Re: MAP Pricing Structure
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: ceylonc</div><div class="ubbcode-body">I posted this in Scott's thread but it may be more relevant here. It is my biased opinion as a "little guy" who supports a capitalist world. It isn't perfect but it is my $.02...
What is going on with Scott & every other shooting industry product where MAP is involved is nothing but a big economics lesson. No need to go into details but you have the "Wal-Mart" effect (ie--big player, "wholesale" pricing, cutthroat marketing & "loss leaders" in play) creeping into niche industries like tactical & benchrest shooting, etc. These used to be small market segments served by a small group of retailers who provided exceptional service, product knowledge, and MSRP pricing. Competition & relationships between the players in these niches was professional & kept above board the vast majority of the time. These little guys could survive because their profit margins were adequate & they could develop a loyal & passionate customer base due to their excellent service & vast product knowledge as it related to the specific niche they were serving.
As the economy has contracted over the last few years, a lot of the high volume outdoor/hunting/shooting product catagories have shrunk while these niche segments have been stable or grown. Thus, the big guys decide they want in on the action & the first thing they do is drop pricing to MAP in order to try to grab a share of the market. Never mind that the vast majority of them don't "know" the customer they're now targeting or are even set up to provide advice or pre/post purchase servicing to the clientelle. To them, they'll compete on price alone & there will be customers. You know what, they are right and have been effective in cutting into the market share & pockets of the little guy who was there first. Couple this into the fact that a "big guy" can walk into SHOT or any manufacturer's headquarters & drop big $$ to purchase all the demos or entire production runs at a well below standard dealer price. Think they'll pass along this extended savings to the customer: NO. They'll keep the product at MAP but reap a higher margin that the rest of the dealer base still buying at "Dealer Price" but selling at MAP. This further erodes the customer base & margins of the people who helped grow the niche in the first place. In the end, you have your little guy having to accept smaller margins, aggressive customers shopping every dealer in town/online, and eventually bleeding small but established businesses to what may be come a slow death...
This isn't just within the optics segment either. I do a fairly robust nylon business & want to grow in 2011. I called a (unnamed) manufacturer after SHOT for dealer pricing, policies, etc and had some questions regarding the MAP policy. In no uncertain terms, the rep told me that yes, they do enforce MAP, but "...it gets complicated" with enforcement when it comes to their large, national accounts. She basically told me that they would not enforce MAP on those accounts because, and I quote, "They spend $1 million dollars a year with us". So, in many cases, you have selective enforcement of MAP where the manufacturer relinquishes control of the policy to whichever BIG customer who decides to openly advertise below MAP. In these cases, the little guy pretty much has to make a decision whether to carry & compete with the same item or just eliminate the product from their catalog. If it's the latter, the customer may be getting the item at MAP price but they are losing a dealer who possesses a knowledge base & could possibly advise on other products that might be better suited to the customer's applications.
I never fault a customer for shopping for what they perceive as the "best" deal. We live in a capitalist society and an item is worth what somebody is willing to pay for it & what the seller is willing to sell it for, not what price the manufacturer assigns to the item. However, manufacturers do play a part & can put a lot of pressure & weight on the dealers who sell their stuff. MAP, while inconvenient, isn't really that big of deal IF privacy is maintained between customer & dealer. Competition prevails, and the CUSTOMER decides whether the price they're able to find is worth it, from a performance, quality, service and value perspective. Regardless, Scott's dilemma & subsequent decision to alter his sales policies should be a fair warning that advertised prices on most of the stuff guys here want are likely going to go UP in the near term. After much thought of late (and reading the numerous pages in this thread), I too have decided to omit the "'Hide member hook up" phrase that used to be part of my sig line. The risk of losing valuable vendors over a MAP spat is simply too great in the current environment to make such an offering or statement in the public arena.
Sorry for the rant. Hopefully the folks here will continue to see the value of a business like Liberty Optics and will continue to support it's existance by buying from Scott.
</div></div>
i couldn't have put it better myself
