MARP Price Fixing Update - Consumers Win!

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I note a lot of folk have put forward the idea that each business has the right to "conduct" business in a way they see best (ie) SP enforcing the MARP agreement on its retailers and if one dos not wish to trade in this way, you are free to buy another brand to trade with.

This is true, but it only looks at one side of the coin, so let me just throw out a hypothetical "other side of the coin scenario" for comments.

Lets say for example I own a strong SP dealership in a big city. SP is bringing out a new reg in 30 days and have some old stock they want to get rid of. So SP calls me up and says "Listen, we have 300 old regs overstocked here on our shelf, how about you take them all and we knock 20% off your price for doing so?"

I say, Great, but how about I take all 300 PLUS 300 gauges, you knock 22% off the regs and 15% off the gauges and I pay today.?

"SP agrees!!".

Now, my next step is I call the local newspaper and dive magazine and I say I want a full page ad saying "SP REGS AT 25% OFF" - OR "SP regs PLUS GAUGE @30% OFF" - 300 available first come first served.

Then I look around my store and pick a few slow moving lines and "piggy back" these lines on "SPECIAL" in my store.

Now to me this is a WIN / WIN situation, SP gets shot of their overstock, plus sells 300 gauges, I am able to entice new customers with a good special, I get rid of my slow moving inventory AND maybe a few extra lines at regular price, PLUS the customer gets a good deal, dives more regularly because he has his own gear and hopefully stays my customer.!! Why not, I worked to get him into my store.!

BUT...............................then SP says NO,NO. You cant do that because of your MARP / MAP agreement, so you must sell these regs and gauges off piece meal, over the next 6 months at regular price, because if you start discounting, JOE 100 miles down the road (who dosnt have the finances or the stomach for the risk by the way) will loose customers and go out of business!!!

"WHAT!!!".................are you kidding me, You, SP, want ME to put up my hard earned money, you want ME to take the financial risk, you want ME to put in the hard work, but YOU want still want to protect your regular priced equipment in Joe s shop down the road.??.

So I say "NO THANKS".

So, what happens,.................... SP moves the product in FRANCE and GERMANY where there is no MARP and the local shops and divers there get the benefit, keeping prices ARTIFICIALLY inflated in the US domestic market and Joe in business.

Surely, surely, anyone can see that is anti-competitive and BAD for any industry.

In my opinion (and its only my opinion) some LDS operators fighting to keep MARP and MAP are happy with the status quo, (they may complain and not like everything about it ) but the alternative is an unknown to them and maybe they are just "a little afraid" of that change.?

 

[friscuba]

Well, more power to the guys in France and Germany I guess, 300 regs headed that way at a bargain price is unlikely to affect the market in the rest of the world. If SP offers a 20% discount and you come back and negotiate a better deal, how does that negate your dealership agreement to where you suddenly don't have to follow MARP anymore? I can't see how any dealer would make that leap, unless they're prone to making leaps all the time. Nothing wrong with increasing one's margin every now and then, that's the reward the guy who has the finances or stomach for the risk gets for putting up the big order.

If SP were forcing those regs on you that's another matter, but I suspect if you turn them down they'll make the offer to another store, or open up a discounted offer to everyone, limited to stock on hand, to move the product quickly. I'm not a retailer, but I've brought in some gear for use on the boat and the companies I've dealt with offered inventory closeouts to everyone when they want to dump product. I suspect SP is no different, if they want to move the last 300 regs bad enough they'll find homes for them even it they have to do it one at a time.

 

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Well, more power to the guys in France and Germany I guess, 300 regs headed that way at a bargain price is unlikely to affect the market in the rest of the world. If SP offers a 20% discount and you come back and negotiate a better deal, how does that negate your dealership agreement to where you suddenly don't have to follow MARP anymore? I can't see how any dealer would make that leap, unless they're prone to making leaps all the time. Nothing wrong with increasing one's margin every now and then, that's the reward the guy who has the finances or stomach for the risk gets for putting up the big order.

