- Category: December 2009
- Published: Tuesday, 01 December 2009 01:00
- Written by Super User
Recently there was a bit of a hubbub generated about Victorinox instituting and enforcing Minimum Advertised Pricing (MAP) on their dealers, causing Tim at Felinevet to raise the prices of certain models in his store. Some of you may have noticed, some may not, and others may have read about it on the forums. Well, I have been meaning to address the issue for the benefit of everyone for some time now, to dispel any rumors or concerns folks may have regarding this.
Some background on retail pricing policy is necessary here for those who have no understanding of the process. A company like Victorinox produces an item and sells to the authorized dealer for a certain amount of money. That price is doubled to make what is referred to as the Manufacturer's Suggested Retail Price (MSRP), also known as the List Price. The retailer then sells the item somewhere bewteen MSRP and his cost, based on competition, overhead and how much of a profit he/she wants/needs to make. For example, if a dealer purchases an item for $50.00, then the MSRP is $100, and the retailer will likely sell the item for $70. In this way, the manufacturer can claim that their product is worth $100, and the dealer can appear to be doing the customer a favor by selling him an item for 30% less than what it's valued at, making the customer happy, while the dealer still manages to cover his expenses and get paid. The percentages vary slightly from manufacturer to manufacturer, dealer to dealer, and item to item, but that's pretty well how the industry is set up.
Up until recently many sellers on eBay have been undercutting each other to the point where they are making almost no money- some have made up for it in volume, others have charged higher shipping rates to compensate, and some, simply were hobby dealers who don't mind only making a few cents here and there. What ultimately happened as a result of this, is that the knives started to be devalued, making it that much harder for website owners and brick & mortar dealers to compete.
So, Victorinox instituted a policy of Minimum Advertised Pricing, similar to that already in place with other knife/tool manufacturers, which states basically that while dealers can sell for less than MSRP (and in fact are encouraged to do so for the reasons mentioned above) they are not allowed to advertise any products below a certain price level. In the example above with the $100 MSRP that dealers payed $50 for, the price has dropped as each dealer tried to undercut the others until the price was more like $55 for an item valued at $100. Some dealers dropped out of selling as a result of not being lucrative enough to be worth their while. By the time one pays seller's fees and shipping, there isn't a lot left over, so Victorinox basically decreed that no authorized dealer can sell for less than a certain level- for example, $65 for the item in the example.
The issue here is that many eBay and other hobby dealers aren't Victorinox authorized dealers, but rather get their stock from an independant distributor such as Blue Ridge Knives, and so are not subject to MAP pricing. This is unfortunate, as many legitimate dealers like Tim are likely to feel a slight pinch, but then, many of them have been squeezed out by undercutting anyway.
As I said, MAP pricing is a practice in place by many manufacturers, and so it's not really a new thing. In Tim's case it's actually a good thing as the few extra dollars that he's being forced to make all goes to support The Feline Vetrinary Emergency Assistance Program, the reason behind Tim's entire dealership. Being an authorized Victorinox dealer does give Tim some benefits as well- he gets new models sooner than they can filter through distributors, he gets news from Victorinox that he shares with the community, and he will always have the best prices he can offer on any new items. Used items will always be at his discretion for pricing, as MAP pricing only covers new items.
This new pricing strategy from Victorinox has also convinced Tim to re-think the way he does business. Since he can no longer compete on eBay, he has decided to close down shop there and concentrate on his shop on SOSAKOnline and listings on EDCSource, which he has been doing plenty of- he has just over 80 items listed at the time I write this. With lower fees and a dedicated collector community, EDCSource will always have a spot for Tim, as well as all SOSAK members, whether they are buying or selling.
I hope this has clarified some of the questions some folks have had regarding this- and as always, feel free to leave comments here, or contact me with any thoughts, comments, questions etc.