As brick-and-mortar retailers continue to feel the competitive
pressure from online sellers, the topic of minimum advertised
pricing (MAP) policies has become a hot one.
Some are beginning to demand MAPs, with which manufacturers
regulate the lowest price at which their products can be
advertised. Pool Boy, which produces powered reel systems, rolled
out such a policy when it entered the pool and spa industry about
five years ago.
“[Retailers] made it very clear that if we didn’t
institute MAP pricing, we weren’t going to get their business
because the Internet companies would just take over,” said
Kevin Schmidt, director of operations at the Elkhart, Ind.-based
But establishing MAP isn’t enough — the policy must be
enforced to be effective. To that end, some manufacturers are
beginning to clamp down on violators. Schmidt, for example, said he
recently cut off ties with a large Internet player when the company
refused to cooperate. The rub? That retailer provided about 30
percent of Pool Boy’s business last year.
“Even [with them] doing one-third of our business, I told
them ‘You’re fired. No more will we sell to
you,’” Schmidt said. “And other companies have
Outside the pool and spa industry, bicycle producer Dahon North America
recently banned a commonly used loophole — the “call to
get price” line that appears on many Web pages. This allows
sites to technically follow MAP rules because a lower price is not
advertised, yet the practice clearly lies outside the spirit of the
“The issue is that the price on the Internet is ... the price
that the public sees,” said Ken Fagut, director of sales and
marketing at Dahon North America, based in Duarte, Calif. “It
becomes the established price and can very much devalue the
To leave room for competitive pricing during Christmas and other
sale seasons, Dahon specifies a few periods throughout the year
during which dealers can advertise prices up to 10 percent lower
Yet many manufacturers balk at the difficulties in policing
Highly visible online sellers such as Amazon.com are easy to watch,
but smaller, less noticeable outfits are nearly impossible to
monitor. Complicating things further, Internet retailers have the
ability to change pricing several times a day, and even use
computer programs that automatically price-match to the lowest
The challenge is more severe for large producers or those making
commoditized products facing severe price competition.
“The moment you’ve got a few products and a few dozen
online sellers, it becomes a very cumbersome process to track
pricing on a daily or weekly basis,” said Wes Shepherd,
CEO/founder of Channel IQ , a Chicago-based firm that monitors pricing
activity for manufacturers and some large retailers in industries
such as electronics.
Methods for monitoring advertised pricing vary by company. Some
producers rely on their dealers to be on the lookout.
“It’s kind of self-policing,” said Bill Kent,
president of Team Horner in Fort Lauderdale, Fla. “If one
person violates it, the competitors call us and we go after the
Smaller manufacturers such as Pool Boy perform daily or near-daily
Internet searches in-house to gauge pricing variations. This can
combine with observant manufacturers’ representatives who
monitor the brick-and-mortar operations.
For larger companies, services such as Channel IQ make sense.
BioLab , for
instance, uses a similar outfit to look after its MAP
“It’s just availability of time,” said Scott
Newton, brand manager for Pro brands with BioLab Inc. in
Lawrenceville, Ga. “You just have so much time in a
Increasingly utilized by larger manufacturers in other industries,
these outfits often have proprietary software that monitors pricing
of their clients’ products in the Webisphere. They also can
supply reports and analysis and, in some cases, take care of
Outsourcing this work doesn’t make sense for everyone.
Shepherd thinks of it in terms of a matrix based on how many
products to which a manufacturer applies MAPs and the number of
retailers selling them. “If you have 50 SKUs and 50 dealers
online, that’s 2,500 possible product pages,” he said.
“It’s going to be kind of tough to monitor once you go
over 1,000 or 2,000 possible product pages on the Web.”
While these strategies help, there is one that Manuel Perez de la
Mesa would like to see used more. The CEO of Covington, La.-based
notes that many Internet retailers purchase from multiple
distributors, making it difficult to find out who supplied their
product. He has long advocated that equipment manufacturers provide
serial numbers for each individual unit to help track how it ends
up on a particular Website in spite of manufacturer sanctions.
“You can trace it, and everything would be
transparent,” Perez explained.
Horner has already enacted this for the products his company
manufacturers, which has helped some in policing MAPs, Kent
Once offenders have been caught, manufacturers handle the
infractions in different ways. The most stringent have a one-strike
policy and cut retailers off at the first violation. Others allow a
second or even third strike — enough, they feel, to establish
that the breaches are intentional. Even if they’re not banned
right away, offending dealers may still suffer such punitive
measures as losing discounts, rebates and other incentives. And
once they’ve been caught, they are likely to be monitored
constantly to make sure they stay in line.
But as the Pool Boy example shows, policing and enforcing MAPs can
come at a price. Yet Schmidt has no regrets.“This was not a
hard decision for us,” he said. “We pride ourselves on
our quality and integrity.”