Sony's Anti-Consumer Online Practices

A few years ago Sony began an online initiative to start selling their own products, including camcorders through their online web site, SonyStyle.com. Following the lead of many other manufacturers, including Dell in the computer industry, the company realized that there are many benefits to selling your own products and not going through retailers - most notably increased profits because they don't have to give the retailers a cut. In what seems to be far from a coincidence, Sony began denying retailers all around the country permission to sell Sony camcorders online. At one point, only 17 companies were authorized to sell online, and currently there are only 42 companies authorized to sell online. The Google directory lists 1789 online consumer electronics retailers. We can assume that the majority of these retailers would want to be authroized to sell Sony electronics on their web site, but they're not. Why? Sony says that it is to ensure quality - but many retailers believe that it is because Sony wants to stop their retailers from competing with SonyStyle.com.

Retailers complain that Sony is competing with them when it should be helping them. Smaller sized retailers can not match the marketing or production budgets of Sony, the largest consumer electronics corporation. It is also impossible for retailers to be able to match the pricing ability of the Sony, because Sony only has to pay for the production and materials with a camcorder whereas a retailer has to pay those costs plus a markup. It's not like selling camcorders is a super profitable business anyway. Retailers only make 10%-20% profit on a camcorder sale. It's unknown what the cost is to Sony to make a camcorder, but we can guarantee that they are making more money off camcorder sales than the retailers. Of course, this only matters to the few retailers who have been approved by Sony to sell online. Most retailers aren't even being allowed to sell Sony camcorders on their web sites while they are allowed to sell Panasonic, Canon, Sharp and JVC.

To be authorized to sell online a retailer has to meet certain requirements. The program requires that retailers ship products within 48 hours, provide a toll free telephone number, provide an email product inquiry service with a 24 hour response time, provide security for online transactions, send order status via e-mail within 12 hours of order placement and offer convenient return procedure.

Not being able to sell Sony camcorders online is hurting many retailers. All camcorder makers have a program where they authorize retailers to sell their camcorders. If a company wants to buy camcorders direct from the manufacturer they must be authorized. A company will risk losing their authorization if they don't follow the strict rules of the manufacturer. Sony prohibits it's retailers from selling camcorders online unless they get permission from the company, and right now only the largest retailers, including J and R, B and H Photo, Best Buy, Circuit City, Amazon.com and a few others are authorized to sell online. This wouldn't be such a big problem if Sony camcorders didn't make up 48& of the digital camcorder market(according to IDC data). This means that most retailers are loosing out on almost 50% of their online sales because they can't sell Sony camcorders. Sony has a lot of power with the retailers, if they loose their authorization they risk going out of business because Sony sales are so important. Sony is using their power to limit the online competition.

Retailers do have a way around these restrictions. For most online retailers that you see selling Sony camcorders online, they are in fact not authorized to sell Sony camcorders. Rather they are selling gray market camcorders. Gray market camcorders are camcorders which the retailer doesn't purchase directly from the manufacturer but from a third party. Gray market camcorders are a very dangerous thing for consumers. Because the camcorders are going through a third party - quality can not be ensured. The camcorder could be damaged, missing parts, refurbished or an overseas model. If a company sells gray market camcorders Sony will not authorize them. It is also a common practice with gray market retailers to sell the camcorder at a price lower than what they purchased it at - however they won't let you buy the camcorder unless you buy a five year warranty and accessory package - making up for their loss on the low priced camcorder. Hundreds of people get scamed in this manner each year. Of course Sony doesn't recommend purchasing from an unauthorized retailer, but since there are so few authorized retailers out there and their pricing is not competitive - many consumers turn to the gray market camcorders.

Because so few companies are selling Sony camcorders online there is little competition. Little competition means that consumers will not be getting the best price. Sony's online policy has forced some retailers to go gray market - meaning that consumers can't be ensured of the quality of the product they are getting - and they may be scamed In an effort to increase their profits, Sony is attempting to control the online camcorder market. They've gotten away with it so far because they have so much power with retailers. The result of their anti-competitive practices however is that consumers are getting hurt and are not getting the best deals possible.

We did talk to a Sony press representative who defended the companies practices but she was unable to give us a more indepth explanation or comment further about the problems mentioned in the article.

What can you do? Email Sony and ask that they allow more retailers to sell camcorders online. If you are shopping for a camcorder and you notice that a retailer doesn't display Sony camcorders on their web site - it probably doesn't mean that they don't sell them, rather call the company up and order through the phone. Hopefully Sony will change their policy to one that is more friendly for consumers.