Move Afoot to Raise Prices on Electronics : Industry Cites Crunch of Rising Costs, Weaker Dollar, Slower Growth

From Reuters

Consumer electronics makers are trying to boost prices in the United States in an effort to offset rising costs and sluggish growth in sales.

In interviews at the industry’s big trade show here during the weekend, executives said they could no longer swallow increasing costs for components and distribution at the expense of profits. The continued weakness of the U.S. dollar is also squeezing manufacturers in Europe, Japan and Asia.

“This can’t go on,” said Jack Pluckhan, a vice president at Matsushita Electric Industrial Co. and president of its Quasar division. “The timing is right” for a price hike, he said.

It is not clear whether the manufacturers will be able to push through higher prices. Competition at the retail level is stiff, and retailers may balk at marking up price tags if it means losing business to competitors who continue to discount heavily.


Sales Growth Slows

But suppliers, citing healthy consumer demand and stable inventories, are optimistic that the increases will take hold.

“I think they will stick,” Pluckhan said.

Their efforts come as newly released statistics show that consumer electronics sales in the United States have failed to rebound to the double-digit growth the industry used to enjoy. According to estimates issued by the U.S. Electronics Industry Assn., factory sales of consumer electronics grew a modest 4% in 1988 and will rise 5% in 1989.

Sales reached $30.1 billion last year as brisk growth in camcorders and compact disc players offset a slowdown in sales of color televisions and videocassette recorders. The trade group, which sponsored the four-day Winter Consumer Electronics Show, forecasts sales of $31.6 billion in 1989.

Manufacturers were successful in stabilizing prices last year after years of declines. They expect prices to rise 3% to 5%--roughly the amount by which costs for picture tubes and other components have risen.

They will also continue new marketing strategies such as restricting advertising allowances for dealers who discount steeply and emphasizing more sophisticated products, which carry higher profit margins.

Change in Pricing Strategy

Tom Harvey, president of Sony Corp.'s Consumer Audio Products Co., said the rising value of the Japanese yen was taking its toll on Sony. If the dollar continues to weaken, “we’ll have to address pricing,” he said.

Philips Consumer Electronics Co., a unit of Dutch-based N. V. Philips, raised prices 2% to 4% at the end of 1988. “We are considering raising prices on the 1989 line,” a spokesman said.

Marantz Co. of Chatsworth will avoid direct price increases for existing products, said Thomas Shaeffer, vice president of product development. Instead the company will bring out new products that offer more features for a slightly higher price.

Suppliers are worried about profits because sales of their hot items are expected to cool off in 1989. Unit sales of CD players will expand 20% in 1989, compared to 50% in 1988, according to EIA estimates.