As PG&A inventories remain bloated, the dangers of heavy discounting mount. Brands take a wallop once their suggested retail prices become a running joke on eBay. To combat this, we’ve long had minimum advertised pricing (MAP) policies.
But dealers have mixed feelings about these policies. Some dealers don’t like them, period. The market should dictate prices, they say. Most dealers like the idea of MAP pricing, but they hate the policies of specific vendors or distributors. Or, perhaps more often, they resent policies that aren’t strictly enforced.
Of course, the main value of MAP pricing pertains to mail-order catalogs and the Internet. In growing numbers, people are shopping for PG&A on a national level, raising the competition for all dealers, everywhere. Strictly enforced MAP pricing allows a local brick-and-mortar to compete with a warehouse operation that otherwise could thrive on thin margins.
That’s the theory. Some Internet retailers have gotten around the rules with “Click for Our Price” and other gimmicks. Major kudos goes to Parts Unlimited for recently rewriting its policy to forbid such tactics. Starting this month, you can’t even insinuate that your prices may be lower than MSRP. (Click here for details on the new policy.)
But Parts Unlimited can enforce its policy because it covers only its own brands. Where the trouble lies is when a product is available from multiple sources. Unless all the sources agree to enforce the same policy (highly unlikely), there is no effective way to police it.
In August, I spoke about MAP pricing with Crystal Ashby, marketing director for Chaparral Motorsports in San Bernardino, Calif. Most of you are familiar with the store’s large mail-order/Internet operation. She said that big online retailers are unfairly targeted for MAP enforcement.
“We’re the big fish because we put the pricing out there,” she said, “so we are constantly monitored and told to fix this price or fix that price. But I could go on eBay, or I could go on any one of the number of PSN websites, and I could find the same product marked for less than what I had it advertised for.”
Ashby thinks this unfair prosecution is why some online retailers have come out with creative marketing plans. MotoClub, for example, has a membership business model similar to Costco’s (click here for our report on this relatively new e-tailer).
Please note that Ashby isn’t against MAP policies per se; she’s against unfair enforcement. She’s also against varying policies, those that allow for slight discounts of varying percentages. Because Chaparral Motorsports offers 170,000 part numbers, it’s time-consuming to keep up with all the changes.
Said Ashby, “I would rather have no MAP policy at all and let the market dictate what the price of the product should be, or have a full retail MAP policy, not a 10 percent off. They [vendors with varying policies] change their minds. A year ago it was full retail. Then it was down to 10 percent. And then, for just one product, we could go down to 15 percent. But now they want everything at retail. So depending on what day of the week it is, I have to go back through all of our advertising and adjust the pricing accordingly.
“If you’re going to have a MAP policy, then you should just make your MAP policy retail,” she suggests. “Because why take off 10 percent and give away 10 percent of the dealers’ margin? By saying you can mark it down 10 percent, you’re basically changing your true retail to 10 percent off of MSRP.”
It’s a game, she said. “Either have a full retail MAP policy and enforce it and cut off people if they don’t adhere to it, or don’t have one at all. Nothing in the middle. Parts Unlimited does a good job. Oakley does a really good job. There are people who do a good job. If they’re dealer-direct, if they have control of their product, they do a good job. If they don’t have control of their product and they have multiple sources, they don’t.”
Using Tucker Rocky as an example, Ashby said it strongly enforces the policies of its house brands, but not those of third-party vendors. “I can’t see [for example] the motivation behind Tucker Rocky caring about EBC’s pricing policy. I’m sure they could, if they wanted to cut off the business. But it’s EBC who wants it enforced.”
Ashby notes that even if Tucker Rocky did stop supplying a dealer violating EBC’s policy, that dealer would just buy from another source. “Tucker doesn’t enforce the same things Parts Unlimited wouldn’t enforce,” she said. “So until they both agree, which I don’t think they will, to enforce all the same things, the dealer could flip-flop around all the major distributors. … I wouldn’t want to push my customers away if I didn’t have to.”
But couldn’t EBC (or any other vendor with multiple channels) enforce its policy by telling all its distributors to stop supplying an offending dealer? Would the distributors comply? Could they? Perhaps this is already being done, but I doubt it.
Another dealer with strong feelings about MAP pricing is Audrey Menarik, owner of Moto Liberty in Dallas. Her store sells only apparel and accessories. For many years, she has been reporting MAP offenders to the distributors’ legal departments, to brand managers, or to her district sales managers. She also often calls the headquarters of the product line itself. She encourages other dealers to do the same.
Unlike Ashby, Menarik believes Tucker Rocky does a horrible job of enforcing its MAP policies among online retailers. “They are the worse out there,” she recently told me. “They just haven’t gotten a handle on it. They’re so far out of control, I don’t think they could get a handle on it.” (Tucker Rocky president Steve Johnson disagrees — for his take on MAP pricing, see the last section of the article found here.)
“Other than that, I’ve always gotten along with Tucker Rocky,” Menarik quickly added (they share a hometown, she noted).
Menarik is also disappointed in Arai’s enforcement efforts. “They make a little headway, and then they slack off,” she said. “I don’t care what they say, they are not doing a very good job anymore.”
Two years ago I spoke with Arai’s Roger Weston about this. He said that the company was aware of an entity that was illegally supplying eBay retailers with Arai helmets. In response, Arai was about to launch a new system to catch MAP offenders. He wouldn’t share details.
I spoke with another Arai rep earlier this year, and he told me nearly the same story. Apparently these things take time.
The interview with Weston was regarding a U.S. Supreme Court decision that has allowed companies to fix their prices. Beforehand, price-fixing was automatically illegal. Now courts will decide such antitrust lawsuits case by case. Since the decision two years ago, I haven’t heard of any powersports suppliers testing the system.
So which companies are enforcing their policies well, according to Menarik? She loves Parts Unlimited’s new policy. She herself played a part in instigating the change. In the months prior to its announcement, she sent formal letters to several Parts executives asking for it. “I was very happy with that,” she said. “All the frustration I had and the time I wasted on those letters, and it did some good finally.”
Menarik also told me an interesting story about Olympia Moto Sports, her No. 1 product line. When a bunch of the company’s apparel ended up on eBay after a store closing, Moto Olympia bought all of it to get it off the site immediately. Olympia Moto Sports told Menarik that it happily would have bought the products from the failed dealer directly, if it had been contacted. “Talk about someone going the extra mile to protect their Internet policy,” she said.
According to Menarik, a helmet supplier that’s been “incredible” about enforcing its policy is Scorpion Sports. But she’s concerned this may soon change now that Tucker Rocky also distributes the lids. “I did send an e-mail to my rep saying, ‘So now who will be in charge of enforcing the policy?’” She never got a reply.
Speaking of Scorpion, it wasn’t too long ago that it began selling directly to consumers on its website. My next blog entry will address vendors that compete against their own dealers. The list seems to be growing.
Tags: Arai, Audrey Menarik, Chaparral Motorsports, Crystal Ashby, EBC, MAP policies, minimum advertised price, Moto Liberty, MotoClub, Olympia Moto Sports, online discounters, Parts Unlimited, Scorpion Sports, Tucker Rocky