Does anyone know how this works?

[spicynacho]

If a manufacturer lowers their MSRP of a product which is already released who eats the cost on existing inventories? Like when sony dropped the price of the 60 GB PS3 from 600->500. Retailers already had stock, I assume they already paid one wholesale price for those and they are being pushed by the manufacturer to sell it for less than they originally intended to sell it for. Does the manufacturer give the retailer a rebate on their inventory, a credit on their next order, or just let them eat the cost?

[DisneyKrayzie]

I believe the retailer takes the hit, because it is just a "Suggested Retail Price" they don't have to lower their price. From my experiance working in retail, when an item drops in price that much its on its way out.

[Tru 2 Blu]

The retailer take the hit in this case. In retail the company buys the sony playstation 3 60gb at 150-200 dollars (my guess) and sells it at 500 dollars. Making 300 dollars off of it. Thats how walmart, best buy, cc make there profits. That money then gos to the employees and the company plus alittle extra to the owners of that company.

[Shadowself]

Originally Posted by spicynacho

If a manufacturer lowers their MSRP of a product which is already released who eats the cost on existing inventories? Like when sony dropped the price of the 60 GB PS3 from 600->500. Retailers already had stock, I assume they already paid one wholesale price for those and they are being pushed by the manufacturer to sell it for less than they originally intended to sell it for. Does the manufacturer give the retailer a rebate on their inventory, a credit on their next order, or just let them eat the cost?

Depends upon the companies involved and the situation.

Historically, Apple has compensated retailers for many of their same product price cuts. (They do not compensate retailers for old product in the pipeline when new products come out as Apple tries to empty the pipeline before shipping new items.) But then Apple tries very hard to keep all vendors selling its products at, or very near, its MSRP. Neither of these things are standard industry practice though.

[Luis_A51]

The retailer takes the hit. There might be reparations (discounts on other stuff) and it depends on the mark-up on the item. Say if something has a $200 markup and then the MSRP drops $50 well thats not a big deal. But if the mark-up is $50 and the MSRP drops $100, then thats a big deal.

I cant imagine any retailer is happy with Toshiba right now. From what we know the margins were already terrible on HDDVD players. So I would think Toshiba would be compensating the retailers. Plus I would think most just want to get rid of the stuff and never stock it again.

[blujacket]

I cant imagine any retailer is happy with Toshiba right now. From what we know the margins were already terrible on HDDVD players. So I would think Toshiba would be compensating the retailers. Plus I would think most just want to get rid of the stuff and never stock it again

Unless your a drunk tivo dealer in NY.

[Shaman]

Originally Posted by Tru 2 Blu

The retailer take the hit in this case. In retail the company buys the sony playstation 3 60gb at 150-200 dollars (my guess) and sells it at 500 dollars. Making 300 dollars off of it. Thats how walmart, best buy, cc make there profits. That money then gos to the employees and the company plus alittle extra to the owners of that company.

No Sony wholesale rebates the retailer within 30 days of shipment and the markup is less then $50

[jsteinhauer]

It completely depends on the arrangement between the wholesaler and the retailer.

Sometimes, items are purchased outright, and the retailer takes the whole risk. Other times, it is completely a consignment deal, where the wholesaler doesn't get paid, unless the item sells, at no risk to the retailer. There are many in betweens. For both the wholesaler and the retailer, having product stay on the shelf too long is not profitable, so it is in both of their interests to reduce prices. This is usually expected and factored into the retail price of the newly released item. The margin is high enough to make up for the reduced prices that will come later. The trick for the sellers is planning right. When the product becomes "old". Maximizing profits in retail is a very complicated thing. It's sort of like actuarial work.