MAP Pricing Means That Steal of A Deal May Not be Delivered

Distributors often refuse to ship products purchased below MAP pricingJust a couple of years ago, only a few manufacturers used MAP pricing. Today, most of products we sell have Minimum Advertising Prices, also known as MAPs.

To sell the items, retailers promise not to sell the product for below the MAP. Doesn’t matter how big or small the store is, and usually the promise is in the form of a legally binding written contract.

This post explains MAP pricing: Why are manufacturers using MAPs these days? What happens when MAP “Cheaters” are caught? Is the product you want subject to MAP pricing? And: if a store lies to or cheats a company they work with all the time, why would an individual customer be treated better?  

MAPs Aren’t Really About Money

A manufacturer makes the same profit regardless of how much a store charges you. MAPs aren’t about fixing prices to maintain profit margins. Its because the manufacturer wants their product prices to say something like “we don’t sell junk and we don’t like our retailers to make it hard for you to figure out the difference between quality and crap.” Not the most tactful statement, but it’s often true.

Here’s something else you probably don’t know.  Many, if not most, things bought on line aren’t stocked in the store’s warehouse. Dealers of all sizes usually store only a fraction of inventory in their own facilities — even the largest online retailers, catalogs and home centers.

Even the biggest stores in the US often rely on manufacturers to ship a considerable amount of items to customers.  Manufacturers hold store most inventory and let others do most of the marketing, sales and customer services while they focus on product development, product branding and manufacturing. Some manufacturers just care about quality merchandise and quality stores more than others.

It’s a model that works well, but trust between the store and the manufacturer is critical. And if the store isn’t playing by the rules, the store’s customer is the loser.

Can you deal with these manufacturers directly? Not unless you have a physical or online store, a Federal Tax ID number, a state sales license and are prepared, in many cases to sign a contract. They are wholesalers, not retailers.

How Can You Tell if A Product Is Below MAP?

You need to compare prices. Don’t look at the product that’s on the top of Google, Bing or Yahoo because often the first price you see is there because the store paid to be number one. When you see the vast majority of prices are exactly the same with a few higher and a few lower, odds are that product has MAP pricing.

Since it’s useful information, but not the focus of this article, we’ve put some tips on using Google Shopping at the bottom of this article. It’s good reading, especially this time of the year.

The Most Punishment for MAP Violations: The Item Sold Is Not Shipped 

PriceMachine.comMany Online Sites Sole Purpose is To Track Prices.
It’s Useful, but The Price You Want? Well, That Can Be Risky.

 When you see a couple of prices that are either a few dollars or quite a bit below the majority of other stores, be careful. We know it’s very tempting.

But, it’s also very easy for the manufacturer to see which stores are selling below MAP with all the price monitoring tools available today.

Pricemachine.com and many other sites make it easy to enter the MAP price. Whenever stores list the price for lower, an email lets them know the dates and store who goes below MAP.

When any dealer agrees to sell MAP products, they know the rules. They know that the most common penalty when items are sold when they are listed below MAP price is that they manufacturer refuses to ship the item. Sometimes they get away with it, but not nearly as often as in the past.   (Repeated offenders are often asked to stop listing products on their websites.) 

And so, customers get a call or email  that says the order has been cancelled instead of an email saying when the delivery is expected. Sometimes, this can be days after the sale when the popular item may actually be sold out for a couple week or a month.

Remember: You Are the Store’s Customer, not the Manufacturer’s Customer

Don’t get mad at the manufacturer. The store took your money knowing what could happen when they got caught. It’s the store’s fault, not the manufacturer’s problem.

If you want to take a chance on a great deal, go ahead but realize there’s a risk attached. Things that seem too good to be true usually are.  And while the dealer may return the credit immediately, it can take 2 to 7 days for it to show up on your credit card.

With PayPal: don’t get us going on how long it could take. We waited 6 weeks to close our personal account while awaiting a refund for a “recurrent payment” we thought was a one-time purchase.  (We still don’t have a straight answer from PayPal about why it took so long: they said it was “confidential” and they didn’t have to tell us. Which is true: PayPal doesn’t have to follow the laws governing payments that banks or credit card companies need to follow. Yet another post for another day.)

Shady people don't give straight answers.What Excuse Do Dealers Give? We Aren’t Sure.

Sometimes, popular products in stock Saturday or Sunday are sold out by Thursday or Friday when you find out the orders is cancelled. If a customer wants a specific model or color they then have to wait a couple of weeks for the item to be delivered.

We also get calls from customers who ordered products on the weekend and were told late week that the order was cancelled without a real explanation.

We usually can guess when it’s due to a MAP violation, especially if customer notes that our prices are higher than the initial purchase.

Manufacturers aren’t shy about emailing reminders about MAP policies and the “We won’t ship” punishment. Many emails note when stores are caught selling below MAP. Sometimes specific stores are named, sometimes they are not.

We will tell you that one entity that is a repeat offender and has been named as such by several different manufacturers for violating MAPs on a wide variety of products: Amazon.  Apparently, cancelling who know how many orders doesn’t faze them, because they continue to do it. Do they get caught all the time? No, but they get caught often and penalized a lot more than in the past. We know several distributors who will not let Amazon sell their products directly.

