Dealing with manufacturers' Minimum Advertised Price (MAP) policies?

the rules aren't always clear

[dickbaker]

I had a manufacturer contact me last month about their newly-adopted minimum advertised price (MAP) policy. My prices were too low.

I saw other retailers of their product use a "mouse over HERE to see our unadvertised price" method. I did that on my site, and the sales manager said it was fine.

He then emailed today and said they decided that mouse-overs were not fine, and said I have to do something more, such as require customers to email for the price. That seems like a hassle that will cut down sales. Raising prices on this product will also reduce sales, as pricing is very cutthroat.

Has anyone here come up with an elegant solution to this problem?

I'd love to tell the company to shove it, but I sell a lot of their products.

[Philosopher]

I see lot's of sites use the "Add the product to your shopping cart to see the price" type of systems.

I think it depends on the manufacturer and what they will allow, but a lot of shops in my market use the above technique.

[dickbaker]

I can envision a lot of customers just walking away from that, Philosopher. It's hard enough to get them to the cart when they know the price.

[buckworks]

Just curious: are you selling products that consumers are likely to seek out and examine in brick-and-mortar stores before they come to your site to order?

If yes, the manufacturer may have issues to deal with that are a lot bigger than how easy or hard it is for you to close sales.

[akmac]

I'm guessing one of their other vendors in competition with you is complaining about your prices.

The "see price in cart" option is about the best you can do-(assuming the supplier allows it) most customers will add to cart to see the price, as it's a signal you sell for below MAP.

I follow MAP and let the price cutters cannibalize each other.

[bwnbwn]

akmac

I follow MAP and let the price cutters cannibalize each other.

I agree 200%.

I have been asked and asked to cut my prices from customers that say I can get them here for x amount. I have always said and will continue to say. That's fine but have your read their reviews. I have an excellent customer service that cost to maintain go ahead and order from the cheap sites and let me know after you finally get your product, or you call and get a machine, or you email and don't get a response in a timely manner.

Been in this business 10 years now and I am still kicking where most that started when I did and tried to be the cheapest on the net are not around.

[KenB]

I see more and more sites that handle the MAP by requiring the product to be added to the shopping cart. Even Amazon.com does this. I think they also have a little note explaining why this is required.

I think customers will understand if it is explained in a easy to understand why they have to add to the shopping cart.

Requiring them to email is a joke. Nobody is going to give up their email address just to get a price before ordering.

[dickbaker]

Believe me, I'd love to sell at MAP. However, I'd be one of the more expensive retailers for this line of products.

One competitor has prices so low that they're close to or sometimes even less than what I pay my distributor. And my distributor's prices are the lowest of any distributor I've signed on with. The only thing I can figure is that my competitor is himself a distributor, and is selling the products retail for wholesale prices.

My distributor offered me an interesting way out of the problem: sign up with them under a different business name, and have all purchases of this manufacturer's product done through that business name. The manufacturer distributes a "do not sell to" list. If my 2nd business name isn't on the list, then I'm good to go.

The only problem with that idea is that I wouldn't be able to buy from any other distributors should the first one be out of stock.

bwnbwn, I understand doing business according to principles. When I had my photo studio, I kept my day rate at what most considered to be fair. I got lowballed constantly for decades.

The lowballers are now retired, and I'm still working. They made money, and I was forced to close my doors.

[dickbaker]

Buckworks, I forgot to reply to your question. Yes, this product is sold in brick and mortar stores, and those stores typically have to sell for considerably more than online stores.

However, just about any online store that handles this product line will sell more than the brick and mortar stores. It's the nature of online sales vs. b&m sales.

I'm trying to think of a downside to the offer my distributor made to me to set up a second account. They don't give out their customer names to anyone, so the manufacturer couldn't find out where I'm getting the product from. If they tried to prevent me from selling their product at all, I would think they could be charged with price fixing. Am I right on that?

Bwnbwn, I also have a good reputation. Five stars on Google Products, and I've worked very hard on customer satisfaction to earn that rating.

