MAP Pricing ... the death of capitalism

[R.Elder]

MAP pricing : Manufacturer advertised pricing





I own a business and a number of my wholesalers make me sign agreements that I won’t undercut MAP pricing on their products. This is why Apple products cost the same whether you buy it from Walmart, Best Buy or Target. If one has a sale they all have a sale.

I came into a little extra cash and have been shopping for some speakers. It didn’t matter where I looked for the products that I wanted as the sellers have agreed to let the manufacturer set the price. This allows smaller companies to be competitive but it also allows the manufacturer to set the profit margin.

What do you think of MAP pricing? Is it capitalism or something else?

 

[BoredSysAdmin]

MAP is not news to me. It's still a Capitalism, but certainly not an entirely free market.
What actually killed Capitalism is Citizens United v. Federal Election Commission, 2010 (5-4 decision) supreme court decision. We get to live now something much closer to a Plutocracy

 

[KEW]

It is a strange thing.
I recently bought a JBL Soundgear. That is a horseshoe shaped device you put over your neck with speakers that point up towards your ears.
MSRP for the regular one is $200.
Bose also makes one for $300 MSRP.
In my research, the Bose model is reputed to deliver lower bass (out of what I would guess are 1-3/4" speakers),but the JBL is reputed to have clearer midrange. I would be willing to pay a bit more for the bass, but not $100 considering the midrange woud suffer.
However, when I started looking at pricing, I found World Wide Stereo sells the JBL SoundGear, NIB, for $125 via eBay and the Bose is $300! No contest since the Bose is restricted to full MSRP! I'm not sure whether WWS is an authorized dealer for JBL, but I am not too worried about what is essentailly a small wireless speaker failing in the first year.
So if you are the little audio shop on the corner, you are between a rock and a hard place. On the one hand, the price controls prevent BestBuy or Crutchfield from undercutting your price on the exact same item (which is beneficial). On the other hand, you generally end up selling a product that is overpriced compared to similar products from another manufacturer which does not require price controls Which is damaging).
Bose manages to maintain a false (certainly false regarding their home speakers) competitive edge because of their devotion to marketing.
Interestingly, I think JBL may have MAP because it seems like most of the mainstream distributors always have the exact same price on JBL items and the sales are also synchronized.
I think a lot of these companies have different levels of enforcement policies, for example if a dealer offers you a product at MSRP if NIB, but then gives you the option to buy their demonstration unit at a 25% discount, does that violate the agreement? What if that dealer sells more "demo" units than new units?
I think some companies might be perfectly fine with this while others might give you a "cease and desist" warning!

 

[R.Elder]

I’ll see your Citizens United and ...
Raise you Wickard V. Filburn...

Do you think a form of governance exists that doesn’t result in a aristocracy of some type?That’s aristocracy as in “rule of the best”. I believe in free speech and chief amongst them is political speech. I figure humans naturally seek to establish hierarchies. Since they develop in pretty much every context in which people associate. Since that is the case then hoping for some egalitarian utopia is unatural and unattainable.

 

[R.Elder]

I think it hurts us. It makes us pay full price regardless of the dealers buying power and profit desires. Sam Walton gave us Walmart’s because MAP pricing didn’t exist. He could use his theory of business, lower profits but greater sales along with his ever increasing buying power to build a retail giant.

I think without MAP pricing we have a couple big websites or Amazon and Crutchfield use their buying power to bring us better deals. This way we pay more. The big buyers just get to make more than the little shops. That’s their incentive.

 

[BoredSysAdmin]

I’ll see your Citizens United and ...
Raise you Wickard V. Filburn...

Do you think a form of governance exists that doesn’t result in a aristocracy of some type?That’s aristocracy as in “rule of the best”. I believe in free speech and chief amongst them is political speech. I figure humans naturally seek to establish hierarchies. ...

Your response is jumping all over and not very well focused.
Aristocracy isn't ruled of the best at all at. Yes, I've noticed double quotes, but it still worth explaining. It's a rule of a small privileged ruling class. The term derives from the Greek aristokratia, meaning "rule of the best-born".
I think we are witnessing era where some high net worth individuals were either elected to power directly or indirectly are far from being "best", certainly they don't a general public interest in a heart (they generally pretend that they do)
Yes, I am a solid believer in protected free speech. This is the basic foundation of democracy. Not much else to add.
To some degree, I agree that the humans what naturally seek to establish hierarchies, since they (we are) rather be lazy and ignorant and let someone else make hard choices.

Since that is the case then hoping for some egalitarian utopia is unatural and unattainable.

