Overpriced at this end of the world

By CHRIS BARTON

When it comes to getting the latest in consumer electronics technology - in particular digital cameras, camcorders and DVD recorders - we're laggards. Mainly because our retail market shows a deep-seated reluctance to introduce sensible prices.

It's as though we've returned to the bad old days when the only way to afford new consumer electronics was to know someone travelling overseas and ask them to bring back an order. It's happening again.

A colleague came back from Hong Kong recently boasting a Sony digital camera for half the price you'd pay here. Then I got an email from an American living here who has family back home sending over all manner of bargains - a Canon mini DV camcorder at $2900 less, and a Pioneer DVD writer at an $1100 saving.

A little research on websites such as www.pricescan.com shows he's right. New Zealand consumers are paying between 40 and 60 per cent more for these products.

New Zealanders have long accepted the country's remoteness means we pay a little more for consumer electronics. But in an age where we're constantly being told we live in a global market, where we have parallel importing and places such as The Warehouse to make sure everyone gets a bargain, 40 to 60 per cent extra is more than a bit on the nose.

How have things got so out of whack? Or as the American put in his email, why is it that "the US has current technology at low prices and NZ has old technology at insanely high prices"?

I last visited this topic about four years ago over PC pricing and upset a lot of US brand manufacturers because I said their New Zealand prices looked like they were doing consumers over badly.

There were the usual excuses for the price differences: shipping costs, GST, our fluctuating exchange rate, the Consumer Guarantees Act (because it extends warranty claims from out to two or three years), and retailers here demanding higher margins (because of our small market).

Interestingly, PC prices here are now not too much out of kilter with the United States. We don't get the ultra cheap sub-$1000 variety, but bang for buck, PCs here are on a par with the United States. Why? Because the local PC assembly market is very competitive and keeps the big brands honest.

So why are we paying 40 to 60 per cent more for DVD recorders, digital camcorders and digital cameras? I asked a number of the brand manufacturers to explain. Most were reluctant to talk, but Philips' Scott Wright and Canon's Mike Armstrong provided some answers.

Armstrong said "economies of scale" and a "different pricing structure" from wholesaler to retailer were involved. He said it was important to ensure consumers were comparing like with like and pointed out that many digital camera and camcorder products did not have international warranties.

Wright talked a lot about "supply chain dynamics" and "product lifecycle". He says that flat panel screens for example - which I found were 20 to 25 per cent more expensive here - have never gained good market penetration in New Zealand. But isn't that because they've been so expensive for so long?

Well, yes says Wright, but flat panels have also been caught up in a worldwide supply shortage that's only just working itself out.

On DVD recorders the argument is slightly different. Wright says prices will fall dramatically in the next six to nine months, in much the same way as they just have with DVD players.

In other words, classic "life" stages of a product theory. When it first hits the market, a product is sold at a premium to the "early adopters" - schmucks with money to burn who must have the latest and greatest now.

Later, as the product reaches "critical mass", the price comes down. But in New Zealand critical mass seems to be a long time coming, partly, as Wright points out, because we are a very small market - "a decimal point in the Philips world".

But also, I venture, because we don't have that many schmucks.

If America has reached critical mass on these devices, you have to ask why can't the rest of the world benefit? Doesn't the American market show that the product is well and truly into the strong selling phase of its life, and doesn't it mean that the manufacturers are now making a profit?

Not really, says Wright. Because of the way Philips - and most other brands - divide the world, New Zealand gets its products out of Asia.

So why then are prices so much better in Hong Kong and Singapore? Well, says Wright, those are very competitive markets and they're also much bigger than New Zealand.

If this all sounds like a chicken and egg plus catch 22 argument, that's because it is. It's also a bit too cosy for the multinationals who on the one hand talk about the benefits of globalisation, but then divide the world into regions to milk extra profits.

American early adopter schmucks are never faced with having to pay the level of premium on new products we have to endure. And their early adopter phase passes in a flash whereas ours seems to drag on for nine months and more.

Why? Because their markets are very competitive. Which seems to me a great argument for flooding our market with Korean and Taiwanese brands. And for more parallel importing - to keep the big brands honest.

* Tell me about your overseas computer and consumer electronics shopping savings - Email Chris Barton