MAP Pricing

[DocJD]

Just speaking as a consumer , I don't like any form of price fixing .

If you go searching for a lower , bargain price on e.g. Spyderco , you will normally find basically the same price from all legit sellers . Except for special approved sales , etc.

So, effectively , the manufacturer has determined the selling price at retail . In my book that is price fixing so far as my wallet is concerned .

It definitely has cooled my buying of Spyderco . Part of my knife buying fun is all about getting a great deal .

 

[Reitwagen]

Show of hands: How many of you need another knife? Me neither. I have plenty, so every new knife is a discretionary expenditure. I buy fewer knives than I used to largely due to the increased costs. MAP is one factor that shapes my buying decisions.

 

[Daniel]

To be clear, I actually have a degree in business management and entrepreneurship. The things you are saying here are clearly from an outsider perspective. Being able to tell the time on the face of a clock is not the same as being a clockmaker. There are many delicately balanced moving parts and pieces in any given market. Being a price leader is only one of a great many possible strategies for carving out a niche in the marketplace. The greatest advantage of MAP pricing is to protect the manufacturer. It's what's known as a "pull strategy" that entices dealers to carry their product, broadening their market reach. And there's a lot more to it than that, but I'm afraid I don't have time to type out a full intro course on marketing strategy. Fortunately there are a great many excellent resources for this information free online if you choose to seek them out. If you're really gung-ho about learning about these sorts of things, I suggest buying a textbook to a current college course on the subject. A great way to get textbooks inexpensively is to purchase the international edition of the book. Typically only a few tiny things are changed compared to the domestic market version of the book, and they're a fraction of the cost.

To be clear, I have an MBA and 40 years of experience in managing large discount stores before I retired. My last store did over $80 million in sales. I fully understand the vagaries of the retail market.

Stating that MAP pricing is not price fixing is akin to calling a pyramid scheme “multi-level marketing”!

It is totally against a free market system. Let the market pick the winners and losers.

There are several knife retailers who sell at or above the suggested retail price and are successful. They differentiate themselves by having models that other retailers do not have in stock and by adding levels of service. One even charges exorbitant shipping rates, but is still in operation. It can be done.

The manufacturer setting the prices does not increase competition.

 

[whp]

I mean, at least in most cases factoring the upcharge for the additional grinding work I do on 'em negates the price increase, but I'm just a small account, and when most other retailers can't bundle add-on services the way I do, it has an overall smothering effect on sales. People aren't going to find my Condor offerings if people aren't even looking in the first place, you know? I've definitely not needed to stock so much inventory as I used to, as a result. It's a perfect example of why MAP often gets a bad reputation. When done right, it should simply set a reasonable floor that's still viable for discount volume sellers without making the margins so stupid-small that folks in the mid-range of the pricing spectrum feel overly squeezed by it. Think of MAP as sort of being like the Fed influencing the economy by adjusting interest rates. Do it right and it can stimulate an economy. Do it wrong and it can really put the brakes on it, or even cause a crash.

That s an interesting comparison : MAP knife pricing compared to the Fed s regulation of the economy. ?!!
I think of MAP advertising and pricing as an interference in the free market. It simply props up businesses that are less efficient than their competitors.
To the detriment of the customer.
As for the idea of avoiding Amazon because it damages vendors, that s like avoiding Wal Mart because it demands low prices from the suppliers (in return for volume). Maybe we can support all businesses by all paying higher prices for our goods. Personally, I don t make enough money to shop like that.
I also avoid companies that have MAP pricing policies. It breaks my heart because one of those companies is a former favorite of mine.

 

[whp]

To be clear, I have an MBA and 40 years of experience in managing large discount stores before I retired. My last store did over $80 million in sales. I fully understand the vagaries of the retail market.

Stating that MAP pricing is not price fixing is akin to calling a pyramid scheme “multi-level marketing”!

It is totally against a free market system. Let the market pick the winners and losers.

There are several knife retailers who sell at or above the suggested retail price and are successful. They differentiate themselves by having models that other retailers do not have in stock and by adding levels of service. One even charges exorbitant shipping rates, but is still in operation. It can be done.

The manufacturer setting the prices does not increase competition.