I hear you, but its not about "effecting the market" (it would take 3000 regs to do that) - this was just an example, but it is about "taking away my ability" to grab a prospective marketing opportunity and improve my business.

Personally, as a businessman, I would not care about Joe down the road, I am in business for me, not him, why must I be forced to sell at a price or advertise at a price that suits him because he is too lazy, underfinanced or inept to run a competant business model.?

The argument that "just sell another product" dosnt hold water for me, it makes me think some shops prefer to sell one reg a month (for example, guys for example) at full retail and then complain that business is bad, rather than selling 20 at a discount by actively marketing a product with magazines and newspaper drops, running specials for their client base, recruiting new customers and so on.

I dont think ANY shop wants to see a customer walk out their door, I would find it very,very, difficult to see a customer walk away when I KNOW I could have made a sale, but didnt, because he wasnt prepared to pay the price and I couldnt drop due to MARP.

Stock can always be replaced, customers cant.

Dealers in a market where there are no MARP and MAP agreements make that leap as I explained in the previous post all the time - me included, its in fact a very important part of my business.

 

[CDNScubaMoose]

Now, my next step is I call the local newspaper and dive magazine and I say I want a full page ad saying "SP REGS AT 25% OFF" - OR "SP regs PLUS GAUGE @30% OFF" - 300 available first come first served.

Then I look around my store and pick a few slow moving lines and "piggy back" these lines on "SPECIAL" in my store.

Now to me this is a WIN / WIN situation, SP gets shot of their overstock, plus sells 300 gauges, I am able to entice new customers with a good special, I get rid of my slow moving inventory AND maybe a few extra lines at regular price, PLUS the customer gets a good deal, dives more regularly because he has his own gear and hopefully stays my customer.!! Why not, I worked to get him into my store.!

Or how about take a leap of faith that not all your customers are price sensitive but instead are just looking for a good deal. Put together a package that promotes your store by transferring some of the extra income that you could capture from the better wholesale price to other parts of your business.

Ex. Develop a customer loyalty program that promotes continuing education. For every dollar that a customer spends at your store on equipment you offer 25% of that towards continuing education fund that the customer can access to pay for up to 50% of any con-ed course. Then when you get a hot deal like the SP you can have a "buy SP regs and get double con-ed credits promotion". This way SP sells their over-stock, your customer gets a good deal, you can promote live long learning to your customers, your customer is going to do more diving (and likely enjoy it more). And if Joe 100 miles away isn't creative enough to come up with something like this then the market will take care of him.

Just because a segment of the diving population wants the cheapest possible price (or close to it) doesn't mean you have to cater to this segment and worse - assume that the entire customer base wants to go this way. There are options out there for this segment and let them make their purchases where they want, they don't see value in a relationship with you (or if they do, as soon as someone comes along with a better deal they forge a new relationship). If you want a high volume, low return business model then go for it, but don't demand everyone follow you and expect that you can dictate business practices to them.

 

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Or how about take a leap of faith that not all your customers are price sensitive but instead are just looking for a good deal. Put together a package that promotes your store by transferring some of the extra income that you could capture from the better wholesale price to other parts of your business.

Ex. Develop a customer loyalty program that promotes continuing education. For every dollar that a customer spends at your store on equipment you offer 25% of that towards continuing education fund that the customer can access to pay for up to 50% of any con-ed course. Then when you get a hot deal like the SP you can have a "buy SP regs and get double con-ed credits promotion". This way SP sells their over-stock, your customer gets a good deal, you can promote live long learning to your customers, your customer is going to do more diving (and likely enjoy it more). And if Joe 100 miles away isn't creative enough to come up with something like this then the market will take care of him.

Just because a segment of the diving population wants the cheapest possible price (or close to it) doesn't mean you have to cater to this segment and worse - assume that the entire customer base wants to go this way. There are options out there for this segment and let them make their purchases where they want, they don't see value in a relationship with you (or if they do, as soon as someone comes along with a better deal they forge a new relationship). If you want a high volume, low return business model then go for it, but don't demand everyone follow you and expect that you can dictate business practices to them.