Now you're really jumping off the deep end here. We aren't talking about communism here. Relax dude. Having fair and balanced control shared by government independent of the control of %0.01 of the population, having simpler taxes system and unified health system are not cursed words and neither this is egalitarian utopia. These should be basic human rights.

 

[R.Elder]

Your response is jumping all over and not very well focused.
Aristocracy isn't ruled of the best at all at. Yes, I've noticed double quotes, but it still worth explaining. It's a rule of a small privileged ruling class. The term derives from the Greek aristokratia, meaning "rule of the best-born".
I think we are witnessing era where some high net worth individuals were either elected to power directly or indirectly are far from being "best", certainly they don't a general public interest in a heart (they generally pretend that they do)
Yes, I am a solid believer in protected free speech. This is the basic foundation of democracy. Not much else to add.
To some degree, I agree that the humans what naturally seek to establish hierarchies, since they (we are) rather be lazy and ignorant and let someone else make hard choices.

Now you're really jumping off the deep end here. We aren't talking about communism here. Relax dude. Having fair and balanced control shared by government independent of the control of %0.01 of the population, having simpler taxes system and unified health system are not cursed words and neither this is egalitarian utopia. These should be basic human rights.

If I’m being honest it was meant to be sort of a joke. I mean you responded talking about citizens united in response to a rant about MAP pricing. If you want to have us a little political debate fine. We can do that.

 

[R.Elder]

MAP is not news to me. It's still a Capitalism, but certainly not an entirely free market.
What actually killed Capitalism is Citizens United v. Federal Election Commission, 2010 (5-4 decision) supreme court decision. We get to live now something much closer to a Plutocracy

Sounds like some talking points. So let’s start with the comment about the “free market”. You’re going to need to start by defining this term since obviously markets are impacted by all sorts of forces. Chief amongst them is regulatory which is the result of Wickard V Filburn which said that basically everything is subject to federal regulatory authority with its expansive interpretation of interstate commerce clause.

 

[R.Elder]

I believe all societies evolve hierarchies which make them oligarchic. Direct democracies even have influential people. If we can agree on this point then we can move forward. So what do you think should dictate who has more influence politically? Should it be lineage (feudalism) or wealth? Since you agree that egalitarianism is a ideal that can’t be attained.

*edit: I don’t mean to create a false dichotomy if you have some other way to determine who is more influential in a society other than the two most common I listed.

 

[Swerd]

What do you think of MAP pricing? Is it capitalism or something else?

MAP pricing is nothing new, just a new name for an old idea. Decades ago, "Fair Trade" laws were enacted for the same purpose as MAP. No doubt, the idea of restricting competition among retailers existed much earlier under different names.

MAP pricing is not capitalism, so much as capitalism run amok.

Over the years, the balance between restricted free trade (such as MAP or Fair Trade) and unrestricted free trade has gone back and forth. It depends on who was elected to power in Washington. You'd be surprised at the differences between who supports or opposes the ideas of free trade and capitalism, and who enacts policies to support or restrict those ideas.

 

[slipperybidness]

Don't miss the point, these items CAN be SOLD for less than MAP, but they CAN'T be ADVERTISED at less than MAP.

For example, many websites have the "see price in cart" option, precisely to get around the MAP.

 

[R.Elder]

Don't miss the point, these items CAN be SOLD for less than MAP, but they CAN'T be ADVERTISED at less than MAP.

For example, many websites have the "see price in cart" option, precisely to get around the MAP.

That’s true for some MAP agreements and originally all of them but not so much now. I asked my wholesaler if I could let my clients have deals and he said yes but to tell my clients not to post publicly about it. If they heard I was selling less than the MAP I’d get in trouble. He didn’t specify what he meant but probably just restricted from their products.

 

[R.Elder]

Scroll down and read the policy here:
https://ecotechmarine.com/new-customer

“UNILATERAL MINIMUM RETAIL PRICE (MRP) POLICY”

 

[KEW]

That’s true for some MAP agreements and originally all of them but not so much now. I asked my wholesaler if I could let my clients have deals and he said yes but to tell my clients not to post publicly about it. If they heard I was selling less than the MAP I’d get in trouble. He didn’t specify what he meant but probably just restricted from their products.

I have seen plenty of variations on this. Tormek sharpening systems also involve MAP and I have seen where if you buy a Tormek system at full MSRP (of course) a distributor will give you a $150 item. IOW, bundling with a non-MAP item is a thing. I think it is a good strategy if you have a "giveaway" item that is pretty well sought after. Gift cards are a bit too obvious as a monetary discount.
Generally, I'd expect them to send you a caution/reminder about the terms of the contract, then if you did it again, they would pull their product. However, I know different companies have differing attitudes about how aggressively they want to enforce their policy.