Very well said.
I wish one of the companies would respond to this posting.

 

[HappyDaddy]

Economic and legal principles are but two things that impact most everyone's lives. It is good to remember that because they impact your life doesn't mean you understand them.

 

[sharp_edge]

Most knives nowadays are overpriced (I am thinking about my first car that I bought for a bit over $1000 which ran a few years without problems). Currently I basically buy only sprint runs or dealer exclusives (which are usually more fairly priced than standard productions that have lesser materials) or second hand from BF Exchange. I could be wrong but I feel somehow this knife bubble will burst sooner or later.

 

[whp]

To be clear, I actually have a degree in business management and entrepreneurship. The things you are saying here are clearly from an outsider perspective. Being able to tell the time on the face of a clock is not the same as being a clockmaker. There are many delicately balanced moving parts and pieces in any given market. Being a price leader is only one of a great many possible strategies for carving out a niche in the marketplace. The greatest advantage of MAP pricing is to protect the manufacturer. It's what's known as a "pull strategy" that entices dealers to carry their product, broadening their market reach. And there's a lot more to it than that, but I'm afraid I don't have time to type out a full intro course on marketing strategy. Fortunately there are a great many excellent resources for this information free online if you choose to seek them out. If you're really gung-ho about learning about these sorts of things, I suggest buying a textbook to a current college course on the subject. A great way to get textbooks inexpensively is to purchase the international edition of the book. Typically only a few tiny things are changed compared to the domestic market version of the book, and they're a fraction of the cost.

What is it we use to say as kids? It s not rocket science. Or, it s not brain surgery. !!
Anything that increases sales, is beneficial to a business. For suddenly increasing customer prices to do that, there probably must be some sort of marketing to allow for this increase.
And if all places charge the same price, how does a business compete with others? Oh yeah, one way is offering other freebies or discounts to accompany the sale of the inflated product. Or offering superior service.
See how one can pick up the basics merely from years of careful shopping with a limited budget.
Being fairly simple minded about my shopping I m still attracted to good value for my money. Unless I m blinded by the marketing. Which probably happens more than I realize.

 

[whp]

Just speaking as a consumer , I don't like any form of price fixing .

If you go searching for a lower , bargain price on e.g. Spyderco , you will normally find basically the same price from all legit sellers . Except for special approved sales , etc.

So, effectively , the manufacturer has determined the selling price at retail . In my book that is price fixing so far as my wallet is concerned .

It definitely has cooled my buying of Spyderco . Part of my knife buying fun is all about getting a great deal .

It is a shame.

 

[Someone1]

To be clear, I have an MBA and 40 years of experience in managing large discount stores before I retired. My last store did over $80 million in sales. I fully understand the vagaries of the retail market.

Stating that MAP pricing is not price fixing is akin to calling a pyramid scheme “multi-level marketing”!

It is totally against a free market system. Let the market pick the winners and losers.

There are several knife retailers who sell at or above the suggested retail price and are successful. They differentiate themselves by having models that other retailers do not have in stock and by adding levels of service. One even charges exorbitant shipping rates, but is still in operation. It can be done.

The manufacturer setting the prices does not increase competition.

Let the market decide what?

I make 10 knives. 2 stores come to me saying they want to buy my in demand knives from me at a cost i decide. I tell them I'll sell 5 to one store for $500 and I'll sell the 5 other knives to the other store for $500. I stipulate to both stores that they're free to sell the knives they bought from me at any cost they choose, but if they want to buy from me again at my wholesale prices, they will advertise the sale price at $200 per knife. They are still free to sell them at whatever price they decide, but if i catch them going against my stipulations, i will not sell to them at wholesale any longer. They're my knives until i sell them. I am free to choose who i sell my knives to and for the price i decide and with which stipulations i attach. They are free to buy my knives at the price i set with the stipulations i demand or not. If they don't like my stipulations or my wholesale price, they are free not to buy.

But they will buy. They know that if they buy my knives at wholesale and sell for the MAP i set, they're looking at 100% profit, minus logistics that eat into margins, leaving one store who runs their business one way with a 10% margin and the other store with a 30% margin. But that's not my business. They buy from me because my knives sell, and those two companies want for sure sales that bring them gross profit. That's my business.

