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Wednesday, October 24, 2007

When is the Best Time to buy Consumer Electronics and Cars during the Christmas Season?

There are a lot of misconceptions concerning the best time to shop for certain items during the Christmas season. It's true that for seasonal items and clothes, January will give you some of the best deals. After all, Christmas decorations are a dead item until the following Christmas and winter clothes are about to be replaced on the racks with spring clothes. But what about cars and consumer electronics?

The best time to buy a car is the last week of December. Anyone who was going to buy a car for someone as a gift has already done so and traditionally, December is a very slow month for car dealers. Unfortunately for the car dealers and fortunately for you, that last week of December can be critical to the car dealers' success in the next year.

Auto dealers receive their allocations, ranking against peers, and pricing percentage based on how they perform each calender year. They're not worried about profits at the end of December: they want to move as many vehicles as possible so as to position themselves the best for the following year. This adds up to big money for a dealership, so they're willing to pull out all the stops on moving vehicles in December. By the last week of the month, it's do or die, so if you're prepared to buy, be prepared to drive a hard bargain and have it accepted. Ask for more than you think is reasonable: you may be surprised and get it, or something close to it.

Moving to consumer electronics, the biggest myth is that you'll get the best deals in January. With gift cards becoming more popular, there may be a few bargains to be found in January but the entire industry is geared to move product from Black Friday (the day after Thanksgiving) through the end of the year. All the volume purchases (along with volume discounts) have been made based on sales during this period. Generally speaking, these will be the best across-the-board prices the retailers will pay all year. They are looking to move volume.

Salespeople and Sales Managers on the floor have pricing flexibility they don't normally have throughout the rest of the year. Like the car dealers, most consumer electronics dealers work on a calender year financial schedule so the Christmas season is THE time to make your numbers for the year.

Another thing that goes out the window by mid-December is MAP: Manufacturers Authorized Prices. Have you ever wondered why the most expensive store in town and the biggest discounter in town both sell a particular product for exactly the same price? It's MAP. I don't understand how its legal (but it is), the manufacturer can set the retail price of a product and if a retailer sells below that price, the manufacturer can cut them off. It's price-fixing pure and simple, but it has been ruled legal by the courts. And it's not just in consumer electronics: gas stations and certain mattress manufacturers are also controlled by MAP as well as many other industries. The rule of thumb is the less places the Seller has to obtain the product, the more MAP is enforced and sticks.

In consumer electronics, one example that comes to mind is top GPS manufacturer Garmin. Authorized Garmin Dealers are always much more expensive than eBay or unauthorized dealers who buy their product from third parties. That's why Best Buy, Fry's, and CompUSA are within dollars of Joe's High End Expensive Electronics, Inc. for the same item. But at least they come with a warranty: that "buy" on eBay probably won't.

The most famous example of MAP I can think of is Tempurpedic Mattresses. You can shop every retail store and website that carries Tempurpedic, and the BEST deal you will get is that they will throw in some pillows. That's it. NOBODY discounts Tempurpedic. They completely control their distribution: there are no distributors. Go against Tempurpedic's approved pricing, and the retailer will be dropped like a hot potato. No product again.

If a manufacturer has lots of distributors as opposed to selling primarily direct, MAP becomes less important, but doesn't go away.

But at Christmas time, especially early to mid December and even more especially if sales have been below forecast, MAP goes out the window. Its volume, volume, volume. The retailers want to be sitting on as little product as possible going into 2008 and during December, most manufacturers will turn a blind eye to "breaking MAP".

So the answer for Cars and Consumer Electronics is December, December, December......especially if the Black Friday Weekend Sales Numbers for the industry are disappointing. If you hear sales were below expectations, than break out the checkbook and credit cards because the CE world is your shopping oyster!




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3 comments:

Robley said...

As a Garmin dealer myself you have it correct but MAP is supposed to also serve another purpose. The manufacturer sometimes builds in a high margin to the product thats good for me of course, but its not true for every item. Because of unauthorized sources Those GPS's are literally being sold for less than $1 profit and on Ebay and Amazon sometimes at a loss because the seller didn't calculate the overhead correctly. The internet has also become a problem in that the customer now knows what the dealers true cost is, not like the car dealers they can actually find to the penny my cost and guess what price they offer that price and want free shipping or they will ocassionally be kind enough to let me make $10 on a $4000 item.

Mr. UnloadingZone said...

I know. Those eBay dealers wake up when they realize they just lost money..sometimes a lot of it.

Unfortunately, there are more geniuses like them just waiting to take their place.

I hope Garmin offers co-op or some other type of incentive to help you.

Mr. Unloadingzone

Sara Ale said...

I really appreciate you for all the valuable information that you are providing us through your blog.

Mrs. Unloadingzone

Mrs. Unloadingzone
"The Girl of my Dreams"