the implementation of UPPs.

  • ED

    How soon everyone forgets about the price fixing scandal that rocked the flat panel industry,some are still paying for this.Sony Samsung,LG,Toshiba ect…… and no one is making money,but still dumping billions into large plants to make larger numbers of hold on wait for it…………..Flat panel tv’s.

  • Chris

    I read sites like this one to determine what is a good television and what is a good price. Best Buy mainly helps me waste gas and time. I’m not down with UPP. Yeah you know me…

  • HBLAF

    Yes, retailers complain about low profit because there truly is not margin in TVs. Consumers who do not support a UPP policy will soon find the bad customer service problem eliminated, because there will not be a choice (or a chance) for brick & mortar customer service. How good is your online retailers on-site support? Can we the consumer learn from our recent economic history? 10 years ago, as margins shrank and Circuit City tried to please stock holders, they ditched the really good sales persons because of the cost. TV buyers recognized the difference, as mentioned in these posts. But Circuit City pacified the stockholder on the bottom line. Who won? Do we choose differently as consumers (& stock holders) today…. tomorrow?
    What (& how) you purchase today is a vote for the kind of world you want to live in tomorrow. UPP gives consumers a chance at better choice. Retailers will always find something else sell or another way to sell it. Sadly, we consumers will lose a facet of the USA we used to know.

  • joe

    seems to me the same tactic is used for gasoline…a fixed price and everybody complies…um…the whole concept is called a monopoly…which is a violation of antitrust laws…regardless…a person will still buy on line because the online entities will still undercut brick and mortar stores …a minimum price fix does not solve the overall problem of a bum economy and high unemployment

  • Jon

    I continually see tv retailers complaining on this site about their lack of profit.

    I once bought a tv, paying a significantly higher price from a brick and mortar store under the premise of better customer service. A few months later when the tv needed to be repaired, this superior customer service seemed to have disappeared. Personally I simply don’t value the service that brick and mortar stores provide in this regard. I quite frankly do not feel that the salesmen are knowledgeable enough to help me, and I rarely find myself trusting them, or the store they are in to stand behind any promises made. I would rather save the money by buying online, and have the same crappy level of support as a brick and mortar store.

    As more and more people seem to be buying online, I would consider this to be a relatively common sentiment. For those retailers complaining about their profit margin, perhaps if you offered some value to compensate for the higher price people might be willing to pay for it.

  • HBLAF

    The value of UPP is in protection of dealers so dealers stay in business to serve customers. 10 years of free falling TV margins has resulted in fewer purchase venues for consumers not more choices. This debate was engaged years ago when Bose Corp began enforcing UPP pricing. The Bose policy has persisted for decades. The result is repeat customers and loyal dealers. Customers keep calling the same phone number and receive what they expect. Not everyone chooses Bose, but is an exercise of a free market. Is this a reasonable lesson of the UPP concept? IMO, it is way past time for Tier 1 supplier UPP.

  • Tipp

    Should we not Call it Legalized Price Fixing… The Manufactures must have Very Good Attorneys…

  • Ken

    We the TV industry are the only ones that eat our young.
    I have always maintained to ship the independent dealer first to set the sell price. But no, the Mfgr’s. flood the market under the guise of market share.
    Sure -you get what you pay for, but Circuit City tied to give it away and look what they got.
    I’m number one but I went out of business!

  • TPAVID

    Perhaps if manufacterers actually made a profit on selling displays now adays the pricing ot this would make sense.
    With all mfg’s claiming to loose money in the display business it blows me away that they were the ones that caused the “race to the bottom”. By allowing the internet to squeeze any profits from standard brick and mortars, they created this idea that a product can be engineered, marketed, and installed for no profit.

  • JAMIE

    this is great news for our industry…unless all you want left in this game is Amazon, Walmart and Best Buy to sell TV’s….this will put profit dollars back into our suffering industry. I say go for it and support this. Could be a savior for Main Street America.