Again moose, I hear you, but believe me, dive shops are not selling bread and milk, few can pick and choose their markets and customers, the business is just not that good to allow any shop that liberty, dive shops need every customer they can get, they need to be able to supply both the high and the low end markets, the price sensitive and the not so price sensitive and they need room to manuver inbetween - no dive shop I know, can afford to turn a customer away - not one.!

I am also not saying all customers are motivated by price, (but as someone in the business, I can assure you a lot are.,) but you are assuming the market is motivated by folk who want the add ons (ie) new divers, this may be so to a degree, but theres also a big chunck of the market who are regular divers or small schools who buy regularly, or who may be upgrading, replacing etc, these guys ARE certainly motivated by price, they have a supply of air, and all their gear, they dont want add ons, they want a deal on THAT reg, thats all, .............why should I not be able to assist if I so desire??

.........Do I just shrug my shoulders and show him the door.??

 

[Peter Guy]

Surely, surely, anyone can see that is anti-competitive and BAD for any industry.

While I may agree with you on both counts, I believe even SP has the absolute right to be totally stupid in how it runs its business.

The issue to me is pretty simple -- would you rather have a few politicians/bureaucrats decide how every one operates their business to make sure it is "fair" for everyone OR would you rather have a multitude of people decide what is the best way for THEM to run their individual operation -- EVEN IF some of them will be "unfair" and even totally "stupid" in how they operate?

Me, I'll take my chances with the multitude even knowing that some of the decisions will be "unfair" and "stupid" beyond belief!

 

[CDNScubaMoose]

Again moose, I hear you, but believe me, dive shops are not selling bread and milk, few can pick and choose their markets and customers, the business is just not that good to allow any shop that liberty, dive shops need every customer they can get, they need to be able to supply both the high and the low end markets, the price sensitive and the not so price sensitive and they need room to manuver inbetween - no dive shop I know, can afford to turn a customer away - not one.!

I too speak from experience - I am in sales, and in an industry where a very large percentage of the customer base refuse to look past price. It is also a very competitive industry that isn't the greatest paying so my competition (who are general less experienced and have less training on selling value) tends to run to price very quickly (approaching lightspeed most days). This doesn't mean that I follow suit, instead since they refuse to come up with any type of value offering, I don't need to come up with much to differiante myself from them. Does this mean I get every customer - no, there are some customers that don't see value in these offerings and I refuse to do business on their terms. I might loose the sale this time but in my opinion it means I just have to come up with a value offering that will get past the price only focus. As I have said before, if you make your sale on price then you can loose it on price too.

I am also not saying all customers are motivated by price, (but as someone in the business, I can assure you a lot are.,) but you are assuming the market is motivated by folk who want the add ons (ie) new divers, this may be so to a degree, but theres also a big chunck of the market who are regular divers or small schools who buy regularly, or who may be upgrading, replacing etc, these guys ARE certainly motivated by price, they have a supply of air, and all their gear, they dont want add ons, they want a deal on THAT reg, thats all, .............why should I not be able to assist if I so desire??

I am not going to claim that the majority of customers aren't motivated by price, but as professional salespeople we shouldn't be willing to accept that price is the only motivation or the most important one. IMHO, a lot of consumers don't realize that there are other areas to negoiate because they aren't used to anything but price being the only thing they can negoiate. In your example - if the group that you are talking about want THAT reg and everyone is on the same page then either those customers have to accept that price or learn to negoiate on another aspect of the deal. If you are able to knock off say 15% off MAP/MARP, then what is to stop someone from knocking off 16% and you loosing the sale over 1%. One of the hardest things I had to learn in sales was when to "fire a customer" ... because you always want to make that sale, always want to give the customer what they want, but sometimes you have to accept you are not going to be able to meet their needs/wants.

