When "Suggested" Retail Prices Are Mandatory

C

Confederate

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On a thread about the high cost of Sebenzas, and whether they should be sold for about the same price as a good revolver. During that discussion, someone noted thst Chris Reeves doesn't let retailers sell the Sebenzas for less than the Manufacturer's Suggested Retail Price (MSRP). This, I noted, flies in the face of it being called "suggested." Dave then observed:

DaveH said:
If you want to argue price control, that's cool, but that's a whole 'nother thread.

In that whole 'nother thread we get to talk about how Benchmade treats online sellers, we get to talk about how each step in the supply chain from manufacturer to retailer almost doubles the price. We'd get to talk about the whole fiction/myth/hype of MSRP that tries to signal to the user they're getting a quality piece at a discount.
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It sounds good to me.

Does CR and other knife makers really hold retailers to high suggested retail prices, and, if so, what justification is there for this practice?

Also, how does Benchmade treat its online sellers?
 
This seems like good justification.

Ruling may hurt discount pricing

By Christine Dugas, Jayne O'Donnell and Laura Petrecca, USA TODAY

Bargain hunters may find fewer deals on high-end apparel, accessories and electronics following a Supreme Court ruling Thursday.
The 5-4 decision overturned a 96-year-old law that prevented manufacturers from setting minimum retail prices. The majority wrote that lifting the pricing ban could benefit consumers if retailers offer better service or selection.

Richard Doherty of technology market researcher The Envisioneering Group agrees, saying the price ruling could lead retailers to use more free products and better service as sales incentives. "It's sure to be to consumers' benefit this summer and through Christmas."

Others predict a different result. "Many prestigious brands will use the decision to require retailers to sell at a specified price," says Washington, D.C., antitrust lawyer Steve Feirman. "Suggested retail prices had to be suggested to be lawful. Now, they can be mandatory."

Consumer advocates say that will be costly to shoppers. "Over the long term … discounters will be squeezed out of the market," says the Consumer Federation of America's Mark Cooper.

Antitrust lawyer Joe Sims expects limited impact from the ruling. Manufacturers now may set prices, but it will be costly to monitor and enforce that price distribution, says the Washington, D.C., lawyer. And, he adds, if the price is too high, they'll lose customers.

The lawsuit arose when Leegin Creative Leather stopped shipping its Brighton tooled-leather accessories to Dallas-area shop Kay's Kloset because the store was selling the goods more cheaply than Leegin wanted. After Leegin cut the store off, PSKS, parent of Kay's Kloset, filed an antitrust lawsuit.

Burlington Coat Factory, which filed a brief supporting PSKS, worries about the impact on the off-price chain. Burlington attorney Stacy John Haigney called the decision "an open invitation to manufacturers and full-price retailers to fix retail prices at a higher level. It will be detrimental to our business, but I really can't tell how much."

The Consumer Electronics Association says it supports the court decision because, it says, "sales training, industry marketing and after-sales service" are what many TV and audio gear buyers look for in electronics stores.

Bill Gates, of golf equipment maker Ping, says, "Not every consumer is a bargain shopper. Some consumers are looking for quality, innovation, personalization and customer service when they shop."[/QUOTE]
 
Recently, as Thomas W noted, the U.S. Supreme Court ruled that it was OK to do that sort of restrictive pricing. (I think the ruling was this year or last year.)

In the ruling the Court said, more or less, that the marketplace would sort things out.
 
Well the marketplace is not merely made up of Manufacturers. I have a problem with this at a basic level. You can basically say goodbye to your corner mom and pop retail store.
 
Confederate,

Not to speak for CRK's, but this is pretty basic business here.

If Comapny A sells $300+ knives with limited production, and they become heavily discounted by a large portion of the retailers:

Which retailer, if any of them is going to make any money?

Since delivery is tough and margins have now become razor thin, why would anyone stay interested and continue to even inventory this paticularly expensive line?

Seriously, as consumers in this industry, it is important to look past ourselves on occasion.
 
Bill Gates, of golf equipment maker Ping, says, "Not every consumer is a bargain shopper. Some consumers are looking for quality, innovation, personalization and customer service when they shop."
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Why can't consumers make that choice? When I go to buy a digital camera at Circuit City, the sales person most of the time can answer only the most rudimentary of questions. I can look at a camera myself and tell what modes it has, but as a shopper, I ultimately visit Steve's Digicam on the Internet and read up on it myself. As a result, I get almost everything online except the big, heavy stuff I'd hate to ship back if there is a problem.

Go to your mall knife store and there's limited selection, full retail prices, and a lot of BS from sales people. And if you need to return something, good luck!

And the Mom and Pop Shop? That's just part of the evolutionary economy. The same arguments were used by friends of mine in Paducah, Ky., years ago when a mall was built. And many small businesses did go the way of the world, just as predicted.

