When "Suggested" Retail Prices Are Mandatory

I think, in the end, the "Market" controls pricing. Even if a mfr thinks they have control over pricing, the "Market" will determine if sales occur.

As Thomas mentioned, survival is prime to a manufacturer. The "Market" determines survival.

Rules regarding prices are very difficult, if not impossible to enforce, unless sales are consumer direct only. Someone will figure out a way around any rule.

I've watched the internet change the "Market". Pricing, distribution, international borders, availability, even cheap copies. it's all determined by the market.

I think that this thread is good in that it helps customers to have a greater understanding of the complicatons of the "business chain".

sal
 
Confederate said:
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.


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.
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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.[/QUOTE]

my goodness, if you have such a woody for benchmade, call them and discsss it with them. no rumors or gossip, their side of things straight from them.
 
IMO it is the classic example of creating the "luxury"/"prestigious" perception of given good to facilitate higher prices on your (limited) output. When manufacturer practices "price fixing" (indeed, he has to do this succesfuly, otherwise this strategy won't work) for his products, prevents ups and downs of the price in the long run and supports it with appropriate marketing he can affect (quite significantly, mind you) demand for it's products. Certainly, you want to keep your output somewhat limited. In other words make it "status symbol" (it implies you have to maintain relative "exclusivity" and "rarity").

I do not like this type of marketing strategy, as the results are typically paying for the brand name instead of quality of the product.
However, it works very well if you do it properly. And IMO CRK does.
 
My family owns a retail business.

Some of the manufacturers whose products we carry have started a Minimum Selling Price. Before this rule was imposed we generally priced ourselves competitively with the large internet dealers, but both of us have had to raise our price to now meet the rules imposed by the manufacturer.

I don't have a problem making more money on these sales, I like profits. Unfortunately I have a harder time making the sales in the first place. One of the main brands that have started this has extremely popular products, considered the best by the majority in their category. So now we sell it at the manufacturers MSP and so do our internet competitors.

Big problem here is that I have to charge sales tax and the internet distributors don't. On a $2500+ item, the savings are significant. No amount of 'service' is going to change our customers minds, because they'll still end up bringing it to us anyway. Even charging for the maintenance that we would normally include with purchase, they still end up coming out ahead in all but the worst case scenarios.

Another problem is that there are other competitors in our local market. You can't win people over with your service if they don't come to your store in the first place. We would have price shoppers find out that we were the lowest in town on what they were looking for. They'd drive all the way across town, past 2 or 3 competitors to get the best price. Once they have experience dealing with us, we generally do a great job of keeping them with the superior service as well. Now when they call from across town and our price is identical to the store down the street from them, what incentive do they have to drive 50 minutes to our location?

I hate Minimum Selling Price policies. It ties my hands as a retail establishment. I have since sold far less of these certain products. I'm half inclined to drop their entire line over this issue. The only thing keeping me from doing it is that our biggest selling product of theirs does not have the MSP policy attached to it, yet. Once it does, I'll move to a different manufacturer.
 
Thanx Incidentalist, for your excellent explanation from the retailers point of view. It further demonstrates the complexity of the pricing issue, especially if you are forced to drop the manufacturer. From a manufacturers point of view, being dropped by a customer is not good for survival.

Another example of complications;

Many years ago, before the internet, we (Spyderco) came out with a new model. We had one large mail order customer that offered the brand new model at a very deep discount. All of our other dealers stopped carrying the model because they could not compete effectively and make sufficient profit. Customers would "check out" the model in their stores and then order it from the MO company. This effectively made the MO customer the ONLY customer. He couldn't sell enough to carry the model so the model was discontinued.

sal
 
I think the minimum prices are lame and a form of collusion
It is a price floor and I am against any price floors (or price ceilings for that matter), based on economic theory :mad:
But hey
The Manufacturers MANDATED Retail Price seems to be working for CRK so more power too him I guess
He seems to have a monopoly on custom knives I guess
So what happens if some one tries to sell one below MMRP on EBAY?
Nothing?
You get some stupid form letter from CRK? :confused:

I know that one of the disadvantages of owning a FRANCHISE is that you have to pay the franchiser's input goods prices even if you can get it cheaper locally
I think they do it mostly for quality control though.....


