What's going on with Benchmade?

[prince1770]

Everyone here seems to be against benchmade's policy toward internet dealers. I personally patronize internet shops for a varirty of products, including BM's. Everyone talks about MSRP, and how they wont pay X dollars for X knife - honestly i wont either. Here is the point: you can have and sell knife whos MSRP is $300.00. This pricing is fixed at the factory because marketing knows that nobody will pay this much cash. So, when a $300.00 knife sells at $200.00 at the gun store, the factory has already made money on it from the get-go. The store also makes money because they purchased the knife from the factory at a cost much lower than $200.00, then selling it at a margin. For example, when you buy a DVD player with an MSRP of $100.00 for a $85.00, you feel that you got a good product for a great deal. Customers come back. The company is still making their margins, and so is the retailer.

The fact that alot of people seem to neglect is that plenty of major companies have a Minimum advertised price. This means that you cant sell the product below this price, or penalties or restrictions (delay of shipment, refusal of service) will arise. Many companies have this - I assume benchmade has it too. The internet retailers deal in volume, so small margins add up in the end - so to them its no big deal to sell things at a heavy discount. This method of restricting min. price also protects everyone in the market; from mom and pop stores, to large chain stores, etc; knowing that people cant undercut them. Internet stores have no overhead, labor, etc. No face time with customers or personal connections when selling. Min. ad. price gives the corner shop stores confidence. When a retailer buys something from a supplier at 60% discount, this gives a lot of room for price positioning because as long as the retailer sells above the MAP, they will make margins - it is up to them to decide how much. Internet dealers dont honor this cuz they need to move product to stay afloat.

So maybe the problem in question is as simple as this. Econ in college was the worst subject but helpful in instances like this.

 

[Cougar Allen]

...a Minimum advertised price. This means that you cant sell the product below this price

You are very confused....

 

[Esav Benyamin]

Internet stores have no overhead, labor, etc. No face time with customers or personal connections when selling.

In fact, they certainly do have some overhead, as Steven Roos and Knife Outlet have just been discussing.

As for personal connections with customers, this whole question came up in regard to an internet dealer famous for his relations with all of us knife knuts, not just his customers.

Business is business. The numbers vary but the elements leading to success or failure remain.

 

[Hair]

You are very confused....

No he isn't. He stated a fact. You misquoted him and took what he said out of context. Look at the entire first two setences from the paragraph you quoted. He described something that some businesses do. He did not say they all do it. He did not say selling below the minimum price was impossible, or that if done the universe would explode. He said that the supplier will "punish" the dealer, whether by no longer supplying product, or by other restrictions.

Notice how NGK's BM prices are "too low to print" and you must email them to see the prices. They don't do this to make us work harder. They do it because BM basically makes them. If NGK did not comply, I do not think they would get any BMs at all.

If you disagree, I would expect more explanation than "you are very confused" from a moderator.

 

[Knife Outlet]

Internet dealers dont honor this cuz they need to move product to stay afloat.

So maybe the problem in question is as simple as this. Econ in college was the worst subject but helpful in instances like this.

No, I honor MAP prices for companies that are honorable and fair with me. An example is Knives of Alaska which I buy from distributors. I have no relationship at all with KA. I just follow their guidelines because it is important to them and they are a fair and honorable company. Others, like Wusthof, I buy directly and honor it or don't get products. I would honor it anyway, however, and always have because they too are a fair and honorable company. I've never had a relationship with Benchmade so I've never been subject to MAP policies with them. I have purposely ignored MAP pricing for a few companies that are not fair and honorable with me. I won't mention any names. So some internet dealers do honor those policies.

Finally, pricing on the internet is low, not because we need to move volume to stay afloat but because we need to be competitively priced with others. Back when we started we all had to deal with a price leader who is no longer in business. Discounting has been high ever since. Back in the late 90's there were a handful of serious dealers. Now there are three figures worth of them. Margins are about as low as they can be now. Like any businessman, I'd like to improve margins. My competitors don't allow it. It has nothing to do with "staying afloat."

