Review of Practices Amid Raw Material Price Surge... Japan's Panasonic Reduces Incentives for Electronics Store Sales

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Panasonic Japan has decided to reduce the payment of sales incentives to electronics retailers, a long-standing practice in the Japanese home appliance industry, as raw material prices soar. The strategy aims to prevent product price collapse and improve profitability through cost reduction.

According to the Nihon Keizai Shimbun on the 12th, Panasonic recently announced plans to expand measures to reduce sales incentives paid to electronics retailers in June. Electronics retailers typically purchase products in bulk from manufacturers and have lowered sales prices to some extent. A major reason for price reductions was the sales incentives provided by manufacturers.

Panasonic plans to significantly reduce sales incentives and extend the sales period. Previously, based on incentives, electronics retailers lowered product prices to sell off old models at discounted prices before new products were released. Now, they intend to lengthen the sales period for old products as well. The existing sales period was about one year, but Nihon Keizai reported it will be extended to two to three years or more.

Typically, when launching new products and ending sales of old ones, home appliance prices were reduced by about 20% and sold through electronics retailers. Panasonic plans to reduce the price discount rate itself to around 1-2%. Based on last year’s figures, they first implemented this for about 8% of total home appliance sales and plan to gradually increase it, aiming to reduce sales incentive payments for up to 30% of total sales in a few years.

The Nihon Keizai explained the background for Panasonic’s move, stating, "Raw material prices such as iron and copper used in home appliances are soaring. It is urgent to reduce costs and secure profit margins." Unit prices, especially for white goods, are rapidly rising at the shipment stage. According to the Japan Electrical Manufacturers’ Association (JEMA), the average price of washing machines last year was 84,537 yen (about 808,000 won), 1.5 times higher than in 2001, the Nihon Keizai reported.

However, Nihon Keizai noted it is still unclear whether the move to curb price declines by reducing sales incentives will spread throughout the Japanese home appliance industry. It added, "To establish the practice of selling high value-added products without lowering prices, strengthening product competitiveness is necessary."

This content was produced with the assistance of AI translation services.