There are significant barriers to collusion, however, under most circumstances. These include:

* The number of firms: as the number of firms in an industry increases, it is more difficult to successfully organize and communicate.
* Cost and demand differences between firms: if costs vary significantly between firms, it may be impossible to establish a price at which to fix output.
* Cheating: there is considerable incentive to cheat on collusion agreements; though lowering prices might trigger price wars, in the short term the defecting firm may gain considerably.
* Potential entry: new firms may enter the industry, establishing a new baseline price and eliminating collusion (though anti-dumping laws and tariffs can prevent foreign companies entering the market).
* Economic recession: an increase in average total cost or a decrease in revenue provides incentive to compete with rival firms in order to secure a larger market share and increased demand.
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Sal Glesser said:
Another example of complications;

Many years ago, before the internet, we (Spyderco) came out with a new model. We had one large mail order customer that offered the brand new model at a very deep discount. All of our other dealers stopped carrying the model because they could not compete effectively and make sufficient profit. Customers would "check out" the model in their stores and then order it from the MO company. This effectively made the MO customer the ONLY customer. He couldn't sell enough to carry the model so the model was discontinued.

sal
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Point well taken, Sal.

As the Supreme Courts wrote in the Leegin case, "...vertical price restraints can have procompetitive effects."

(emphasis added)
 
We've heard from several knife manufacturers, a bunch of buyers, some deal getters. There has been much verbiage. But do we actually know that CRK sets a minimum retail price, or is it that their "wholesale" price does not have a lot of room in it for discounts? Maybe their pricing setup just does not set an artificially high MSRP and there is no room there to discount??

Most production companies have to sell their knives for say $50 to make their costs and a profit. They set an MSRP at $100 and the online price ends up being $75. That's a standard business model in the knife industry today.

With CRK perhaps they have to sell for $350 to make their costs and a profit. And they set the MSRP at $400. So there would be no room in the structure for discounts. And no one is getting exhorbitant profits. It's just that they don't set a super high MSRP that people are then free to cut, but no one actually charges.

I suggest this because I don't actually know CRKs costs nor their pricing structure. And I do not think we have heard from anyone who does. We just have assumptions that CRK products are overpriced. I've been involved with manufacturing for years. I used to run an operation where I had to calculate my costs and set my prices. I know enough about manufacturing costs to understand that CRK may not actually be making exhorbitant profits. It's a specialty market. It does not need to fit the business model of production knife companies.
 
Thomas W said:
Big Ben you missed the point. It isn't to protect the B&M outlets, it is to protect yourself.

I'm also unsure what you mean by "artificially inflating" prices.
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Thomas, it's simple. If Jones and Co. order 500,000 knives from a "big name" maker, they'll get factory direct, and a favorable price or they'll buy elsewhere.

If Smith's hardware odrers 20 knives from the same manufacturer, they'll get a much higher price because of low volume, and they''ll be forced to buy from a wholesaler, rather than factory direct thereby further increasing their cost.

If you FORCE Jones and Co to sell to the public at the same price as Smith's hardware, you're artifically inflating the price and engaging in blatant protectionism. This is bitterly anti-competitive, and anti capitalist.

Let the market place determine prices, not protectionist pressure groups.

Enforcing MSRP and MAP, is a form of "racketeering" in my book, and should not be tolerated in a free society.
 
Let's say a manufacture wants to get his products sold in a hypothetical huge +/- 3,500 store discount chain called "Mega Mart". He also sells it at other places that order much less volume.

I'd assume that "Mega Mart" would be able to negotiate a better wholesale price than the Mom and Pop stores. I don't think that is surprising.