 

[nevertoomany]

Thanks, particularly to Fred from KO (one of the good guys!) especially for saying he'd like to charge more but his competitors won't let him. One of the greatest deficiencies in American education is the failure to teach basic principles of capitalism.

 

[Cougar Allen]

I would expect more explanation than "you are very confused"

I guess that isn't as common knowledge as I was thinking last night. The confusion is the idea that MAP "means that you cant sell the product below this price." It does not mean that.

The reason some companies have a MAP, by the way, is because dealers complain when customers come into their store, point to the price on something and say, "Hey, so-and-so is advertising that for $80." Nobody comes into stores and complains, "Hey, so and so is advertising that same knife for CALL!" so having a MAP solves the problem without making any attempt to control selling prices. MAP means Minimum Advertised Price and that is all it means.

 

[Knife Outlet]

I guess that isn't as common knowledge as I was thinking last night. The confusion is the idea that MAP "means that you cant sell the product below this price." It does not mean that.

The reason some companies have a MAP, by the way, is because dealers complain when customers come into their store, point to the price on something and say, "Hey, so-and-so is advertising that for $80." Nobody comes into stores and complains, "Hey, so and so is advertising that same knife for CALL!" so having a MAP solves the problem without making any attempt to control selling prices. MAP means Minimum Advertised Price and that is all it means.

For a manufacturer to set a minimum selling price is illegal. It is price fixing and was made illegal to combat the "fair trade" pricing of the 1950's and '60's. MAP policies were actually OK'd by the court system, not by statutory law. It was a way to help manufacturers go back to the "fair trade" practices without "price fixing." There are still some serious issues about it and some court cases involving them have failed in court for one reason or another.

MAP policies are legal depending on how they are handled. Those who want to employ them would do well to consult a lawyer. Most of the ones in the knife industry are not really legal, as I'm told by attorneys, but they exist anyway. Selling auto knives across state lines isn't legal either but it happens every day in the industry. Our industry is small and doesn't get the kind scrutiny larger ones do. So these things go on.

 

[hardheart]

minimum advertised price and minimum selling price are quite different, that's why you have to email to get a price. The only minimum on selling price is how much a seller is willing to lose.

 

[berzerker]

Not an explanation, but some observations:

I periodically work at a friend's knife shop. It's a very common occurence for a potential customer to compare two or three kniives--usually a bargain, mid-range, and premium brand (benchmade, perhaps). They end up liking what they see in the premium brand; overall quality, fit/finish, materials, etc. They write down the model number and leave. On rare occasions, they "whisper" to a companion that they'll buy it cheaper online. Even without those "whispers" we've come to recognise the signs.

All this is, of course, their privilege. However, it does eliminate the brick and morter knife dealers.

There is a huge difference in profit margin between the premium and lesser brands, and a physical store must make enough to survive the more diverse demands on its income. There is a lower limit that can be charged. (The big box stores make it on volume, and a lack of employee to customer contact.) No one likes price-fixing, when it's done for the wrong reasons. However, if the price is leveled for all dealers, then the competition is on things like direct access, customer service, advice on making the purchase, and so on. Most of my friends customers are casual purchasers, and not necessarily members of a forum such as this one, customer service and employee knowledge have real value to them.

"So what?" one might say. I guess it depends on whether you want to actually "handle" and inspect a knife before you buy, without the hassle of ordering and sending it back. I do know that forumites mourn the loss of the regional knife stores.

Just a few thoughts; I suppose I've earned a few flames for them.

 

[Knife Outlet]

I'm not sure the on line sellers are what is causing the difficulties for the knife retailers. I closed a retail store I had last year (kitchenware, not knives.) I won't get into the details because they will bore you but small, family owned retail stores are dropping like flies everywhere in the country and have been for a long time.

The internet currently represents about 15% of retail sales. It might be higher in the knife industry, I don't know. But it is obvious from the behavior of the manufacturers that retailers are a larger segment than on-line sellers by far. So retailers own the vast majority of the business.

