Received a blunt letter from a supplier

Out of the blue, we received a rather rude letter from one of our suppliers

[derekwong28]

Without any warning, we received an e-mail from one of our suppliers today.

It stated that our listed prices were not acceptable to them. It gave us 24 hour to raise the prices above those of their online shop or else they will terminate our order.

It further accused us of playing games and if we did not comply, they will stop all our outstanding orers and credit the payment to our bank account without hesitation.

The point is that they never told us that there was any price control and accusing us of playing games was plainly unreasonable. Our problem is the their website offers free shipping on all their products whereas ours do not. When shipping costs are taken into consideration, the actual price is equal or more than theirs.

From the tone of the letter, I think they would really like to terminate their relationship with us. We have to work with them at the moment since they still owe us a few consignments. Luckily, we are dependent on any single supplier.

[edited by: lorax at 2:48 pm (utc) on Dec. 12, 2005]
[edit reason] removed email excerpt [/edit]

[RailMan]

However, telling you that if you discount, they will stop selling to you is completely legal.

that would be their loss
whatever the retail price is, the wholesale / trade price would still be the same, they would make the same profit per item, but choosing to cut out a retailer means they'll sell less
it would be just plain stupid if they were to stop selling to you .........

[lgn1]

And whoever said MAP based price fixing was legal, read the following article.

[usatoday.com ]

Price fixing, however disguised, is being tracked down and penalized.

Price fixing damages the free market economy and forces consumers to pay more for goods than they should, and should be punished by the full extent of the law.

What scares me, is the number of people who actually said price fixing was legal or ethical or defends it.

[jsinger]

Price fixing was actually the law in California years ago. See "fair trade laws"

[CernyM]

What is the legality of channel agreements?

Can a manufacturer dictate how you may sell your goods? Can you, say, be prohibited from selling their goods via the web?

[ispy]

Manufacturers who sell direct to the public are sketchy anyway. Be careful to not inadvertently direct your website traffic to the manufacturers site. Often they will embed phone numbers or other contact info into material or PDF documents etc. or require a logo or branding as a requirement for your online sales. The customers will always buy directly from the source if given a choice.

[wingslevel]

we just had this happen to us last week with a vendor. they said that our prices were too low and that they couldn't process the orders that we had in their system unless we raised our prices to their "minimum advertised price". this particular manufacturer does not sell directly, but this is a clear attempt to patronize their traditional bricks and mortar distributors.

we were never informed of a "minimum advertised price" program. i did some research and found that some of our web brethren appear to be circumventing the requirement by offering free shipping. this is tough for us because we are not a free shipping site and it would be difficult for us to offer just a few items with free shipping.

did some research, and it appears that "minimum advertised price" programs are riding right along the edge of US fair trade laws - here is the most thoughtful (though not conclusive) article that i read on the subject:

<snip>

my guess is that we will be seeing more and more of this issue as we start to cut into traditional distribution channels and those folks whine to the manufacturers - fasten your seat belts....

[edited by: lorax at 1:22 am (utc) on Jan. 11, 2006]
[edit reason] removed URL [/edit]

[jecasc]

It may seem strange but in my niche you will actually sell less when selling branded goods to discount prices.

There are several shops out there who are more than 10-15 percent cheaper but sell less than I do. I know from several manufacturers that I am by far their biggest customer.

I have spoken to several of my customers who choose to buy at my shop despite knowing about the cheaper alternatives. However they were concerned that these sites were selling inferior or old goods. Or how else could they be so much cheaper?

[Essex_boy]

ive come across this kind of thing in teh bricks and mortar world, not being able to sell something then putting the price up 20% it sells.

People have an expectation that price = quality which as you know isnt so.

[otech]

Welcome to my world.

Here in Australia, we have to put up with this rubbish all the time even on big brands - often because those brands themselves dont set up shop here but licence distribution out to a smaller contractor.

In one case I had a supplier watching my website and threating to chop supply whenever I dropped my price enough for another retailer to ring and complain - and YES PRICE FIXING IS TOTALLY ILLEGAL HERE TOO.

Anyway, I played ball for a year, and have since become his biggest dealer Australia-wide - I can set my price at whatever I want because I now sell so much - but surprisingly I have found the shoe is on the other foot!

I now wish he had the power to stop other online stores chopping out my margins!

My advice, play ball and build a relationship - a supplier that defends his dealers margins is worth much more than one that lets everyone cut each others throats (example? you just CANT make money selling computers or general IT equipment on the net - here in aus they just upload the major suppliers DB into their shop, and put 5% on the cost - what a waste of time).

thats my 2 cents from down under! (not that we have 2c coins any more...)