When "Mega Mart" sets its retail prices it will want to have a lower price than the Mom and Pop stores, because low prices bring in the customers. If all the stores were free to set prices, "Mega Mart" would see what the price the rest of the stores set, and then set the "Mega-Mart" price lower. On the other hand, if the prices are dictated, "Mega-Mart" can set it's price and demand that the manufacturer set the minimum price for everybody else higher. Why would "Mega-Mart" lower prices when they could instead force it's competitors to raise theirs.
 
Ben Dover said:
If Jones and Co. order 500,000 knives from a "big name" maker, they'll get factory direct, and a favorable price or they'll buy elsewhere.

If Smith's hardware odrers 20 knives from the same manufacturer, they'll get a much higher price because of low volume, and they''ll be forced to buy from a wholesaler, rather than factory direct thereby further increasing their cost.
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This is just not the way it plays out Ben, and it's not that simple.

I'm afraid you just don't understand the basic principles of 2-step manufacturing within our little knife industry. Volume does not equate to a better price.

In this particular thread, we are AGAIN talking about a small specialty manufacturer which turns into a much different situation than if we are talking about a volume factory.

If you FORCE Jones and Co to sell to the public at the same price as Smith's hardware, you're artifically inflating the price and engaging in blatant protectionism. This is bitterly anti-competitive, and anti capitalist.

Let the market place determine prices, not protectionist pressure groups.

Enforcing MSRP and MAP, is a form of "racketeering" in my book, and should not be tolerated in a free society.
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You have your opinion Ben, but this form of "racketeering" (yes I'm offended), is perfectly legal in this free society.
 
Ben Dover said:
Enforcing MSRP and MAP, is a form of "racketeering" in my book, and should not be tolerated in a free society.
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I respectfully disagree.

In some circumstances, you're right: enforcing MSRP is not helpful and in fact can be problematical.

However, in other circumstances, enforcing MSRP can actually spur competition and be very helpful in a market based system such as ours.

So, completely banning - in all circumstances - the enforcement of MSRP is anti-market and out of place in a "free society".
 
Grey, I don't think we will have to worry about CRK's getting placement in Mega-Mart.

Maybe the subject of "Price Racketeering" needs a thread of it's own in a different forum, but we are talking CRK's and alike in this one.
 
I don't have a problem with MSRP and MAP.

Manufacturers Suggested Retail Price is just that, suggested. Many times, it's just plain comical (speaking from my industry, not necessarily the knife industry). If it's enforced it shouldn't be labled as a suggested retail price.

MAP levels the playing field between the big guys and the little guys, but (in my industry) I cannot think of any manufacturer that enforces a selling price at the MAP. You can still sell under the MAP, you just can't advertise under the MAP. Ever notice how some internet stores require you to put an item in your shopping cart before you see the price? That's one attempt around MAP. One of our biggest internet competitors would have the tag line "call store for price" on many items. If you call me and ask me what I'd sell you a sprocket for, that's not advertising on my part. But I can't run an add in the paper saying "Thanksgiving Weekend Sale, Sprockets for $100" if there MAP is $123.

So if a manufacturer is 'setting' the selling price at the MSRP or the MAP, that is wrong. They should at least call it what it is, a Minimum Selling Price. What does 'suggestive' or 'advertising' have to do with the minimum price the manufacturer wants to see it's product sold at?

Another thing that just came to mind is that most dealers know up front when they are first getting a line that there will be MSRP, MAP and possibly MSP. At that point, you can either accept it or not.

The scenario I described above was instituted 2 years ago and we had been authorized dealers of that manufacturer for over 25 years. Furthermore, they wanted to apply it to back stock. So if I had 3 widgets left over from the 2005 master order, they wanted to enforce the 2006 minimum selling price on those 3 widgets as well.

I can begrudgingly accept new product lines from an existing manufacturer or a new manufacturers products with these stipulations, but to change the rules mid-game pisses me off.
 
Trent Rock said:
So what happens if some one tries to sell one below MMRP on EBAY?
Nothing?
You get some stupid form letter from CRK? :confused:

....
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Sure would like to hear answers to thos questions. Everyone here seems to assume that CRK sets the retail price. Haven't heard anyone who actually sells the things confirm or deny. Nor have I seen anything from CRK. Sure would like some proof that this is actually happening before we decry it.
 