Sure, a retail store is going to lose some sales to the internet and the internet actually loses some to retail stores (probably more given the market share differences.) Honestly, I don't think the internet is the problem.

I think it is changes in American consumer buying preferences and American consumers don't patronize locally owned, small business retailers like they did in years past. It isn't a knife industry phenomenon. It cuts across all consumer businesses.

I'm not flaming you. I'm just disagreeing. It is always easy to blame something tangible for business problems. In the case of small business retail stores, I'm afraid the tangible really doesn't deserve the blame. I'm not suggesting it is easy to make a go of a small business retail store. I wasn't able to do it and I'm no beginner at retailing.

 

[berzerker]

Hi Knife Outlet:

Disagreement understood. I follow your argument, and agree that both sales channels compete.

I still think the web may be a part of the problem--for higher-end items, but agree that there IS a change in the buying patterns. I think people are no longer sold on the "buy a quality product and own it for life" approach (at least within the general public). I've had many people essentially tell me they want a POS (although many of those same people demand that it do all that a premium product can do), because they'll "just lose it anyway." I think that goes a long way toward explaining the attraction of china-made knives. I know I'll get flamed for this one, but many of the chinese pieces are real value for money (flamers, save yourselves the "slave labor" arguments, I've heard them all).

I certalinly agree with your comment on small specialty businesses. They cannot compete against the volume benefits of large diversified stores (not just purchasing power, but so many other ways, as well). These things do run in cycles, however. Department stores gave the early small shops a hard time, but people got tired of them, and the "boutique" cycle began; then the first discount stores, etc. Unfortunately, real people created those little stores and it's not like perennials in a flower bed, they don't just reappear when the snows melt.

I guess my point after all this rambling is that small knife shops suffer disproportionately in losing business to any of the other channels--big box, online, etc. I think there are tangible elements at play, here, but there are so many that it's much harder to down any one of them.

Best regards.

 

[WadeF]

I think it's the WalMarts, Targets, Lowes, Home Depots, Bed Bath and Beyonds, etc that are squeezing out the Mom and Pop shops. If I had a knife shop I'm only going to get people who are looking for high end products, everyone else will pick up knives at Lowes, Walmart, etc. If I'm only going to get knife people who are looking for high end knives there's a good chance they are already looking at them online and are aware of the deals online.

It's a shame BM has to shrug off companies like NGK who have an actualy brick and morter store, offer great customer service, and is a company that's making it in these times. I doubt WalMart is going to start selling Benchmade, and I'm seeing less brick and morter knife stores all the time. So why would Benchmade turn their backs on what maybe one of their only options to sell their prodcut?

 

[Knife Outlet]

I guess my point after all this rambling is that small knife shops suffer disproportionately in losing business to any of the other channels--big box, online, etc. I think there are tangible elements at play, here, but there are so many that it's much harder to down any one of them.

.

I think if you replace the word knife with retail in the first sentence then we agree completely.

Americans these days really do prefer larger businesses. My kitchenware store was located less than a mile from Bed Bath and Beyond. I had a wider selection, lower prices and a person to person shopping experience. Bed Bath and Beyond sent customers to us every day to find products they didn't have. I had 3000 square feet of dedicated gourmet cooking products, about twice what BB and B has. I also provided cooking classes and free cooking demos. I even advertised more than they did. My staff actually knew something about cutlery . If you wanted to get the feel of a chef knife we would set you up in our kitchen with a cutting board and some vegetables. If you wanted to know how to make creme brulee we would show you.

That kind of shopping experience doesn't hold the value of Americans like it once did. I'm gone. Bed Bath and Beyond is still there. That's what I'm talking about. I didn't have a bad store or a bad location or bad people or bad merchandise. Experts in the industry said I was doing it like it should be done. People just preferred shopping with the bigger company.

Like Wade says above, most people prefer to go to Wal*Mart or another store like that even though the prices may not be lower or the selection better. Personally, I buy most things besides groceries and clothing on line. I don't like Wal*Mart or other stores like that. I don't shop in them. The quality specialty stores are about gone. So I turn to the internet, not to save a buck but to get a better shopping experience and higher quality products than I get at Wal*Mart.