 

[friscuba]

I hear you, but its not about "effecting the market" (it would take 3000 regs to do that) - this was just an example, but it is about "taking away my ability" to grab a prospective marketing opportunity and improve my business.

Personally, as a businessman, I would not care about Joe down the road, I am in business for me, not him, why must I be forced to sell at a price or advertise at a price that suits him because he is too lazy, underfinanced or inept to run a competant business model.?

The argument that "just sell another product" dosnt hold water for me, it makes me think some shops prefer to sell one reg a month (for example, guys for example) at full retail and then complain that business is bad, rather than selling 20 at a discount by actively marketing a product with magazines and newspaper drops, running specials for their client base, recruiting new customers and so on.

I dont think ANY shop wants to see a customer walk out their door, I would find it very,very, difficult to see a customer walk away when I KNOW I could have made a sale, but didnt, because he wasnt prepared to pay the price and I couldnt drop due to MARP.

Stock can always be replaced, customers cant.

Dealers in a market where there are no MARP and MAP agreements make that leap as I explained in the previous post all the time - me included, its in fact a very important part of my business.

What is Scubapro's MARP these days anyways? I seem to recall hearing it was 15% below recommended price back in the day (EDIT: I notice now that it's listed as 10% in another thread), if so there are still opportunities to discount the gear and, as CDNSM points out, tie in other value to the sale. Why not toss in airfills with the purchase and get them back in your store numerous more times?

You may not care about Joe down the road, but you can bet there are customers HE started that are looking at your store, if you do a good job of service you'll get some of them. If he goes down the tubes, in the long run you might find that you suffer. I'm trying to think of times that predatory or high discount pricing has increased the market size and I'm having a tough time doing that, I can readily think of examples where such pricing has hurt competition AND the overall market (Our local example is GO airlines vs. Aloha and Hawaiian air... Go put out super low rates, got a few extra customers, hurt everyone, Aloha ended up going out of biz... did Go get all of their customers... NO, fewer people started making the trip immediately and it never recovered).

I'm well aware that many shops may only sell a reg a month, but to think that that'll somehow go magically to 20 by advertising a 25% discount (I believe that's the original number in the thread) and not do a thing by offering a manufacturer allowed discount coupled along with other value might be a reach. I could see it easily go from one to four to eight or so, but at that rate are you really bringing in that much more profit by the time you spend money on advertising and other efforts after it's all said and done?

I worked for a dive shop with multiple owners that "took turns" managing the store. One believed in discounts and high volume... he moved LOTS more product but the store barely cleared a profit. The other guys kicked him out, went back to MSRP, sales fell in half, and everyone made more money.

 

[mdb]

Wholesale pricing is the issue yet to be raised in this very popular thread.

Any legislation will not affect the wholesale price charged. The "big guys"
are buying in pallet and container loads, purchasing, in most cases, at huge discounts,
discounts not ever published.

If the MAP price is eliminated the prices will fall fast. The big will prevail. They will still
have a good margin. The smaller Retailer will, if they choose to match prices, be underbid
every time.

We do have a MAP policy. We have no MARP, no restrictions on e-commerce, we sell parts direct to divers,
our price list is clean and fair. It is simpler that way. We want all our Dealers to do well.

 

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While I may agree with you on both counts, I believe even SP has the absolute right to be totally stupid in how it runs its business.

Ha,Ha,Ha, you gonna have to buy me a new keyboard, cos I just spit my tea all over this one.

But,............ you are right, I agree with you completely.

Dont you think that it will have to change pretty soon though?.

Personally, unless it changes, I cant see the local Mom and Pop store (world wide, not just domestically in the USA) surviving the next 5 years, and Scuba equipment sales will be absorbed into the big sports retailers, department stores and over the internet.

Independant Scuba shops will "morph" into multiple sports and dive training only and day trip operators to divers in Summer and say for eg. Ski schools or similar in winter to survive.

Dunno, maybe I am wrong, "Hope so".!