Being the biggest doesn’t make you the best, not in the eyes of many manufacturers and distributors. (Or this consumer: We like to know who gets our money and that can be difficult on Amazon. As one of my old bosses used to say “you need to know whose head will roll when things go south.”)

Are Lower Prices Always Good? Not if Price Doesn’t Indicate Value or Quality

Often, you do get what you pay for.

Let’s say you need a new microwave oven. You look around online and see two very similar microwave ovens from two manufacturers. One microwave costs $50 and the other costs $150.  Both offer the same basic features with no frills.

Comparing_Apples_To_OrangesMost of the time, the quality of the $150 microwave is going to be far better. It could cook better, it may be easier to use, and probably it will last much longer than the $50 dollar microwave.

If you chose to buy the $50 dollar microwave you probably know that the cheaper item won’t work as well or last as long.  If the $50 dollar model is what you can afford or if you don’t use microwaves all that often, it might be the best choice for you.

But what happens with Catalog Bonanza Online decides they do want to sell microwave ovens along with pillows and planters. They can’t just start listing them and get the same market share as stores that have sold kitchen appliances for years.

So, they lower the price, often far below fair market value. But instead of seeing a $50 and $150 microwave, you may very well see two microwaves on their site for $60 to $70.

If price doesn’t indicate the value or quality for you, do your research to see whether you’re overpaying for the $50 microwave oven or getting a great deal on the $150 microwave. And if the $60 microwave may not be shipped due to a MAP violation.

Customer Service is One Reason for MAP Pricing

customer_serviceOne Reason for MAPs: Encouraging Sales Based on Customer Service,
Not Low-Price Wars

Some manufacturers use MAP pricing to encourage sales based on quality customer service, pre- and post-purchase, as opposed to sales based solely on low-bid competitions. (Some manufacturers don’t care about anything other than that the product moves. We don’t work with them.)

With many products, especially items with evolving technology like solar lights, customers have (or should have) questions about which particular model will best meet their needs. What is the best value available for their given budget and needs?

Try getting this type of information from Amazon, a large home center or catalog site, especially if it is a new or evolving technology. Customer service reps may be able to answer basic questions about shipping or returns, but they rarely have the knowledge to intelligently discuss product features to help you figure out what is the best value for your money.

Equally important, manufacturers of quality items don’t want you to mistake their product with overpriced imitations. The rising popularity of solar garden products and energy-efficient lighting means there are a lot quality items. Unfortunately, it also means there are a lot crappy knock-offs out there.

You may know a certain shoe or handbag priced hundreds of dollars less than the real-thing is a knockoff.  Most people don’t care as long as the look is right and the quality is decent.

With technology, it’s very different: you’re paying for more than a designer label. You’re paying for state-of-the-art features.

MAP Pricing Lets Manufacturers Determine the “Perceived Value” of Their Products

MAPs give manufacturers the control to place prices that indicate relative value on their products. They don’t like to relinquish this control to stores that wouldn’t sell their product two years ago and may not sell it next year.

investment

Manufacturers, especially of quality products, have invested heavily so that solar power, solar lighting and LED technology evolve. The prices often reflect this investment. Many items with MAPs use patented technology that other manufacturers won’t be able to use for some time. When they can use it, the technology is usually outdated.

Sure: manufacturers love the numbers of sales and increased exposure their products get when the Big Guys start selling them. That doesn’t mean anything goes.

More and more, our suppliers are telling retailers “We set the perceived value for our products, not retailers. We charge $150 for a basic microwave oven because it is made better, works better, is safer and lasts longer than a $50 microwave.”

In other words, they don’t want ANY DEALER making it difficult for the consumer to understand the difference in quality and to sell their quality item for the same price as a piece of junk.

If customers don’t like the price, manufactures don’t move merchandise. The USA still is a free capitalist society.  When items are overpriced, they don’t sell well and manufacturers usually adjust the price rather quickly.

How MAPs Work

Again, dealers usually sign contracts acknowledging MAP pricing are to be followed, and acknowledging the penalties for breaching this contractual obligation. The rules are very clear. Dealers can make special orders with customers that contact them directly, but ADVERTISING products below the MAP (including putting a below MAP price on the product description) is strictly forbidden.

Creative ways to charge MAPs but still get at the top of search engines are also forbidden. One old trick was to list a product $20 dollars below MAP and charge $20 for shipping. This trick is still used, but it’s also usually picked up by distributors and it’s considered a MAP violation.

Dealers don’t have a gun to their heads when they enter into these agreements, and we’ve always get lots of advance notice when MAP pricing will begin. (Usually it’s when annual price changes become effective.)

When dealers agree to play the MAP game to sell some of the best products, they are sent three prices for each item:

  • Wholesale cost – what the store pays for the item
  • Minimum Advertising Price (MAP) – the lowest price for which the seller can advertise the item
  • Manufacturers Recommended Selling Price (MSRP) – 95 percent of the time, MAPs are far lower than MSRP

How To Tell If a Product You Are Looking At Has MAP Pricing

With all the search engines and product listing sites, it’s not hard to tell. If you are looking for a product, the site listing the products may automatically give you a list of other dealers and other prices. Sometimes you might have to click a “compare prices” icon to get this. And, it’s worth your while to do so.