Discounters can still do workarounds, like offering free shipping and/or free accessories. With cameras it could be memory cards; with knives, sharpeners and other, lower priced knives.

Overall, I see it as a negative development.

Now how about some juicy stories about Benchmade?
 
I respectfully disagree with Thomas. No one sells to lose money. Loss leaders and other marketing devices aside, If you're not making a profit, you're not staying in business. So, if Thomas' Company A is selling Product A for $300 and a competitor is willing to take less profit per item, and sell it for $275, Great.
If company A can convince its customers that the other services it provides to its customers is worth the difference in price, also great. All other things being equal, the lower price wins. But the discounter is still is still making a profit. And the manufacturer is still selling units.
 
I can summarize the juicy story from benchmade:

Brick and mortar stores put pressure on manufacturers to not sell to or force internet shops to sell at full prices to protect their market and profits. This creates tension between manufacturers and internet shops.

Last year or two years ago a Well Known Internet Retailer approached Les of Benchmade at blade show to discuss issues. The WKIR was treated quite unprofessionally and Benchmade cut them off so they had/have to buy from a wholesaler.

IMO, that was not only unprofesional but also very short sited considering the role on the internet in selling more upscale production knives.

I believe certain an other internet seller just plain dropped benchmade completely and no longer carry them. My point here is when you discuss prices and price control, there's lots that goes on behind the scenes that that may/may not/both be brought on by the manufacturer.
 
I think you're making a big deal over nothing. I think it's unrealistic to believe that ALL manufacturers would (Could) get together & make their msrp mandatory. Down the line, someone's going to want to profit by volume & break the chain.

I think it's entirely fair to allow manufacturers to decide whether they want to market their product at a msrp or a mandatory price. Look at Saturn autos, for example. Whether you like their cars or not, many like the pricing practice because it's consistent. It also tends to keep resale higher if the product's good, because if you can't get a new Saturn at a discount, then used ones are generally going to go for a certain price & price fluctuation on the used market will be dictated by the consumer because you'll only get a new product at X price.

Same with the knife industry. If Benchmade, Kershaw, Spyderco, etc. want to allow their vendors to sell at below msrp, then fine.

I think that by "demanding" that manufacturers sell their product at below msrp is being unrealistic. Again, if CRK, Strider, & whoever else sells their product at msrp do so, I believe that's their right. You, as a consumer, have the right to NOT buy the product. If enough people exercise that right, believe me, those knives will be selling at below msrp. They're here to make a profit. That's their bottom line. Now, if they do so, while providing a high level of service & don't need to discount their product, then that's the way it is.

I kind of get scared when I hear people saying they believe that companies can't decide at what price they can set for something. When you start doing that, it's called "price control", whether it's to keep something inflated in price or down in price, & neither is good in the long run.

I would've thought most people on this Forum wouldn't be into Socialism.

Obviously, I think we should let the market dictate the price of things, & that's you & I.
 
fudo said:
I respectfully disagree with Thomas. No one sells to lose money. Loss leaders and other marketing devices aside, If you're not making a profit, you're not staying in business. So, if Thomas' Company A is selling Product A for $300 and a competitor is willing to take less profit per item, and sell it for $275...
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fudo, sorry I should have been more detailed.

Company A (the manufacturer) has a MSRP of $300. There is a dealer program involved, so let's say the dealer can buy the $300 knife for...$150 (easy number). Street price turns into $199 from the deep discounting dealer. So now there is $49 in profit on a $150 investment offered by a percentage of dealers. What percentage of the remaining dealers that sell within 20% of MSRP want to continue to invest heavily into Company A's inventory? They know that they are either going to be undercut by price and be stuck with a gang of very expensive knives, or be forced to make 25% on Company A. Truthfully, Company A is going to lose a ton of customers, as the full market is just not going to warrant the price/profit ratio in this paticular high end category.

MAP is the only way for Comany A to survive. Would it be better for Company A to just go out of business?

Kai USA has a very strict pricing policy in place on our Shun brand name, without it we would never get placement with the meaningful dealers nationwide.

What are you and I left with without placement?

Confederate said:
Why can't consumers make that choice?
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You do have a choice on whether to buy a brand or not. Just know you're not going to be able to buy everything at 40% off.

Now how about some juicy stories about Benchmade?
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Could we refrain from this type of...posting please.:grumpy:
 
If a company wants to sell a product at a certain price or with certain terms, that's the right of those who make up that company. They can't force you to buy the product if you don't wish to adhere to those terms. Either they sell to you or they do without.

Likewise, you can't force a company to change their terms to ones you favor. You go elsewhere or you do without. It's not like you can't find some other knife that does what you want or buy a used one somewhere at the BFC Exchange.
 