I think we probably agree for the most part.

 

[Knife Outlet]

So why would Benchmade turn their backs on what maybe one of their only options to sell their prodcut?

Because they simply can't stand that level of discounting. Pure and simple. It has nothing to do with the store or the customer service. It is not likely they dislike the dealership. They dislike the discounting. I'm not sure how they are going to manage the whole thing without taking a pretty large hit in volume. I assume they have a plan. I have no idea what it is.

I can tell you this. Since I dropped Benchmade a few months ago my Spyderco sales have really increased dramatically and new players like Blade Tech are doing really well for us. That tells me that some customers - certainly not all - who are looking for Benchmade on our site end up choosing something else. Some, of course, go somewhere else to buy Benchmade. Benchmade was a six figure per year line for us and we hardly miss it now. I was a little nervous about dropping it but I don't regret it at all. It has saved us some grief and not really hurt the operation much at all.

If NGK does the same thing, they are likely to have the same result. They'll do fine whether they sell Benchmade or not.

 

[WadeF]

If you wanted to get the feel of a chef knife we would set you up in our kitchen with a cutting board and some vegetables. If you wanted to know how to make creme brulee we would show you.

Can you open your store back up so I can come? Sounds like you had a wonderful store and it's a real shame the people in your area didn't support you better.

When I see a specialty store like yours I'm excited to go in and check it out. Another problem with our society is the majority of people don't seem to like quality stuff. They'd rather get something cheap that barely gets the job done as long as it saves them money. I'd rather buy something that will last a lifetime and could be handed down to the kids, etc.

Maybe if we had more programs on TV pushing quality goods that you're not going to find at WalMart and the like we'd have more people seeking out the smaller Mom and Pop specialty stores.

 

[Knife Outlet]

I don't know Wade. Fashions and preferences come and go. When I was a kid almost everyone felt like you do and I do. I always remember the old saying that the quality will live on long after the price is forgotten. I don't think that is the fashion these days. It will probably turn back that way some time in the future.

At least it is still possible to find and buy high quality knives. A lot products are only available in the cheapest possible form.

 

[Hair]

I guess that isn't as common knowledge as I was thinking last night. The confusion is the idea that MAP "means that you cant sell the product below this price." It does not mean that.

He never said it did mean that. No one did. Did you read my reply? Did you only read the portion of his post that you quoted? Or did you read what came after the comma?

The purpose or MAPs is common knowledge. So is the purpose of a comma.

 

[Esav Benyamin]

First quote:

The fact that alot of people seem to neglect is that plenty of major companies have a Minimum advertised price. This means that you cant sell the product below this price, or penalties or restrictions (delay of shipment, refusal of service) will arise. Many companies have this - I assume benchmade has it too.

Second quote:

I guess that isn't as common knowledge as I was thinking last night. The confusion is the idea that MAP "means that you cant sell the product below this price." It does not mean that.

Third quote:

He never said it did mean that. No one did. Did you read my reply? Did you only read the portion of his post that you quoted? Or did you read what came after the comma?

The purpose or MAPs is common knowledge. So is the purpose of a comma.

Hair, I just copied prince1770's original statement with one line emphasized. In what way does Cougar Allen's interpretation fail to address that statement?

 

[Hair]

This is the problem:

"This means that you cant sell the product below this price, or penalties or restrictions will arise"

Is not the same as:

"This means that you cant sell the product below this price"

Notice the comma and then those extra words. Very important words, they are.

No one has said that it is impossible to sell below the MAP. Like I said, the world will not explode. But if you sell below the MAP, there are restrictions and possible penalties, such as not being able to advertise your price, or the supplier refusing service. I would consider not being able to advertise your price to be a restriction or penalty. Selling with a restrction is different than not selling at all. And no one ever said anything about not selling at all.

Hence Cougar's post was trying to correct something that was not incorrect in the first place. He took only a portion of a sentence and left out the rest of it. And then he made a comment that did not further the discussion at all or explain his position. It was meant simply to insult.