But if i did not stipulate a MAP, one store would be happy with even a negative profit (loss leading) on my specific knives as long as the customers who want to buy my knives generally buy other goods from them that do have higher profit margins and do push out their competitors. I can either allow one store to monopolize the market of my knives and other people's goods, or i can do my part to ensure both companies have an equal opportunity to receive 100% profit, depending on how efficient they decide to run their business. That's on them. What i don't want is for one company to monopolize the market, put everyone else out of business, and then demand that i sell my knives to them for $20 while turning around and demanding my fans to pay $250.

So i protect more companies, ensure more jobs, ensure a fair (not equal) opportunity for them to operate their businesses as they see fit, i ensure a healthy distribution chain to my fans, and i ensure my fans continue to receive fair pricing for years to come.

It may be distasteful to YOU, but they're my knives and i can sell them for whatever i want with any stipulations i desire, and if resellers want to continue to buy my knives at wholesale, they'll pay my asking price and adhere to my stipulations, in the long run protecting YOU, hopefully my long time and repeat end line customers because in the end, without serving you, i can't put food on the table for my kids. But i can't serve you for long if i allow a monopoly for any single supplier because i can't produce my knives for $20 each, and you won't readily pay 25% more for my knives, so we all end up losing except the monopoly business who wouldn't care either way, they'd just move on to the next sucker until they were put out of business.

That's me using capitalism and a relatively free market to ensure a fair price for you which keeps me in business. Because that's my business and my choice.

 

[whp]

Economic and legal principles are but two things that impact most everyone's lives. It is good to remember that because they impact your life doesn't mean you understand them.

Economic and legal "principals" that cant be understood by a large fraction of the population may not be valid.

 

[GermanyChris]

In contentiousness we're having the equivalent of a clone thread.

MAP pricing protects resale for those who care, and pisses bargain shoppers off in the end bunched panties and harsh words are easy to find on the internet. In the end I don't care if I need to pay a few extra dollars for the new hotness, I don't mind helping smallish businesses and made in America manufacturers. If you disagree with (pick your favorite brand) prices there are lots of others to buy from, then have a coffee and let the market decide who wins.

 

[whp]

Let the market decide what?

I make 10 knives. 2 stores come to me saying they want to buy my in demand knives from me at a cost i decide. I tell them I'll sell 5 to one store for $500 and I'll sell the 5 other knives to the other store for $500. I stipulate to both stores that they're free to sell the knives they bought from me at any cost they choose, but if they want to buy from me again at my wholesale prices, they will advertise the sale price at $200 per knife. They are still free to sell them at whatever price they decide, but if i catch them going against my stipulations, i will not sell to them at wholesale any longer. They're my knives until i sell them. I am free to choose who i sell my knives to and for the price i decide and with which stipulations i attach. They are free to buy my knives at the price i set with the stipulations i demand or not. If they don't like my stipulations or my wholesale price, they are free not to buy.

But they will buy. They know that if they buy my knives at wholesale and sell for the MAP i set, they're looking at 100% profit, minus logistics that eat into margins, leaving one store who runs their business one way with a 10% margin and the other store with a 30% margin. But that's not my business. They buy from me because my knives sell, and those two companies want for sure sales that bring them gross profit. That's my business.

But if i did not stipulate a MAP, one store would be happy with even a negative profit (loss leading) on my specific knives as long as the customers who want to buy my knives generally buy other goods from them that do have higher profit margins and do push out their competitors. I can either allow one store to monopolize the market of my knives and other people's goods, or i can do my part to ensure both companies have an equal opportunity to receive 100% profit, depending on how efficient they decide to run their business. That's on them. What i don't want is for one company to monopolize the market, put everyone else out of business, and then demand that i sell my knives to them for $20 while turning around and demanding my fans to pay $250.

So i protect more companies, ensure more jobs, ensure a fair (not equal) opportunity for them to operate their businesses as they see fit, i ensure a healthy distribution chain to my fans, and i ensure my fans continue to receive fair pricing for years to come.

