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Monday, December 17, 2007

A MAP to Christmas...

I am not sure how familiar you will all be with the concept, but I thought that it may be a neat topic to discuss MAP.

No I don't mean Map Quest, Google Maps, or those 180-panel maps that cannot be refolded. I am talking about Minimum Advertised Price! Most stores that you will shop in this holiday adhere to this policy and those that don't, well you either see key products advertised or potentially even available.

Ever wonder that, for the most part, everywhere you go the Wii is $249 no matter pretty much where you get it? Don't cha thick Wal-Mart would try to under-sell Best Buy on this (if they had them) just to get you into their stores?

No can do.

There is probably a Minimum Advertised Price for the piece or perhaps even an Minimum Selling Price.

But why would Nintendo care, they make their money selling to Wal-Mart and Best Buy, locking in their profit? Basically to make sure that all of their dealers have a chance to make some margin on the product. Nintendo cannot afford to just have Best Buy and Wal-Mart as their only dealers, because they probably (deservedly so) get better pricing based on the volume they buy.

Basically without this protection, little Mom and Pop shops could be crushed.

In fact, in many cases if you won't adhere to the policy the vendor won't open (or keep you) you as a reseller. This is why you rarely see Sony in Costco. Costco won't sell at an agreed upon price as they are an EDLP reseller, or Everyday Low Price. This means the generally they price cost up. They want to make X on light bulbs so they charge their cost plus X margin. So if they want to sell Sony they have to find a whole seller that will sell to them, albeit at a higher price.

Until recently all this policy was kind of on the fringes as it walked a tight line to price fixing which is illegal...until recently.

The Supreme Court (not to be confused with the Supremes in court) recently handed down a verdict that made it legal for manufactures to be able to set Minimum Sell Prices for the first time officially. Basically a Costco-type place sued a high-end Purse manufacturer saying that they violated price fixing laws by cutting them off from reselling the purses.

After all the arguments the Court agreed with the manufacturer, basically agreeing that the manufacture can sometimes take steps in order to protect their brick and mortar dealers from over zealous competition.

So where will this end up? Well discounters are a smart bunch and this is why you see new promotions like "Gift Card Sales" or "Come in and Save" type promos.

While MAP means that it can be tough to get lower prices on top-flight gear, at least there is bio-diversity in what stores you can shop...


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