I would guess that if the person selling a Sebanza on ebay is an authorized dealer, then they would be held to the same standards as the brick and mortor CRK dealers. If they are breaking the stipulations of their contract with CRK, then I would have to assume that CRK could pull their dealership.

If they aren't an authorized dealer, what could CRK do? Nothing. Though it does beg the question of how much did the person who is selling it on ebay for 'cheap' pay for it and where did he get it?

I've heard from authorized CRK dealers that CRK does fix their prices 'to a certain extent', whatever that means. I've heard the same thing about William Henry.
 
knarfeng said:
Sure would like to hear answers to thos questions. Everyone here seems to assume that CRK sets the retail price. Haven't heard anyone who actually sells the things confirm or deny. Nor have I seen anything from CRK. Sure would like some proof that this is actually happening before we decry it.
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I'm shocked! The dealers are selling every one they can get their hands on for full retail. The horror! How dare CRK make them do something like that! They should be in here taking potshots at the goose that lays the golden eggs!
 
Ben Dover said:
If I can buy a product from a manufacturer or wholesaler, it then becomes my property. I should be able to sell my propery for whatever price I choose to sell it for.
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I agree, and you can...but then you may have problems getting more of that property, at least from the manufacturer. But if you already have a boatload of knives, flashlights, or whatever, you can sell them for anything you want, if you're not gouging, or you can give them away.

Smith & Wesson, a number of years ago, railroaded a lot of their dealers into not selling Rugers. Do it, they said, and "no soup for you!"...that is, our popular firearms will go to others. At the time that meant no stainless revolvers, no .44 magnums, no 36/60s...well, you get the picture. So I had to special order mine. Eventually, demand became so great that S&W could no longer reward their most faithful dealers, and the entire arrangement finally collapsed. (I remember one day I walked into the store and saw a beautiful stainless 629 Smith .44 mag. w/a 6-inch barrel on display. I knew it would sell for significantly more than retail, but I'd henceforth only seen them in hi-gloss gun rags. Anyway, the gun wasn't for sale, just display. The dealer had bought it himself wholesale. Had he not given up his Ruger line, though, he never would have to been able to get his hands on one.)
...I refuse to buy so-called "fair trade" items where the prices are artificially inflated by the manufacturers to protect brick and mortar businesses.
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I hear you! But remember, it's also done to protect the manufacturer of goods that have a reputation of being "high ticket" items. The price, they feel, represents the fine quality of the product.


If the B&M store, or the mom and pop can't compete, let them go under like the buggy whip makers.[/QUOTE]
 
Ben Dover said:
If I can buy a product from a manufacturer or wholesaler, it then becomes my property. I should be able to sell my propery for whatever price I choose to sell it for.
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Confederate said:
I agree, and you can...but then you may have problems getting more of that property, at least from the manufacturer.
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No you really can't. If there are pricing policies in place with a specific manufacturer, as an authorized dealer you just can't sell it for whatever you want.

With these specialty manufacturers there will be no other outlets to get the product, as there is never any 2-step program (distributors) in place with them. So you either want to play by the policies or you don't play at all.

Almost all the dealers that carry these boutique factories knives have no serious issues selling at an agreed upon retail price set by the manufacturer. In most cases it is difficult to even become an authorized dealer, as stock is quite limited, and there are strict qualifications required.

Now the bargain shopping consumer is the only one that will take real exception with all of this because ultimately they desire the deal of the day on a premium item. Heck, I'm in this boat on occasion as well.
 
I really really doubt CRK is making obscene profits, ever see the video from CRK? There's a lot of hand work involved. I think CRK is not charging enough, especially lately as other companies have moved upscale and are charging near sebenza prices for knives that are much inferior.

In fact some CRK dealers charge $100 over normal price for some models and they still sell out quickly.
 
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