Thomas, does order size enter into this discussion at any time?

Do compnies A, B, and C all pay the same wholesale price if A buys 1,000 pieces, B buys 500 pieces and little C buys 50?

I would have to guess that not all buyers are treated equally as it makes sense to offer discounts to volume buyers. Maybe the knife industry is different from most others, I don't know.

I do know from experience in the manufacturing field, (I'm a retired Finance Manager) that we allowed our cutomers discounts from our published price list anywhere from 40% to 68% on parts. And we grossed over 50% in doing that. There's a long distance between manufactured cost and retail selling price, lotta folks in that food chain.
 
The deep discount sellers are one of the things that dealt a big blow to the ARC flashlight company. (to hear ARC tell it) an online place was selling arcs just a few bucks over the acquisition price from the company. When arc reformed (either the second or third time I don't remember) they started doing price enforcement to keep that from happening.

Also I think what happens is that knife wholesalers and bricks and mortars come in make the case that they can provide valuable services to the manufacturer, like buying in large quantities, advertising etc, that manufacturers put up with/listen to them. That keeps the price higher then it might otherwise be.
 
DaveH said:
Last year or two years ago a Well Known Internet Retailer approached Les of Benchmade at blade show to discuss issues. The WKIR was treated quite unprofessionally....
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Okay, this has all the makings of a great story. Can you provide some details? I don't understand why things are so hotly disputed.

...and Benchmade cut them off so they had/have to buy from a wholesaler.
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Fine. Now what if the WKIR bought up a bunch of Benchmades from one or more wholesalers, then decided to sell them at cost?

IMO, that was not only unprofessional but also very shortsighted considering the role on the Internet in selling more upscale production knives. ... My point here is when you discuss prices and price control, there's lots that goes on behind the scenes.[/QUOTE]
I agree. If I can't get a bargain on a Benchmade, I can find one a bargain on another brand. If all brands resort to this, companies like Cold Steel, which are sold like hotcakes on the Internet, will find it tough going.

I, and many others, just don't buy things unless we can get bargains..great bargains--bargains we can boast about, bargains that we can rub in the faces of our friends and co-workers. True, we don't live in caves and carry clubs anymore, but we are still the great hunters/gatherers!

Again, I detest the practice of mandatory retail prices. But I'd love to hear the details of the Benchmade story.
 
To those of you who are arguing that this goes against the principles of a fair market, it does not. If all the manufacturers got together and agreed that for a 3" folder, it would cost at least $100 at retail, that would be collusion and price fixing, which is illegal and unethical. If CRK decides that if you want to buy sebenzas from them you have to sell them for at least $XXX, and if you go below that you'll be getting stock elsewhere, then they're not price fixing, they're protecting their dealer network.

If sebenzas could be sold at any price the dealer wanted, you would have some people wanting to sell a few at a regular margin (mall knife shops, small internet vendors, gun stores), and you would have some that wanted to sell a lot at a small margin (huge discount internet stores). If that happens, then a lot of the sales that would have gone to the first category go to the second category, meaning that it's not worth it for retail stores to carry your merchandise anymore. Then your only retail outlet is a low-margin, high volume discount retailer, and LMHV retailers are notorious for poor customer service. If you have high volume and regular margins, you can pull off great service, but if you have low margins, you just can't afford it. Then sebenza is no longer the premium brand it once was.
 
jvan said:
Thomas, does order size enter into this discussion at any time?

Do compnies A, B, and C all pay the same wholesale price if A buys 1,000 pieces, B buys 500 pieces and little C buys 50?
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It can when we are talking volume, but this conversation involves CRK's, an upscale manufacturer with limited capacity and production. So I don't believe order size plays a part in this example.
 
Wow, great posts and I now need to get a another beer later tonight and really analyze what people are saying. But to jump in after a long walk, I think that I understand and agree with Thomas as well as how CRK and others that dictate price is doing their business. My point of view is that if the MSRP of such a model is $200 and it is almost common knowledge (with a bit of reasearch) that you can get it for $120 in 10 or 20 internet shops, the MSRP is essentially worthless. I have no problem with CRK saying you as a retailer will sell a Sebenza for x$ or anyone else. As a consumer I can chose, I either pay the admission, or I chose something less or not at all. You can even logically argue that it even protects the Mom and Pop B&M store when you hear how many people post that they go to store A to handle "model x" then order the knife of choice from a discount store.

I have noticed on more than one occasion it should be OK for Billy-Bob to try and dicker a $365 knife to $300, but God help you if you suggest to Billy or anyone else that at months end the $3650 worth of labour that he put in last month the employer should only have to pay $3000 for.
 
Esav,
Yes, not quite the way to make a point, thought the better and arrived to edit just after your post. Thanks Esav for your time. :foot:

Should be a fair bit less obnoxious now.
 
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