Did the Supreme Court in its infinite wisdom suddenly give the CE/Imaging industries a license to make a profit? Could it be that the Divine Nine knew that by striking down a century-long statute against resale price maintenance they’d be helping to drive some sanity to this industry? Did they think we really wouldn’t be better off slashing prices so low that we’ve been described as a business of profitless prosperity? And what will we do with our new-found rights?
In the landmark Leegin Creative Leather Products, Inc. v. PSKS, Inc. case, the Court found that agreements between a manufacturer and a reseller that set the minimum price for which the manufacturer’s goods could be sold are no longer always illegal. The decision suggests that the “rule of reason” should be applied to determine whether or not a supplier’s pricing practices are illegal. Previous anti-trust rulings made it difficult for vendors to enforce most MAP pricing schemes.
The dissenting Justices expressed fear that the new ruling may increase retail prices. Let’s hope they’re right.
Every quarter many publicly-held industry giants issue grim reports about plummeting sales and earnings. Although sales of items like flat panel TVs and digital cameras continue to be brisk, the falling prices suggest that it’s impossible to increase sales revenues. And margins? What margin?
Independents may fare somewhat better by adding services and accessories to their sales and by moving customers to products with move features and higher margins, but these aren’t the glory days for those companies, either.
When Maytag first introduced Unilateral Minimum Retail Pricing (UMRP) a dealer contacted me suggesting that NARDA spearhead a campaign against the practice. He explained that it was his Constitutional right to sell products for whatever he wanted and that if he wanted to sell below cost or for $50 profit he could darn well do so.
I listened to him quietly and then asked what he had against making money. I suggested that the company was going to help him sell a premium product for a higher price point than he had ever sold a laundry pair for. I asked him to consider the policy as a supplier’s attempt to help him grow his revenues and his bottom line. At that point, he hung up the phone.
I don’t know how the Supreme Court ruling will ultimately play out in our every day lives. It may make no difference at all and we may continue to eat our young. In the meantime, I applaud the decision and welcome the opportunity to return some kind of pricing sanity to our business.
Costs have risen. Prices of almost all other consumer goods have risen. Housing prices are at an all time high even with the softening of the real estate market. The average price of a car today is much, much higher than a few years ago. Grocery prices are up. Gas is no long a cheap commodity.
Yet in our business, we continue to lower prices on ever-improving miraculous new technologies. Our mantra seems to be “give consumers more for less.”
It’s time for the consumer electronics and imaging industries to start showing the real value we provide to our customers. I don’t think today’s consumer has any idea how much a DSLR or a big screen is really worth. They’ll buy for as little as we’re willing to sell to them. It’s retailers – not the public – setting prices for our consumers.
The Court’s decision does not bode a return to Fair Trade, nor will it allow unregulated price fixing. Free markets will still prevail. Consumers will still continue to find low-price alternatives to full-featured high-price merchandise.
Unhappy with a supplier’s MAP prices? Buy from someone else. Similarly, vendor’s who don’t like retailers’ pricing strategies should seek distribution elsewhere. The decision will allow manufacturers to determine what they think consumers will perceive as the market value for some of their products. Not all products will be governed by MAP or UMRP. There will always be lower featured products available to consumers at entry-level prices.
I hope that the Court’s decision will bring some needed profitability to our business. Too bad we couldn’t do it for ourselves.
Elly Valas is the President of Valas Consulting Group and the co-author of the book Guerrilla Retailing. She welcomes your contact or comments at elly@ellyvalas.com or at 303/316-7569. Visit her website at www.ellyvalas.com
