Shop Talk by Dennis Bergendorf – June 2009
The Ups and Downs of Minimum Advertised Price
A new acronym rears its scary head in the pro shop biz.
IT’S JUST A SMALL ACRONYM, but it may become a very big word over the next few years in discussions over whether pro shops live or die. The acronym is MAP, and it stands for Minimum Advertised Price, or the sale price a manufacturer declares when releasing new products, and then enforces.
For a variety of reasons, makers of name-brand consumer goods (such as electronics, sporting goods, clothing, toys, even automobiles) want to maintain “price integrity.” The most essential reason is that consumers view price as an indicator of quality. Another big reason: Many manufacturers value their top retailers, and want to protect their position in the distribution chain. But for decades, manufacturers had little say in pricing because of anti-trust laws. Then, about two years ago, the Supreme Court ruled 5-4 that MAP agreements may be, under certain circumstances, legal.
So now, a manufacturer may warn a discounter to raise the price, or face losing that item or advertising “co-op” dollars. Maptrackers is one of several services that contracts with manufacturers to monitor dozens of retailers and Web sites, trying to spot violations. “It’s then up to the client to tell anybody that is undercutting to stop it, or threaten to cut them off,” explains Mike Mitchell, one of the firm’s three partners.
The rub is that the process must be initiated by the manufacturer and, although Mitchell welcomes questions from retailers (“to help them understand the landscape”), he says Maptrackers can only report infractions. It can’t enforce a thing. “If the manufacturer doesn’t want to enforce the policy, there’s not a lot we can do about it,” says George McMahon, one of Mitchell’s partners.
So far, much of the MAP activity has been in consumer products, where literally millions of units may be sold each year. That’s because such activity involves “big box” stores like Costco, Wal-Mart and Best Buy (as well as a slew of on-line discounters).
Whether bowling’s much smaller sales numbers would make it a candidate for MAP action is a big question mark. But many pro shops continue to say internet pricing is their biggest issue, and Del Warren, President of the International Bowling Pro Shop & Instructors Association, says MAP is something the organization is looking into. Warren says the subject was discussed by IBPSIA’s marketing task force in March, and that he expected it to be a major topic at the group’s Advisory Board meeting in April.
However, Warren believes the bowling equipment distribution chain is different enough that a MAP policy may not work. He offers golf equipment as an example. “Golf does a good job, but they sell to retailers, not distributors,” he says. The primary difference is that manufacturers can literally order [a retailer] to sell at a particular price, or risk losing that brand. “If TaylorMade comes out with a driver, it’s $400 in every retail outlet and every Web site.” (This is quickly confirmed by looking up TailorMade’s R-9 driver on the various golf equipment sites.) Only after a club has been on the market a defined period of time may it be deeply discounted, and even then the price is controlled. “It’s not the internet,” Warren claims. “It’s the unfair pricing that the internet sites are buying product for. And it’s how some people have their businesses set up.”
On ezinearticles.com, John Mehrmann (an expert on business ethical issues) addressed the issue when he wrote regarding consumer electronics: “If there is no competitive price advantage between online options and brick-and-mortar neighborhood retail stores, then consumers may be swayed by convenience, installation options, service or speed of delivery. Service and solutions could begin to take precedence over price and performance.”
Does any of that sound familiar?*Posted with permission from Luby Publishing Inc.