updated 7/7/2005 6:51:56 PM ET 2005-07-07T22:51:56

While consumers may be able to buy most of the current car models from the top three U.S. automakers at employee discount rates, they shouldn’t expect the same incentives for power boats, furniture or other big-ticket items.

Industry analysts say the companies who sell these items already offer deep discounts and gimmicks like zero percent financing, and don’t believe they need to mimic the auto industry’s tactics.

The auto incentives aren’t unique. In recent years, department stores and apparel chains have offered employee discount rates at various times of the year in what are called “friends and family” programs. But these offers are made to select customers, not the general public.

Scott B. Krugman, a spokesman for the Washington-based National Retail Federation, noted that “retailers are already aggressive when it comes to discounting.”

What’s different about Detroit’s discounting is that it grows out of automakers’ need to pump up sluggish sales.

Richard Hastings, a retail analyst for the credit-ratings firm Bernard Sands, said, “the auto industry has their back against the wall. Retailers are looking at risk and reward. They would be more hesitant.”

The domestic Big Three, which have been hurt by slowing sport utility vehicle sales and aging product lines, have been luring shoppers with various promotions.

General Motors Corp. started the employee discount promotion last month, and Ford Motor Co. and DaimlerChrysler AG’s Chrysler Group started similar pricing schemes when they saw the success GM was having. GM’s sales soared 41 percent last month to their highest total in almost 19 years due to the program, which allowed customers to buy 2005 vehicles for thousands of dollars less.

For example, a Buick LaCrosse CX, which normally would sell for $23,495, costs just $19,944 under the program.

Industry differences
Bill Cody, managing director of the Baker Retailing Initiative at the University of Pennsylvania’s Wharton School, noted that the auto industry “doesn’t have a great parallel with the retailing industry.”

For one, the relationship between the auto manufacturer and the car dealer is different from that of a typical retailer and supplier. Automakers dictate what should be sold at car dealers’ lots, while in other retail settings, it’s the merchants who have the power over suppliers, Cody said.

There actually are concerns in the auto industry that such discount programs could hurt automakers’ relationship with dealers, who may have to sacrifice profit margins to support the program.

Another factor is that automakers’ models come out once a year, compared with such big-ticket items as furniture, refrigerators and TV sets, whose models are shipped various times in a year. That schedule puts less pressure on retailers to get rid of the inventory at a particular time.

Furthermore, in some categories like furniture and boats, older models are not viewed as obsolete as last year’s car model.

Overall, Jim Neal, a strategist at Kurt Salmon Associates, a retail consulting company, said “retailers are better served by communicating their value” by offering every day low prices or tying sales to the calendar.

Paul Capelli, a spokesman at Staples Inc., said the office supply chain doesn’t plan to take discount cues from the automakers because it offers a guaranteed low price year-round. Staples, like many retailers, does have special deals on items that need to be cleared out, he said, but “there is less of a need to drop all the prices to employee discounts.”

Even the boating industry remains unfazed with the auto industry’s new tactics. Tom Dammrich, president of the National Marine Manufacturers Association, noted that the industry sells about 350,000 power boats per year, and therefore does not have the economies of scale to sustain such discounts. And with inventories matching demand for power boats, there isn’t a need for big incentives to get rid of old models to make room for the new ones.

“Right now, inventory is not a big issue,” Dammrich said.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Discussion comments


Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 3.79%
$30K home equity loan FICO 4.99%
$75K home equity loan FICO 4.69%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.83%
Cash Back Cards 17.80%
Rewards Cards 17.18%
Source: Bankrate.com