Until a year ago, Google did not charge stores to list inventory. Today, they do and the first price you see is rarely the best price these days. The first product you see usually is from the store that paid the most money to be there. (Some stores have Google Product Listing Budgets that exceed $10,000 per month depending on how diverse their inventory is. That’s a lot of clicks and guess which online retailer spends the most and raises the bid prices higher than most stores can afford. It begins with an “A.”)

Sometimes, the first price you see may be lower most, sometimes it’s higher, so it’s always smart to look at other prices, even if you have to go to the second page of the search.  If you see that 90 percent of prices are say $179.99 or $199.99, 2% are far lower and 8% are higher, odds are a MAP rule is there.

The listings 2% lower than the 90% are cheating or incorrectly listing their products. The other 8% look like they are selling at the MSRP (which is always higher than MAP pries) and/or adding padding to accommodate actually “free shipping.”

How to Identify MAP Prices and Compare Prices, Taxes and Shipping with Google

Smart shoppers online always compare prices online to get the best deals, see who charges for shipping and who does and does not need to charge sales tax.  If they didn’t stores wouldn’t low-ball prices. And, if you’re spending hundreds of dollars on an item, we do recommend you talking to the seller unless you know the product very well.

Tip: Whenever you look for items on Google, don’t use the regular Google search. Instead click on “Shopping” on the Google menu before entering what you want to buy. That’s how you can compare prices.

Screen Capture of Below Map Pricing. Store is closedHere’s a screen capture from regular Google of an item with MAP pricing.

Oops. Seriously, we did not plan this. Hugh71 won the top spot on a random Google search.

Unfortunately Hugh71 also appears to be out of business. Look closely and you’ll see that Hugh71’s sale was almost 2 months ago. Even Google searches are duds sometimes.

That’s why you need to look at the top of the Google menu and click “Shopping.”  Google Shopping, which stores now pay to list on, is more accurate and lets you easily see prices from several stores for the same item.

First of all, look at products that say “available from 20+ stores.” (Few products are only available from one store. If you see one that is, odds they entered the manufacturer’s product number differently from most, maybe with or without a dash or something.

Clicking the “from 20+ stores lets you see MANY of the different stores that sell the price and pay to have the listing on Google, such as the two circled in the screen capture below.

screen_capture_comparison_sitesWhenever possible, even if you have to go to page 2 of the Google search, look for Items available from multiple stores.  Google listings that aren’t “from other 20+ stores” are near the top of the page because the seller paid to be there.  The 20+ other stores don’t pay nearly as much and don’t pass that cost on to you.  Google clicks can cost $5, and often far more around any holiday.

When you click on the other 20 stores, you’ll see a list. Now far more than 20 stores sell this lamp.  The 20 stores are samples. Stores with smaller budgets run out earlier in the day or have their ads spread out evenly over the day so you no longer see all the stores all the time.

The more you pay Google, the more you show up. It used to be that all prices were shown all the time. (Don’t like it? Neither do most people. For more info, read our post Google Shopping is Becoming a Commercial Site: Impacts to Consumers that we wrote in the summer of 2012 when Google announced it’s “improvements.” We predicted the end of free listings on Google would mean less choice for consumers and that highest bids would rule the roost. Of course, Google said the “improvements” would provide a “better shopping experience for consumers.” We disagree and think that Google wanted to raise funds for their latest attempt to challenge Amazon as a major online retailer.)

Anyway, once you see the 20 stores, click on “Base Price” and you’ll see something like the following screen capture. Immediately you see one price dominates. A couple are far lower (MAP violations) and other stores charge fees. Because we sorted by base price, the lowest prices are shown. Page two of the search had many stores that charged the MSRP or some arbitrary number that covered shipping and transaction fees.

Guess Which One is the MAP Price?

WMost prices are the same and it’s clear which violate MAP rules. You used to see more low prices. Stricter MAP enforcement means these “deals” are largely going away. They’ll always be some cheats, but its much easier to find and penalize offenders than in the past. 

The first two dealers obviously aren’t playing by the rules. Sure, you can risk buying from them, but if your order is cancelled you may have to wait to get your money back. PayPal makes dealers return funds immediately, but PayPal takes their sweet time giving the money back to you.

Individual credit card companies and banks vary, but it could be 3 to 7 days business days between the time your order is cancelled and the return charge is credited to your credit card. And that is money you can’t spend put towards a replacement item.

So, along with sleazy shipping tricks, make sure that you don’t get Scrooged by someone playing game with MAPs. Do they always get caught? No. But when they do, it means there’s a good chance your “Great Deal” will turn into a great pain in the neck.

Copyright 2013, SolarLightingSmart.com, SolarFlairLighting.com. All Rights Reserved. This post/articles or any part of it may not be used in whole or in part without the express written permission of one of the above parties.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s