Simple Problem, Simple Answer

Apparently our Black Friday specials were a little too good.  Several disgruntled manufacturers have contacted us regarding their concerns that our pricing was too low.  Seems as if a few of our competitors (one in particular) ratted us out and complained that we were unfairly discounting the prices.

Listen, I get that as we grow and become bigger threats to our competition they will use tactics like this as a way to take a shot at us.  In a way, it’s a compliment:  they’re admitting that because of their bloated inefficiencies that they have no way of competing with us on price.  They have crappier websites, larger warehouses, and a lot more employees, which leads to a whole lot more overhead.

I also get that manufacturers want to preserve the integrity and quality of their brand, and therefore do not want to see certain products for sale below certain prices.

Here’s what I don’t get.

First off, it was Black Friday.  Get over it.  It’s not like these are our year-round prices (although if the volume was this high we certainly could potentially get away with running those type discounts year-round…)

Side note:  definition time, from a manufacturers perspective.  Customers = who buys the product from you.  Consumers = the end user.  Sometimes they are one in the same, but usually there is a middle-man like us who is a customer of the manufacturer and sells products to the consumers.  Make sense?

Secondly, there is a fool-proof way for all manufacturers to never ever have this become an issue:  provide guidelines for all of your customers.  As your customers, give us strict price guidelines so that we know what we can and cannot charge consumers.  And I’m not talking about MSRP.  You give us a “suggested” retail price and we may or may not follow it.

What I’m proposing takes 15 minutes to come up with but avoids years of misunderstandings.  Give us real guidelines.  What is the absolute minimum we can sell your product for?  Can we run sales?  If so, for how long?

Let’s say I just created an awesome new blue widget that I sell to my customers for $75.  It’s much better than all of the other blue widgets out there that normally sell to consumers for $100, so I’ve decided that I want my MSRP on this particular widget to be $149.99, and I tell my customers as much.  However, I also tell them that I’ll allow them to list the product as low as $139.99 at their own discretion.  Once per year, for no longer than a month, they can sell it for $124.99.  Over Black Friday weekend, it can be discounted as low as $114.99.  All other sales require my approval first.

How hard was that?  Give us something like that as soon as we place our first order with you and we’ll never ever have an issue.  We will strictly abide by your terms.  Problem solved.

Or give us no guidance at all.  In that case, we’ll do whatever we want.

13 comments on Simple Problem, Simple Answer

  1. Anthony says:

    Well, I agree with the sentiment here. But I’m quite sure the reason they don’t do what you’re suggesting is because, as far as I’m aware, the legality of it is extremely up in the air.

    MSRP, as I understand it, is a nice way for a mfg to “suggest” a price to you without telling you you need to sell it at that price (but secretly tell you you need to sell it at that price). The reason they do it this way is because “suggesting” vs. “telling” is the difference between being in the clear vs. operating in a legally questionable manner.

    Tip of the iceberg on this subject:

  2. jennsquared says:

    I agree. With the yarn business, there are definitely clear guideline and what’s the minimum you can sell on the yarn and what’s the lowest discount that can be applied. I am a bit surprised to see that the detailing industry doesn’t do that. Then again I can see Anthony’s point.

    BTW, I’m working for Sikorsky now…

  3. Ted says:

    Manufacturers and wholesalers/distributors in Australia are prohibited from setting a minimum retail price. It is considered anti competitive.Heavy penalties apply for those that try. Of course there are a few different ways around these laws but none are fool proof.

    I think this is the way it should be. Competition brings innovation and benefits to consumers.

  4. Adam McFarland says:

    Thanks guys, you really made me think about this.

    @Anthony – I honestly never thought of the legalities of the whole thing. From the link you sent me, it seems like it’s OK to give pricing guidelines as long as “the competitive benefits outweigh its anti-competitive effects”. For the most part, I think manufacturers can provide fair guidelines that would be more beneficial than not.

    BUT, your comment made me ponder another question: if one of our manufacturers stopped selling to us because they disliked our pricing, would we have legal recourse against them? The answer seems to be yes, since it would be prohibiting us from competing. I am going to bring it up with our lawyer next time we meet to see what he thinks.

    @Jenn – congrats on the new gig. Happy to get out of Schick?

    @Ted – I completely agree that that’s the way it should be. It’s only fair…right? Again, I never really considered the legal aspects of it prior to writing this post, but now that I have I feel a lot better about what we’ve been doing with our discounts.

  5. Brandon says:


    I’m surprised your vendors don’t already have MAP pricing requirements. A majority of the vendors in every market we’ve worked in so far have minimum advertised price guidelines either equivalent to MSRP or at a level x%-lower than MSRP.

    As far as I understand, in the US these companies cannot legally require that we do not sell lower than MAP price.
    However, instead of going the legal route, they will simply stop selling to you if they find you are selling lower than MAP.

  6. Adam McFarland says:

    Agreed Brandon.

    Question though: if they stopped selling to you couldn’t you take them to court for not giving you a fair chance to compete? At least that’s how I understood the link to the article Anthony provided.

    Don’t get me wrong: I don’t ever want to get to that point in a vendor relationship. I don’t even want to have to mention lawyers or court or anything like that.

    I guess my main gripe now is this: they act like we broke the law by selling their products below MSRP, while in fact they themselves might be breaking the law by giving us a MSRP and holding us to it. It would have been nice if they were a little nicer about it to us instead of making it feel like we’re now on “probation” with them for running a Black Friday sale that, by the way, moved a lot of their product off of our shelves and led us to placing more large orders with them.

  7. nethy says:

    Hi Adam.

    Take it as a compliment. Getting big means that others will feel threatened. They’ll growl & maybe even bite.

    I’m definitely no expert on the topic, but t seems to me like the law in these matters is just another element in the environment. It doesn’t directly dictate what goes on. Sure they can’t legally stop supplying you. But you competitors can ask them to. They can ask you to. They can send a C&D. They can threaten & growl.

    They can use the threat of legal costs as a weapon. All sorts of things can be done ‘with’ the law. You tend to have an advantage if you are a bigger & more established player because 5-10hrs of lawyers fees cost the same regardless of your turnover.

    Anyway like I said, take it as a compliment. Big kids rules, I guess.

    Maybe this is a cue to start thinking bigger. How about a Di label? Finding white label suppliers is supposedly getting easier. Just a thought (you’ve probably had it too). That’s also the kind of thing that might worry your suppliers. They may appease their clients by softening their competition, but the last thing they want is to create a competitor out of their customer.

    BTW Adam, thanks for sharing. Appreciated.


  8. Leigh says:

    This reminds me how lucky I am not to work with physical products that I need to buy from a supplier. When I write and publish an e-book, I can set my own price. If I want to just get the info out, I can make it free. If I want to make a profit, I can charge $27, $37, or more.

  9. Tim Reynolds says:

    Nice post. Thank you for the info. Keep it up.

  10. Adam McFarland says:

    Update – apparently MAPs (minimum advertised prices) are legal

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