I suspect Akmac is right, and it's a competitor who complained. One of my competitors has one of the largest online stores on the 'net, and sells all sorts of things. It wouldn't surprise me to find that they'd complained.

[pageoneresults]

I see lot's of sites use the "Add the product to your shopping cart to see the price" type of systems.

This is what we do and appears to be the current acceptable solution to MAP by all involved.

MAP is a total pain in the arse. It has been responsible for the loss of significant sales. It also forces you into thinking about Free Shipping and all sorts of other offers to negate the MAP. I dislike it and I've asked my one client to just find a replacement product as it isn't worth the efforts required for the little in return.

And then for some reason, you always find one or two who are flat out violating the MAP but the MFG doesn't appear to do anything about it. That's when you begin to wonder and all the conspiracy theories come into play. ;)

What else does MAP do? It pits distributors against one another. I know we've spent a considerable amount of time researching the top 50 results for our particular product line. When the client finds someone violating MAP, he reports it to the manufacturer. Usually within a few days we see action taken. So all the distributors end up snitching on each other in an MAP environment. :(

[ssgumby]

Here is what worked for me. Put the MAP price and then a note "our price too low to show, add to cart for OUR price".

We in general conform to MAP, but we have 1 manufacturer who sets MAP for online WAAAAAAY above MAP for B&M because B&M have screamed .. B&M do not factor in that people pay for shipping which puts us above B&M pricing.

[ssgumby]

pageoneresults, your conspiracy theory is not that far off. We've been threatened that we would lose the product if we dont meet MAP. When I point out Amazon is WAY below MAP nothing is said. One product in particular I even was threatened by a lawyer saying we were violating copyright law because we use their product image and told us we were illegally selling their product. When I pointed out to this attorney that we received their product images from them with a consent to use them and we were listed on their site as an authorize retailer this attorney then said we would be removed due to MAP violations. When I pointed out Amazon was till violating they informed me that Amazon has a negotiated contract with them. How is that legal to tell small companies that we have to sell for #*$! but amazon is fine to sell for ZZZ? Anyway, im done with that product and am much happier now!

[dickbaker]

We've been threatened that we would lose the product if we dont meet MAP.

Every distributor that sells this product line gets a "do not sell to" list of retailers who've been banned by the manufacturer.

The company is just a hair from engaging in price fixing, and they know it.

[pageoneresults]

The company is just a hair from engaging in price fixing.

MAP in my mind is the framework for Price Fixing. It also sets the stage for less than acceptable business practices by a few trying to get around the MAP.

[KenB]

I agree the MAP is a framework for price fixing and it is time that the FTC started investigating the practice.

The way the FTC can fix the problem is tell manufacturers that they can't decide who distributors can or can not sell to. At least on on an individual buyer level, it could only be done on a regional level. Manufacturers who didn't like this would have to skip the distributor model all together and then sell directly to retailers.

[dickbaker]

The companies know they're skating near the thin ice.

In this case, one of the terms of the MAP agreement is that the retailer is not to let anyone know about the MAP policy. It's absolutely secret.

The most obvious explanation for not displaying the price would be a statement such as, "our prices are so far below the manufacturer's minimum advertised price policy that we can't show them. Click on the Add to Cart Button to view our price."

That would make the manufacturer look bad, though. Thus the secrecy.

[ssgumby]

Here is the key to MAP ... they cannot and do not make you sign a contract saying you will sell it for $X. However, they do verbally indicate selling below $X can get you removed as a retailer. I know in the last few years there was a court case over this and the manufacture won .. I truly suspect we will see this coming up again in the next 3-5 years, maybe sooner with the current economy and pricing being paramount to each and every shopper.

[ponyboy96]

Here's another take on MAP.

What if you are a new store opening up and you don't have the buy-in power? Then comes all the other guys selling for cheaper than you can buy the product. How can you compete? The other shops price you out of the market "predatory pricing" anyone? Let's not forget that in order to sell brand X's products you agreed not to sell below MAP. Those of us that have to play by the rules are then hurt by those that don't.

