Some say minimum advertised pricing would help storefront dealers compete with Websites. Others say it’s not that simple.
It’s no secret that brick-and-mortar retailers in the pool and spa industry are feeling the heat from their Internet counterparts.
Many see their products sell online for close to wholesale, leaving business owners to wonder how they’re supposed to make a profit or even stay afloat.
“This is something that I’ve been fighting in the industry for years, basically since high-speed Internet became commonplace,” said Randy Budd, president of Budd’s Pool Co. in Deptford, N.J. “There’s not going to be a pool industry left.”
It’s a contentious issue, with fingers pointing in every direction. Many dealers say manufacturers and distributors offer unfair advantages to Internet retailers, while some suppliers believe the brick-and-mortar professionals could do a better job differentiating their own value in the minds of consumers.
There’s probably no one solution to the online issue, but a number of industry members believe that minimum advertised pricing (MAP) would greatly help level the playing field.
MAP has been around in some form since the 1880s and quite simply is a policy that doesn’t allow resellers to advertise prices below a certain amount specified by the supplier. Currently utilized in a number of industries, the concept has supporters as well as detractors.
One outspoken proponent for the practice in the pool and spa business is Manuel Perez de la Mesa, president/CEO of PoolCorp in Covington, La.
“With minimum advertised pricing, brick-and-mortar companies can resell their product at a profit,” Perez de la Mesa said. “It also imposes on [Websites] the need to avoid the shortcut of using price to get business.
“What manufacturers gain is [the ability to] protect the value of their products, which are currently being devalued in the marketplace. And it protects their smaller dealers.”
Perez de la Mesa isn’t the only one who would like to see MAP instituted, or at least explored. Last year, the Northeast Spa & Pool Association formed a task force to address the issue of Internet retailers, and MAP came up as a viable way to help ease the problem.
“I think that minimum advertised pricing is actually the most fair concept we can possibly come up with,” said Rene Insignares, owner of Cool Pool & Spa in Nanuet, N.Y., and chairwoman of the NESPA task force. “There are some times when MAPs would at least hold a level that is higher than the actual price I pay for it.”
But is minimum advertised pricing the solution? Here, professionals discuss the pros and cons.
Cure for all ills?
Minimum advertised pricing is more complex than it sounds. A contingent of pool and spa manufacturers — including some that currently use MAP — believe it can’t be treated as a blanket solution.
MAP makes sense in certain instances, but not others, said Bill Kent, president/owner of AquaCal AutoPilot in St. Petersburg, Fla. His firm instituted MAP as part of its authorized dealership program for heat pumps and salt generators. The program also requires dealer training, whether that seller is brick-and-mortar or Web-based.
But while Kent believes the program makes sense for his particular niche, he wouldn’t assume so for everyone. AquaCal AutoPilot produces technically complex products that require knowledge on the sales and installation end, all the way through warranty support and troubleshooting.
Thus, MAP not only benefits Kent’s dealers, but also ensures that his company is making enough profit to finance its training and post-installation customer support. Otherwise, his firm is left to fix problems that may or may not stem from warranty issues.
But AquaCal AutoPilot also comes at it from an advantage. Kent believes many consumers specifically seek his brands and will pay more for them. He thinks MAP is best suited for products that are specialty items or require technical knowledge. “If I were a manufacturer of pool brushes, I wouldn’t have a MAP program for them,” he said.
In addition to looking at an item’s level of complexity, some manufacturers use other methods of deciding whether MAP is appropriate for a given product.
For instance, Zodiac Pool Systems will only dictate minimums for products commonly sold on the Internet. When it comes to items not generally seen online, mostly construction-related, MAP can unnecessarily tether the dealer, said David Nibler, vice president of marketing at the Vista, Calif.-based manufacturer.
“If we put MAP on the Internet for a waterfall and the builder then upcharges for installing it, the consumer can say, ‘No, that should only be [a lower price]. I saw it on the Internet,’” Nibler said.
Other categories that may not prove MAP-friendly are those with significant price disparities from region to region, such as chemicals. By dictating a minimum that must be charged, MAP can hinder a location’s ability to price according to what a given market will bear, said Charlie Schobel, vice president and general manager of BioLab in Lawrenceville, Ga.
“Florida is a completely different market than New York,” he explained. “The prices are different, which makes it very difficult to have minimum advertised prices.”
A link in the chain
Some believe MAP has a place in the industry, but that it doesn’t constitute the entire solution. These professionals say setting minimum prices would be a good first step to showing loyalty for brick-and-mortar retailers, but MAP alone won’t solve the problem.
For one thing, it’s important to remember that MAP stands for minimum advertised price, not minimum selling price. In other industries, Internet retailers have gotten around MAP by not listing a price on their Website, but instead inserting a tag line stating, “Call for our low prices.” The retailer then can sell the product at whatever price he or she wants.
“We can’t control what people do verbally,” Kent said. “That’s impossible.”
Yet even in that scenario, MAP still may have an effect because forcing consumers to call for a price will result in some lost sales. “It requires an act by the consumer to call,” Perez de la Mesa said. “So it does serve to protect the storefront retailer to a degree, as many consumers won’t make the call.”
It must be said, however, that some Internet sellers have found a way to get around the extra step. Rather than requiring shoppers to call for a price, the site will state, “Add to cart to see our low price.” The consumer then views the cart to learn the cost.
Bearing the burden
Then, of course, there’s the question of the burden that MAP places on manufacturers, and whether they stand to gain from dictating minimums.
It’s a simple fact that a manufacturer will lose business if it insists on MAP while its competitors don’t.
“When a company puts out competitive products that aren’t [MAP’d], we come across as a higher-priced product,” Nibler said. “So from our standpoint, we’re willing to do that to protect our dealer channel, but there are competitive losses.”
The other problem with MAP lies in enforcement. With so many constantly updated Websites out there, monitoring seems like a nearly insurmountable challenge.
The NESPA task force has acknowledged this fact and is trying to devise a way to help with the monitoring. They have discussed starting an Internet chat room where people can post complaints when they see something advertised too low. “But I’m not really sure how many members have time to monitor that,” Insignares said.
Concerned dealers tend to keep track to some extent, Kent said. His customers feel so strongly about maintaining the pricing minimums that they watch and will report violators.
“In general, it’s self-policing,” Kent said. “We do some policing, but it’s almost impossible to keep on top of it because it changes every day with the wind.”
But brick-and-mortar dealers say one thing is certain: Manufacturers stand to gain loyalty by instituting MAP.
“I can’t let [Web retailers] put me out of business,” Insignares said. “So I’m going to move toward companies that institute [MAP] because they’re assisting me in maintaining my existence.”