It may be distasteful to YOU, but they're my knives and i can sell them for whatever i want with any stipulations i desire, and if resellers want to continue to buy my knives at wholesale, they'll pay my asking price and adhere to my stipulations, in the long run protecting YOU, hopefully my long time and repeat end line customers.

Isn t one definition of the value of a product the price it commands, at every level? Can the free market not determine that? If so, then manufacturers are free to set the retail prices for their product as they see fit. If better value is found with competitors, then the price setting company will suffer decreased sales and may change their policies. If not, their products may continue to be listed for artificially high prices. "Artificially" being defined as not being determined by the free market. It is the manufacturer s right to charge what he wants for whatever reason and place whatever conditions he wants on the sale of his product. Then continue to attract customers. Marketing may help with the perception of the product's value.

It s probably apparent that it s been many years since I read an economics textbook. But at the time, I thought a lot of it was common sense. Not smart enough to figure out the complicated parts.

 

[Daniel]

Let the market decide what?

I make 10 knives. 2 stores come to me saying they want to buy my in demand knives from me at a cost i decide. I tell them I'll sell 5 to one store for $500 and I'll sell the 5 other knives to the other store for $500. I stipulate to both stores that they're free to sell the knives they bought from me at any cost they choose, but if they want to buy from me again at my wholesale prices, they will advertise the sale price at $200 per knife. They are still free to sell them at whatever price they decide, but if i catch them going against my stipulations, i will not sell to them at wholesale any longer. They're my knives until i sell them. I am free to choose who i sell my knives to and for the price i decide and with which stipulations i attach. They are free to buy my knives at the price i set with the stipulations i demand or not. If they don't like my stipulations or my wholesale price, they are free not to buy.

But they will buy. They know that if they buy my knives at wholesale and sell for the MAP i set, they're looking at 100% profit, minus logistics that eat into margins, leaving one store who runs their business one way with a 10% margin and the other store with a 30% margin. But that's not my business. They buy from me because my knives sell, and those two companies want for sure sales that bring them gross profit. That's my business.

But if i did not stipulate a MAP, one store would be happy with even a negative profit (loss leading) on my specific knives as long as the customers who want to buy my knives generally buy other goods from them that do have higher profit margins and do push out their competitors. I can either allow one store to monopolize the market of my knives and other people's goods, or i can do my part to ensure both companies have an equal opportunity to receive 100% profit, depending on how efficient they decide to run their business. That's on them. What i don't want is for one company to monopolize the market, put everyone else out of business, and then demand that i sell my knives to them for $20 while turning around and demanding my fans to pay $250.

So i protect more companies, ensure more jobs, ensure a fair (not equal) opportunity for them to operate their businesses as they see fit, i ensure a healthy distribution chain to my fans, and i ensure my fans continue to receive fair pricing for years to come.

It may be distasteful to YOU, but they're my knives and i can sell them for whatever i want with any stipulations i desire, and if resellers want to continue to buy my knives at wholesale, they'll pay my asking price and adhere to my stipulations, in the long run protecting YOU, hopefully my long time and repeat end line customers because in the end, without serving you, i can't put food on the table for my kids. But i can't serve you for long if i allow a monopoly for any single supplier because i can't produce my knives for $20 each, and you won't readily pay 25% more for my knives, so we all end up losing except the monopoly business who wouldn't care either way, they'd just move on to the next sucker until they were put out of business.

That's me using capitalism and a relatively free market to ensure a fair price for you which keeps me in business. Because that's my business and my choice.

Why should you care how much someone sells your knife for after they have paid you the price that you have agreed upon?

Your whole discussion does not really make any sense to me. If you want to control the retail prices on your product, then only direct sell to the end user.

If I buy your $200 knife and that price is fine by you and then I sell your knife for $150-how does it affect you and your business? If you think that your knives are worth $400, then you should be selling them for $400 and not making deals with purveyors. Perhaps, you do not feel that you have the expertise to sell your knives in the marketplace. That is ok, but you then have to pay the purveyor to market your knives to sell more than you can sell by yourself. This does not mean that you get to control the price to the end user.

If you tried to make that a requirement to me, I would tell you good luck with your sales.

 

[gadgetgeek]

In contentiousness we're having the equivalent of a clone thread.