 

[R.Elder]

I have seen plenty of variations on this. Tormek sharpening systems also involve MAP and I have seen where if you buy a Tormek system at full MSRP (of course) a distributor will give you a $150 item. IOW, bundling with a non-MAP item is a thing. I think it is a good strategy if you have a "giveaway" item that is pretty well sought after. Gift cards are a bit too obvious as a monetary discount.
Generally, I'd expect them to send you a caution/reminder about the terms of the contract, then if you did it again, they would pull their product. However, I know different companies have differing attitudes about how aggressively they want to enforce their policy.

Yeah I think most manufacturers don’t care. They will only care if another retailer or retailers come complaining. It’s important to remember the wholesale price never changes regardless of how much retailers sale for. So the manufacturer makes the same amount even if I give a client a good deal it’s me that makes less.

 

[highfigh]

It is a strange thing.
I recently bought a JBL Soundgear. That is a horseshoe shaped device you put over your neck with speakers that point up towards your ears.
MSRP for the regular one is $200.
Bose also makes one for $300 MSRP.
In my research, the Bose model is reputed to deliver lower bass (out of what I would guess are 1-3/4" speakers),but the JBL is reputed to have clearer midrange. I would be willing to pay a bit more for the bass, but not $100 considering the midrange woud suffer.
However, when I started looking at pricing, I found World Wide Stereo sells the JBL SoundGear, NIB, for $125 via eBay and the Bose is $300! No contest since the Bose is restricted to full MSRP! I'm not sure whether WWS is an authorized dealer for JBL, but I am not too worried about what is essentailly a small wireless speaker failing in the first year.
So if you are the little audio shop on the corner, you are between a rock and a hard place. On the one hand, the price controls prevent BestBuy or Crutchfield from undercutting your price on the exact same item (which is beneficial). On the other hand, you generally end up selling a product that is overpriced compared to similar products from another manufacturer which does not require price controls Which is damaging).
Bose manages to maintain a false (certainly false regarding their home speakers) competitive edge because of their devotion to marketing.
Interestingly, I think JBL may have MAP because it seems like most of the mainstream distributors always have the exact same price on JBL items and the sales are also synchronized.
I think a lot of these companies have different levels of enforcement policies, for example if a dealer offers you a product at MSRP if NIB, but then gives you the option to buy their demonstration unit at a 25% discount, does that violate the agreement? What if that dealer sells more "demo" units than new units?
I think some companies might be perfectly fine with this while others might give you a "cease and desist" warning!

Manufacturers limit the demo units, usually to one per year- it'snot possible to sell more demo units than NIB.

One issue that isn't well-known is that dealers who buy from distributors make far less than if they were buying directly from the manufacturer but the initial buy-in and annual requirements are enough to choke a horse, so it's only dealers with a pile of money or a wish to build up a large amount of debt who will buy this way. If that have some way of guaranteeing their annual sales, this is great- they sell something, go into the back room to grab it and hand it off to the customer. This implies that they have a store but online sales are different- that requires a different dealer agreement and if I want to lose a lone, I make it known that I'm selling them online.

FYI- manufacturers risk pissing off their real dealers if they allow online sales by people who aren't signed up as resellers for that brand and warranties aren't honored when this is revealed. They can also cut off a reseller who doesn't adhere to MAP or UAP, which is what Pioneer did to Amazon.

I wanted to sell a brand of marine audio equipment and when I found out about their newest top of the line model at the time, I looked for it online. Sure enough, I found several "dealers" who priced it around $25 more than dealer cost and THEY HADN'T EVEN REACHED THE US! That immediately stank of bait & switch and I called the rep, who said it's hard to govern, blah, blah, blah so I told him about Pioneer cutting off Amazon. He was surprised and forwarded the info to the higher-ups, so it could be dealt with. That company has since been sold to a larger company, which means there's more required in ordered to become a dealer and it also means they're better able to watch online pricing.

 

[R.Elder]

Manufacturers limit the demo units, usually to one per year- it'snot possible to sell more demo units than NIB.

One issue that isn't well-known is that dealers who buy from distributors make far less than if they were buying directly from the manufacturer but the initial buy-in and annual requirements are enough to choke a horse, so it's only dealers with a pile of money or a wish to build up a large amount of debt who will buy this way. If that have some way of guaranteeing their annual sales, this is great- they sell something, go into the back room to grab it and hand it off to the customer. This implies that they have a store but online sales are different- that requires a different dealer agreement and if I want to lose a lone, I make it known that I'm selling them online.

