MAP pricing in the hobby

[Titus]

MAP pricing is becoming more prevalent every day in our hobby. Just last week I got an email about an online sale that noted at the bottom "Not valid on products by EcoTech, Neptune Systems, Digital Aquatics, CoralVue, Reef Octopus, Maxspect, Aqua Illumination, Vertex, Korallen Zucht, Speedwave, Sweetwater, Atlantic". I fully expect to see this list grows longer and longer until sales have more products excluded than included.

Does MAP pricing help the LFS? I am not sure. In theory it should, right? Unfortunately most of the LFSs I have price checked at ask more than the MAP price anyway, so it has yet to drive me to buy local.

Does MAP pricing hurt the Manufacturer? I think it could. Sales drive un-planned purchases. Most of us have bought things we didn't plan on because the sale made it it too good to pass up. I know that an AI Hydra is always going to cost me $399. If something else that competes with it goes on sale while I am planning to purchase a Hydra, I could change my plans and AI looses a sale.

Why don't we see "Add to cart to see price" deals? Vendors like Amazon use this all the time in order to sell things like TVs below MAP. The courts have ruled that this is legal, but yet we haven't seen any of the online vendor in the hobby use this to move product.

Thoughts?

 

[steamer51]

I think it hurts the sales for the manufacturer. MP 40's are always the same price but now there are Chinese knockoffs that are much more reasonable to compete with them. I know several people who have purchased the knock offs and are happy with them. Personally I would not trust them since China steals everything and makes it as cheaply as possible. Anything from China is suspect, they just don't believe they have to follow the rules (Good Manufacturing Practices for food production etc.) and generally what they make lacks in quality. I think we don't see "Add to the cart to see price" because if Amazon etc. got caught they would be banned from purchasing from the manufacturer and these are hot items. I also suspect that "Add to the cart" is a marketing gimmick to convince you that your purchase is the bargain of the century.

 

[Reef Pets]

MAP pricing protects the investment of those that purchase wholesale which I think is great for everyone. For example, if I purchase MP40s at X amount and so does every other wholesale buyer why should that wholesale buyer be able to sell for less than me with the same investment? Without MAP pricing it lowers the value of a product. If everyone is able to undercut the next guy on sales it only hurts the manufacturer because why would I try to compete with every low ball seller in the country, instead I just would not purchase the product from the manufacture.

 

[ReefFrenzy]

From a manufacturer's standpoint I can express my opinion in that MAP pricing can serve a purpose to protect both the manufacturer and the store owner. Take our product for example, frozen fish food. When our product first hit the market it was all the rage in NC and within a few months we had 20+ stores in NC and SC selling our food. We soon added about 6 more in the city of Atlanta. The food sold great due to club forum reviews and the quality alone had people buying the food. Price was not an issue, because folks understood what the market price of frozen food is for an 8 ounce pack of food, especially when compared to 3.5 and 6 ounce packs already on the market.

Now most stores need a certain mark up on food to cover delivery, overhead and electrical costs for storing frozen inventory.

However, here is a hypothetical, but plausible scenario where a "price war" hurts both parties and MAP pricing would benefit myself and the local store.

Lets say "XYZ Fish Store" is selling LRS at the average price of $20 per 8 oz pack for a few months. "ABC Fish Store" 5 miles across town sees that his frozen food sales are down and the local club members are all talking about this new "Reef Frenzy" food. He calls me and places an order for 30 packs and posts a "New product introductory sale" in the window and in the online club forum and advertises it for $18 a pack "for a limited time only."

Well after a few weeks ABC Fish keeps the price at $18 so soon, since both stores are in a convenient location to most residents, XYZ Fish Store drops his price to $18 to win some customers back and move out the older inventory. This lowered price eliminates the ability for the LFS to offer any further sales or discounts for club members, since the margin was reduced $2 already. So if local reef club members have a discount card at either store for an additional $10% off any product, now that further hurts the store owner.