If you have the buy-in power then you stand to make more money by selling at MAP. To sweeten the deal you just offer free shipping, better service, etc... It really protects your bottom line.

[dickbaker]

Would you have all of the gazillion manufacturers out there tell WalMart that they must raise prices?

I'm certain that the majority of online stores that sell this product for more than my price are buying it for the same price, or close to it. I'm simply willing to make less profit.

Why? Because I'm the new kid on the block. All things being equal, would you be more likely to buy from a big established online store than a relatively new and unknown store?

Once I get my store better known, I can consider slowly raising prices.

By the way, nobody agrees to not sell for less than MAP. That would indeed be price fixing. They agree to not advertise a price that's lower than MAP.

[MrHard]

I follow MAP and let the price cutters cannibalize each other

This does not work. Everyone's advertising on the same keywords. If someone has it lower they will get the sales.

I'm talking about blatant advertised price undercutting, not sneaky get arounds which is another issue. For get arounds, easy coupons. Discount as much as you like. Coupon field in cart or even direct links to coupons.

Three Options:

1. Keep prices at MAP and give sales to competitor.
2. Complain to manufacturer until they make competitor raise to MAP.
3. Undercut like competitor, and risk being discontinued as a retailer by manufacturer.

We can't risk whole product lines here, so the only option I have found is to complain to the manufacturer and have them force the competitor to raise their prices to MAP. Hopefully remove them as a retailer, but probably won't happen.

If you don't want to abide by the MAP agreement you signed, then you need to sue the manufacturer to have MAP removed, not undercut the rest of us.

[edited by: MrHard at 1:56 am (utc) on Feb 11, 2010]

[KenB]

As a consumer I see this whole issue of MAP as an end run around price fixing. It should be illegal for manufacturers to dictate what minimum price retailers can advertise. The laws in regards to price fixing are intended to protect the consumer, not the retailer.

If two retailers are getting the same wholesale cost and one can make a profit on a smaller margin that is better for the consumer. If you need to charge a higher margin for value added services, then prove to the consumer the extra price is worth it.

Complaining to the manufacturer to basically engage in a price fixing scheme against the cheaper competitor is pitiful. You won't get any sympathy from me.

[buckworks]

You have to know WHY the competitor is cheaper before you decide where your sympathies lie.

I'm familiar with a sector in which the online discounters openly encourage shoppers to go to the local brick-and-mortar dealer to examine the products, get expert consultation to figure out exactly what would suit their needs best, then come back to order online at their no-services price. The discounters offload some significant costs, and the store who actually serves the customer is left with nothing for their troubles.

Manufacturers who have this kind of thing happening in their sectors face the very real problem that brick and mortar stores get fed up with acting as free showrooms for their competitors, and they simply stop carrying those lines.

If shoppers can't examine the product in person before they buy, they are a lot more hesitant to order the product online, so the manufacturer loses from both ends.

And consumers end up with fewer choices, so they're not being well served either.

[KenB]

I hear what you are saying and the problem is that competitors are openly suggesting customers go to stores. This is the practice that should be stopped. Getting all flaky about MAP isn't the solution.

If the goal is to stop these cheap prices from getting indexed by search engines then require the item to be added to a shopping cart before price is displayed such that search engines can't index the prices and leave it at that.

[dickbaker]

If you don't want to abide by the MAP agreement you signed, then you need to sue the manufacturer to have MAP removed, not undercut the rest of us.

I didn't sign an agreement of any kind. My distributor buys from the manufacturer, and I buy from my distributor.

The manufacturer isn't trying to protect anyone but the manufacturer. The brick and mortar stores can charge whatever they like, just as can the online stores. The restriction is on the advertised price.

For those of you who are disparaging those of us who compete on price, I have a question that I'd like you to answer 100% truthfully: have you ever bought anything from a retailer because that retailer's price was lower than the competition? Ever?