MAP pricing protects resale for those who care, and pisses bargain shoppers off in the end bunched panties and harsh words are easy to find on the internet. In the end I don't care if I need to pay a few extra dollars for the new hotness, I don't mind helping smallish businesses and made in America manufacturers. If you disagree with (pick your favorite brand) prices there are lots of others to buy from, then have a coffee and let the market decide who wins.

I would add to that, we as the consumer only have a perception of value, rather than an understanding of true costs.
Looking at the trends in knives since I got into it, and seeing where different makers put their money, there are sacrifices that need to be made to hit a certain price-point. Not all makers value things the same. For example, I suspect that US made carbon fiber has a higher cost than when its made in China due to the cost of N95 masks. Just a hunch. Titanium used to be far cheaper in the soviet union because they had heaps of the stuff, so they made things out of it just to see if they could, now the market is more global, but I'm sure the principal holds to other materials, and time. When it comes to the larger makers, the tail gets longer in the ordering and planning chain, and so more reliable income is necessary. I'd say that a company like Buck is very conservative and careful, and its served them well, where many other "peer" companies have fallen away.
A fact that I didn't know about steels that came up in one of the trainwreak threads a couple weeks back was the size and scope of certain steel productions. So a company needs to gauge how much steel they need to order to maintain production, based on their estimate of its popularity, and the possibility that there is a limited supply, or that if they order from multiple batches, will that mean re-calibrating heattreats, again, depending on the acceptable tolerance of that company. Just that one factor alone is more complex than I can understand, so when someone complains about the price of one of the most popular knives on the market because of what it used to cost, I just wonder if they are stuck "in the good old days".

 

[FortyTwoBlades]

Isn t one definition of the value of a product the price it commands, at every level? Can the free market not determine that? If so, then manufacturers are free to set the retail prices for their product as they see fit. If better value is found with competitors, then the price setting company will suffer decreased sales and may change their policies. If not, their products may continue to be listed for artificially high prices. "Artificially" being defined as not being determined by the free market. It is the manufacturer s right to charge what he wants for whatever reason and place whatever conditions he wants on the sale of his product. Then continue to attract customers. Marketing may help with the perception of the product's value.

It s probably apparent that it s been many years since I read an economics textbook. But at the time, I thought a lot of it was common sense. Not smart enough to figure out the complicated parts.

Look...you bang the drum of "FREE MARKET", but it is the manufacturers choosing to implement this system. It's not government regulation, but a free market decision on the part of the manufacturer. It's your free market decision to shop elsewhere or purchase other brands.

 

[gadgetgeek]

Why should you care how much someone sells your knife for after they have paid you the price that you have agreed upon?

Your whole discussion does not really make any sense to me. If you want to control the retail prices on your product, then only direct sell to the end user.

If I buy your $200 knife and that price is fine by you and then I sell your knife for $150-how does it affect you and your business? If you think that your knives are worth $400, then you should be selling them for $400 and not making deals with purveyors. Perhaps, you do not feel that you have the expertise to sell your knives in the marketplace. That is ok, but you then have to pay the purveyor to market your knives to sell more than you can sell by yourself. This does not mean that you get to control the price to the end user.

If you tried to make that a requirement to me, I would tell you good luck with your sales.

So what happens when you go to sell the knives you make, and a large buyer decides its a loss leader, thus devaluing your work in the eyes of the customer. Now they come back to you as the only seller willing to buy your product, as no one else can sell them at a profit, and they demand that instead of $200, they will only pay $100 per. Free market, you loose, better find a day job.
Free market doesn't have to mean "no rules" a free market is simply one not regulated by a third party. You are free to sell your product at the price you see fit, but the internet has warped a lot of the "free market principals" that people thought existed, but in reality were artifacts of time, distance, and access to information. Yes now I can buy direct from the manufacturer, but marketing in the internet is nearly impossible, so there is still a place for the retailer, though their pure function has changed, and is changing depending on the market they serve.