Then what happens is that the local community gets used to buying a pack of food for $18 (or less with discount), and the $18 per pack price is also posted on the club and store's websites so potential customers from even outside the area assume that $18 is the standard cost. Soon, if this persists the store is not making an appropriate profit margin compared to how much room in the freezer is taken up, so they discontinue stocking LRS Foods. They go back to filling the freezer with other food products, that take up less space so they can sell more of it. Then I loose, the club members hooked on our food loose, and the store owner looses what were once decent margins and the ability to offer a superior product.

Fortunately for us we have not had any "price wars" because I set the expectations with new stocking stores.

I have visited over 50 local fish stores in the past 9 months and many use advertised sales to draw folks in knowing that while they are there for that sale, they will buy salt, test kits, food, etc at the normal price. I think that if some of the big manufacturers did not have MAP pricing then you would see wild fluctuations in sale prices and certainly online giants would crush the LFS.

That's just my $.02 and you may not agree, and I could be dead wrong, but at least for our product I think the above scenario demonstrates what can happen.

 

[Titus]

Awesome feedback... I thought this thread was DOA and now we are getting the perspective of both a retailer and manufacturer. Thanks guys!

 

[revhtree]

Great thread.

 

[revhtree]

Moved to get better views!

 

[GHill762]

Map pricing is crap.. It takes the retailers power away. If they own the inventory they should be able to sell as high or low as they want. It undermines the invisible hand if capitalism.

 

[RacinRevo0818]

It's my understanding that any retailer can sell any merchandise for whatever price. However I believe most online places act like the price is set in stone to make the most amount of profit and don't really say anything else except there is no sale on particular items.
I would suggest if there's a lfs just talk to them about it. Most will work with you to at least make up for sales tax ( a whole other subject)
It just helps to allow everyone to make the most amount of money and keep stores in business.

The Truth About Minimum Advertised Pricing

Minimum advertised pricing only relates to “advertised†pricing and is perfectly legal under U.S. antitrust statutes. So, essentially, you are limited to advertising MAP-protected products at a certain price, but you can sell these products at any price you choose (often guided by the Manufacturer’s Suggested Retail Price or MSRP).

 

[specvjeff]

Working for an industry retailer, and being a hobbyist I see both sides of it. Many of the products we sell have such small margin that it's not even worth it for us to carry. When I ordered a skimmer for myself, I paid wholesale price as an employee. I saved $40 on a $418 skimmer. If the MAP pricing guarantees more money for the retailer, it's a good for the local fish store. If the retailer is able to make more money they are able to bring in better quality corals, fish, and pay their employees fair wages.

It also creates a level playing field for each and every retailer when selling a product. If their was no set pricing, any store could sell the product at a major discount just to get the customer in the store. While it's great for the customer, it ultimately hurts the other retailers.

MAP pricing in my opinion is a good thing. It creates a fair market place for retailers, and if the MAP pricing includes a decent margin for the store it helps promote small business.

 

[ksigaekdb]

Manufacturers set MAP's for several different reasons, some economic and some marketing/psychological. From an economic standpoint MAP's prevent large, low overhead retailers, from cornering a sales market based on ability to sell in volume. Your LFS needs a much higher margin on every item that is sold than say Amazon does to stay in business as Amazon runs on razor thin margins but massive bulk. If the LFS needs a 25% gross margin on a product, Amazon will only need ~3-8% due to the sheer volume of sales. After a period of time nobody will purchase big ticket items at the LFS because they can get an automatic 15-20% by buying online, and the LFS will no longer carry the item. This then allows the bulk retailer to negotiate a lower purchasing price point with the manufacturer because of their leverage, depressing the margin the manufacturer gets. In this hobby the volume of sales will never grow enough for a manufacturer to be able to shave the initial margin and make up for it widgets moved. From a marketing standpoint, there will always be the perception that more expensive means better quality so by keeping the price point up the value of the brand is maintained.

 

[sparker]

I basically look at MAP pricing as the retail price, so for high ticket items I wait for a deal from a jobber or wait til a store will throw in something for free with the purchase. (Though with most fish related things I tend to look for the budget items anyway, so it is much less of an issue)