On this particular product line I'm able to get the models at prices that are apparently lower than what many of my competitors can buy for, even the big, established stores. Or perhaps, as I said, I'm just willing to make a smaller profit.

On other product lines, though, these same online stores are selling items for close to my cost.

It's business.

[buckworks]

The manufacturer isn't trying to protect anyone but the manufacturer

Yep. It's business.

[dickbaker]

In this case, and other MAP cases, the manufacturer is trying to protect the brand identity. Perception is everything, and if an item is priced "too low," the perception is that the item isn't top shelf.

The manufacturer gets (or should be getting, if they're playing by their own rules) the same price for their products from every distributor. They get their money no matter what. They believe they'll sell less product if the brand identity is tarnished.

Back in the very early 1970's, a hurricane hit New Orleans, and flooded the warehouse of one of the largest producers of blue denim. Millions of yards of fabric were splotchy from the water.

The mill's main customer, the largest producer of blue jeans, had tons of damaged material. Rather than sell it cheap, they created the tie-dyed fashion, and actually charged more for the damaged denim products.

Perception.

[MrHard]

If everyone set their own prices, I think we would all be out of business. There are those out there just wanting to break even or make cents on profit, look at Ebay.

I suspect that if MAP were abolished you would be concerned that you can't make a profit at all. I can't see anyone advocating for the customer getting the lowest possible price when you are working for free.

I suspect what you don't like is that you were called on an issue which gave you an edge on the playing field (lowering MAP when others did not understand they could do so), not that the customer was not receiving the lowest possible price.

If one guys using steroids you don't just sit back and let him hit homers.

[dickbaker]

I don't understand why I'm seemingly not able to make my point clear.

1. MAP doesn't set prices. It sets the price that can be shown in advertising (newspaper ads, on websites, in catalogs, etc). The price the merchant charges can be anything. A merchant could sell a $200 item for $1, and it would not be a violation of MAP.

2. No matter how low you set your price, there will always be someone lower. I set my price at a point where I make a profit I'm comfortable with, yet I'm competitive with most sites. Not all, but most. On some items I make a very good margin; on others, not as much.

3. I'm not upset because I got "called" on something that gave me an "edge." I'm upset because the manufacturer is trying to circumvent price fixing laws.

4. It would seem that some here like MAP because they think it's "fair." There is no "fair," at least not if you define the word as equality of results. I have almost no overhead, therefore I can charge less than someone who has overhead. On the other hand, the person with the brick and mortar store has an advantage in that he can show the customer the products, let the customer play with them, and persuade the customer to buy on the spot. Online merchants are at a disadvantage with that.

Again, I'd like to hear from anyone who has never bought something from a retailer because the price was lower than the competition. So far nobody has spoken up on that one.

[jecasc]

I have heard of many stupid things since I am doing business, but this tops it all. So you are saying the manufacturer can set a minimum price you have to show on your website, but this is not the price you are actually selling for? My first intention was to say this must clearly be illegal but a little search on the internet proofed me wrong. It's illegal in the EU but allowed in the US.

If you are forced to advertise the higher price, and everybody else, too - why not simple charge the higher price?

After all if for example you buy a product for 50$ and the sales price is 100$ a 25% discount means you need to double sales in order to achieve the same profit.

Since the MAP is the lowest price anybody can advertise compete on other things:

- faster delivery
- better service
- better usability of your website

Or offer coupons, free shipping and other bonuses.

[ponyboy96]

The manufacturer gets (or should be getting, if they're playing by their own rules) the same price for their products from every distributor. They get their money no matter what. They believe they'll sell less product if the brand identity is tarnished.

I think the problem here, at least in my industry, is that the manufacturer doesn't sell to everyone at the same price. Plenty of other shops are selling the same products that I do much cheaper than I can even buy them for. This leaves me not even bothering to carry their products as I cannot compete. When a company has MAP, I know I'm at least going to be able to be competitive.