FYI- manufacturers risk pissing off their real dealers if they allow online sales by people who aren't signed up as resellers for that brand and warranties aren't honored when this is revealed. They can also cut off a reseller who doesn't adhere to MAP or UAP, which is what Pioneer did to Amazon.

I wanted to sell a brand of marine audio equipment and when I found out about their newest top of the line model at the time, I looked for it online. Sure enough, I found several "dealers" who priced it around $25 more than dealer cost and THEY HADN'T EVEN REACHED THE US! That immediately stank of bait & switch and I called the rep, who said it's hard to govern, blah, blah, blah so I told him about Pioneer cutting off Amazon. He was surprised and forwarded the info to the higher-ups, so it could be dealt with. That company has since been sold to a larger company, which means there's more required in ordered to become a dealer and it also means they're better able to watch online pricing.

Yeah Distributor Buy Ins are very high most of the time. One of my wholesalers is a distributor and online retailer. Which means they make a hell of a lot more when they sale the same item for the same price as I do. The link to eco tech is a manufacturer of products that I sale. They unilaterally set the minimum price.

 

[highfigh]

MAP pricing is nothing new, just a new name for an old idea. Decades ago, "Fair Trade" laws were enacted for the same purpose as MAP. No doubt, the idea of restricting competition among retailers existed much earlier under different names.

MAP pricing is not capitalism, so much as capitalism run amok.

Over the years, the balance between restricted free trade (such as MAP or Fair Trade) and unrestricted free trade has gone back and forth. It depends on who was elected to power in Washington. You'd be surprised at the differences between who supports or opposes the ideas of free trade and capitalism, and who enacts policies to support or restrict those ideas.

You (or others) might see MAP as corporate socialism. but it allows people to compete when they're 'the little guy'. A lot of the little guys do business more ethically than the big guys/medium guys and I'm one of them. If I want to sell Sonos, I have to buy from distributors and make very little unless I decide to buy every item in their line PLUS four other pieces, state that I do a certain amount in annual sales and that I'll buy a certain amount every year. I fail to see why I need to state the annual sales- it means nothing WRT how well I'll promote their product and if I have to buy every item they sell, it means I'll be stuck with items I don't want or need, but it ties up my money that could be used to buy something else. While it's true that I'd make more profit, I don't like being told what to buy when I don't like some products. I would use several of them, but not all.

It's extremely frustrating to be told that I have to buy something I don't want or an amount that would kill my ability to do business if I don't want to finance the equipment. Financing costs money, requires more space and sometimes, a rep will dump things on a dealer just because the company wants to get rid of them. That really screws the unsuspecting dealer.

I understand how it looks from the POV of a consumer- nobody wants to feel that they spent too much, but the reality- if someone wants to pay dealer cost, they need to go into that business because they're not a dealer for that brand.

 

[highfigh]

Yeah Distributor Buy Ins are very high most of the time. One of my wholesalers is a distributor and online retailer. Which means they make a hell of a lot more when they sale the same item for the same price as I do. The link to eco tech is a manufacturer of products that I sale. They unilaterally set the minimum price.

Direct buy-ins are expensive- most distributors just need a signed dealer agreement although Sonos and Savant were tied together through a company called HAUS a few years ago and they required dealers watching some BS training videos and taking some tests- then, HAUS folded, so all of that time was completely wasted and now, you can't shake a dead cat without hitting a distributor who sells Sonos. I went direct with a few brands because they want smaller dealers to sell their products because we can often be a lot more enthusiastic.

Distributors stock the stuff- I get that it costs money but if I can't make anything and then hear "But you get the installation dollars" when the stuff basically sets itself up, it's just clicks and beeps.

 

[R.Elder]

Direct buy-ins are expensive- most distributors just need a signed dealer agreement although Sonos and Savant were tied together through a company called HAUS a few years ago and they required dealers watching some BS training videos and taking some tests- then, HAUS folded, so all of that time was completely wasted and now, you can't shake a dead cat without hitting a distributor who sells Sonos. I went direct with a few brands because they want smaller dealers to sell their products because we can often be a lot more enthusiastic.

Distributors stock the stuff- I get that it costs money but if I can't make anything and then hear "But you get the installation dollars" when the stuff basically sets itself up, it's just clicks and beeps.

So I get how it allows small business to compete as like you I benefit from MAP pricing. I think it does hurt consumers because we have to wait either way. If retailers are stocking these products that would change things but for the most part you have to wait for them to order it and you could have gotten it from the internet just as fast. If you offer the convenience of having the product on hand often people like myself will buy it even if it is more expensive. Right now though we are as audio enthusiast basically paying a premium so the few boutiques out there can offer us listening spaces. That’s how it seems at least to me.