 

[FortyTwoBlades]

The major reason why MAP has become fairly standard practice is because we live in an era of internet shopping. The barriers to entry are drastically lowered compared to a decade ago, and that means any fool can throw up a store or eBay/Amazon vendor account and try selling stuff. That means that inevitably, without SOME degree of controls, that a large number of customers will be able to find retailers selling at unsustainably low prices. This overall dis-incentivizes other retailers from carrying the product, and erodes the total dealer base for the manufacturer. It doesn't matter that these fools only stay in business for a few months before they crash--most new businesses last less than 2 years. More will pop up where they came from. What you get is the economic equivalent of black mold. It bogs down and weakens a healthy distribution chain. Intelligent application of MAP can help with this Fewer people break with MAP policy because in order to sell the product they have to agree to the policy. Dealers that see other dealers violating MAP can report them to the manufacturer, who can then enforce that policy. It creates something of a self-policing system. The key is to make sure that it's not set so high that it drives sales below an optimum level. A rule of thumb is that a retailer usually needs at least a 20% markup in order to tread water covering their fixed expenses.

We all love bargains, myself especially. And when we find out that something is keeping us from getting something at the lowest possible price, that can anger us. But businesses need margins to actually stay in business, and MAP is a tool that can help keep the whole system running properly if it's done right. Sal would know better than I would, but I can just about guarantee that the reason why Spyderco's prices have gone up in recent years hasn't been because of MAP, but because of increases in costs and plain ol' inflation. Costs for materials of all sorts have been steadily rising, without signs of ever coming back down, and that includes the consumables used in working those materials. I can tell you that one of the reasons why Condor's prices went up was because of minimum wage increases in El Salvador. MAP is a factor, but when MSRP raises, that's typically nothing to do with MAP and more to do with cost.

 

[Someone1]

Why should you care how much someone sells your knife for after they have paid you the price that you have agreed upon?

Your whole discussion does not really make any sense to me. If you want to control the retail prices on your product, then only direct sell to the end user.

If I buy your $200 knife and that price is fine by you and then I sell your knife for $150-how does it affect you and your business? If you think that your knives are worth $400, then you should be selling them for $400 and not making deals with purveyors. Perhaps, you do not feel that you have the expertise to sell your knives in the marketplace. That is ok, but you then have to pay the purveyor to market your knives to sell more than you can sell by yourself. This does not mean that you get to control the price to the end user.

If you tried to make that a requirement to me, I would tell you good luck with your sales.

What if i said my niche was making knives you like, not dealing in the logistics of selling them globally? That i desire someone to sell my knives to the masses where i cannot do that and/or have the will to do that efficiently that would keep you as the customer happy? I need to sacrifice a slice of conceivable profit to ensure a happier customer? But to do that i need to protect those that reliably sell my products from fly by night dealere who only look for the highest possible quick money rather than long term customer satisfaction?

That is free market, my friend. It's funny. I asked my wife if she thought MAP was akin to price fixing. She's a somewhat naive, somewhat ignorant progressive who's been redpilled via baby level doses and isn't quite there yet. She initially said it was absolutely price fixing. I then simply read my post to her. I didn't say it was from me. She totally reversed couse and said Amazon shouldn't be able to demand lower production costs and higher resell costs when they monopolize sales of a product. I laughed and agreed. I said walmart and target too. She had this worried look on her face because she loves target. I said that manufacturers should have a say in how their products are sold, nationally, globally, or otherwise, and it should be their choice if they continue the deal with the devil or not. She agreed.

I'm confident that if my wife can swallow this rather unsavory redpill, the people here on bladeforums can, too. But it goes against a globalist, monopolistic, oligarchical programming, so countering that programming is literally going against every tv show, every news segment, every ad, every movie people have shoved down their throats at every turn.

 

[Daniel]

A company does not have to lower their prices in selling to Amazon or Walmart. That is their choice because they know that they can increase their sales by selling to them. In fact, they do not have to even sell to them.

However, they should not be able to require Amazon or Walmart to have a price floor- MAP.

All of this discourse is moot. The courts have held that MAP pricing is not illegal. So, it is not going to change. However, it is not free market. The market is not determining the pricing structure.

I will still refrain from buying at MAP pricing. I buy on the secondary market, MARKET, where the prices are determined by actual value to the buyer. Or, I wait until knives go to clearance prices.