  • Johnny TeeVees

    Its not as simple as saying “The Consumer is getting screwed” or “This is bad for the consumer”. There is a reason that most tier 1 TV manufactures went to UPP or some type of price protection policy. For a couple of reasons, to protect themselve and retailers from going out of business. If Best Buy or Walmart control pricing they can force others out of business and then everyone is in trouble. And ultimately prevent a stranglehold on TV pricing that would result in the Big Box stores selling a TV that cost you $1000 now because there is more options in retailers to get them from, to a couple of retailers that could dictate that the same TV be twice the price we have now because they are not afraid of anyone else getting your business.
    UPP is not at all what you think it is also. Margins on TV’s is as small as it has ever been even with price protection policies in place. An example would be a 46″ Samsund LCD 3 years ago was around $1800 now you can get the same 2012 model for around $600. So as you could imagine retailers make very little on them.

  • Dave

    TO4T,

    Thanks for your explanation. Trying to fully understand this issue, who benefits and who doesn’t.

  • Chris

    We all know that a customer would like to buy at the lowest price possible. The problem with unrestricted online discounting is that the prices erode to a level that makes it econmically impossible for a retailer to stay in business or at least continue to sell certain TVs. If customer use the retail stores as a showroom and then buy online at somepoint the retailors will go out of business or quit selling tvs and then there will be nowhere to see what your buying. Or be left with something worse than a Best Buy where there are products but no one to explain features and benefits and reasons for choosing one brand over another. I know some people can do this one their own but many cannot. Customers can’t have it both ways. There are places online selling
    TVs barely above cost in some instances and there is not a way for a store to compete with that. When a manufacturer lowers the price on a tv through the year it doesn’t always mean they had enourmous margin in the tv to begin with. Sometimes they litterally wind up selling the tvs below cost to move through inventory that they are sitting. They make estimates on how many tvs to build months in advance and if sales are slower than expected they have to do something to sell them.

  • JOHN

    I will put my Vizio up against the so called tier 1 anyday. The price difference is much more noticeable than the so called performance difference.

  • TO4T

    The difference is that the auto companies do not have to deal with web sites offering deals that they cannot possibly fulfill. Amazon has many “partners” that offer prices on products that they do not physically have. Companies like Samsung, Sharp, and Sony are trying hard to get these “businesses” shut down. What purpose does it serve anyone to offer a massive discount on a product that you cannot possibly deliver on. For example, the Sharp 90le745 is at stores for $8999 currently. Yet, there are websites offering it for as little as $6489. This being a upp product, and not available anywhere other than brick and morter stores, I find it interesting how they are offering it for sale. Is it a used item? Thye claim new in box. When you ask the Sharp rep about it, he copies down the companies name and tells me that is not right and they will investigate. same goes for the Samsung 75es9000. The samsung rep did the same thing. He explained that only authorized sellers could offer the set, and that even then, they had to be within the upp window. That tells me that the sites are either trying to defraud people out of money, or that the only purpose to exist is to drive “market conditions”… That is why I refuse to buy anything other than books from the internet. Can’t trust the online retailers. I have even been burned by Amazon and their “Partners” before…

  • Dave

    Imagine the uproar if every American car manufacturer implemented vertical price restrictions (UPP) telling their dealerships they must sell vehicles at an artificially set price and could not negotiate based on market conditions. Only the manufacturer would have the authority to set prices as a condition of dealerships getting their vehicles. Someone who understands economics please tell me what am I missing?

  • TO4T

    It actually helps all brick and mortar stores, not just Best Buy. It even helps the little guys in areas that do not have big box nearby. Keeps the web from undercutting and keeps the big box from using its purchasing power to bury Bob and his local electronic store in nowhere, Idaho … Consistent pricing is really a good thing guys. Less leg work, less time wasted. Of course, the Samsung example given above is really just showing you how much margin was in that product in the first place, and how bad first adapters overpaid. Maybe if everyone could wait awhile instead of running out and buying first thing, they would save a little more money…

  • Dave

    Vertical price restricting (aka UPP) became apparent to me when full service retailers like Sears attempted to block big-box stores like Best Buy from undercuttng them. We see where that and other boffoonery got Sears. Now we see Best Buy seemingly embracing UPP as way to reduce the impact of web retailers on their HDTV sales. I’m not saying Best Buy instituted this but they certainly may profit. Good luck Best Buy. Artificial price restrictions which prevent a product finding its true value in a free market can be detrimental to consumers. It can also backfire on the manufacturer the moment a non-UPP player floods the market with comparable or better products, i.e., the Chinese. Here’s hoping Panasonic doesn’t jump on bandwagon and profits from these price restrictions by other HDTV manufacturers.

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