In order to make shelf space for new models that will be arriving in stores soon, retailers are discounting the units they still have in stock. What’s more, a new incentive system will be introduced this spring, making it a lot less likely for stores to mark down TVs in the future as dramatically as they have in the past.
Electronics manufacturers are tired of seeing their prized creations sold at substantial discounts off the original MSRP. TV prices dropped during the 2011 holiday shopping and continued getting cheaper into 2012, but manufacturers seem to be saying that enough is enough.
According to HD Guru, the newest Samsung and Sony TVs will be rolled out in stores in the coming months with what’s known as a unilateral pricing program (UPP). Under such a scenario, retailers—or, more likely, e-retailers—are penalized for selling a TV below Sony or Samsung’s preset price.
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How are retailers penalized? A Consumer Reports post explains, by way of comparing UPP with MAP, or Minimum Advertised Pricing, which is currently the most popular system:
With MAP pricing, a manufacturer can cut off co-op advertising funds if a retailer advertised a TV below a minimum price, which is why you often have to actually go through an online retailer’s checkout before the price become visible. If the retailer is willing to lose those funds, it can sell the TV for whatever price it wants.
Once UPP is in effect, however, Sony and Samsung will have more leverage than simply the power to withdraw advertising funds. Under the new agreements, manufacturers can also cut off the store’s supply of the units, leaving them with nothing to sell:
So basically, the TV’s actual selling price is being set by the manufacturer, leaving little wiggle room for dealers to out-discount their competitors.
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The bottom line is that when the new TVs arrive in stores at the end of March or early April, retailers will have little choice but to sell them at a price determined by the manufacturer. Or at least that’s how things are expected to play out.
Right now, however, stores aren’t facing such restrictions, and leftover units are being sold at closeout prices, often close to 50% off their original MSRPs.
Brad Tuttle is a reporter at TIME. Find him on Twitter at @bradrtuttle. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.
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