Why is it that.....

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So many retailers and online vendors carry Festool products and every one of them sells for the same price. Same with Leigh jigs and accessories. Same with Akeda but in this case there's only one vendor and that vendor sells the jig at a higher price than 'suggested retail'. What has happened to competitive pricing on these products?
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It's called MAP. Minimum Advertised Pricing. Since I am involved with a retail company, I am quite familiar with it. We are free to sell below MAP, but the mfg is free to not sell us any more product.
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On Thu, 2 Nov 2006 16:14:49 -0500, "Locutus"

Thanks for the explanation. Would I be far off in my thinking it sounds like price fixing?
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shhhhhhhhhhhhhhhhhh!!!! ;)
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Actually, it would be. I don't think that this is what is happening. Manufacturers often offer retailers compensation for advertising their products. It helps to defer the cost and incent the retailer to include the products in regular advertising. To qualify for this compensation, an advertisement must usually conform to the manufacturer's rules - which often include pricing limitations. That's why you see so many ads which say "too low to advertise" or "call for today's price". It's not price fixing because the retailer isn't being restricted from selling or advertising the product - they are just being given incentives to do it according to the manufacturer's rules. They can turn down those incentives at any time they like and pay for 100% of the cost of advertising.
Ed Bennett snipped-for-privacy@ts-aligner.com http://www.ts-aligner.com
tommyboy wrote:

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On 2 Nov 2006 14:09:28 -0800, snipped-for-privacy@ts-aligner.com wrote:

Or they can sell below the MAP..... in which case the manufacturer ceases supplying the retailer. Now we get into restraint of trade. Sounds like a helluva tangled web.
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Well, it wasn't actually stated in so many words that the manufacturer "would" cease to supply the retailer, only that it was "free to not sell us any more product". Not necessarily the same thing but that is certainly the implication.
I realize that my marketing expertise is far below any level of bare competent, but I would think the manufacturer would want to sell as many units of the product as possible. If selling below the MAP helps do that and it only impacts the retailer's margin, why does the manufacturer object. Of course that assumes the price to the retailer for the product is the same in either case.
In my limited understanding of the process, it doesn't make any sense.
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On Thu, 02 Nov 2006 17:26:14 -0600, Tom Veatch wrote:

I'll take a shot at this. MAP means all retailers pay the same wholesale price for the item and sell at the same retail price. This setup seems to offer some protection to the 'mom and pop' operations. The Borg down the street or the non brick and mortar internet giant is brought down to a level playing field. Implication here is that if wholesale varies according to volume, the retailer now can demend lower pricing or discontinue selling the product, putting the manufacturer at the retailer's mercy. Sound logical?
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<Tom Veatch> wrote in message wrote:

It some retailers start selling a certain product at little margin, it can and does discourage other retailers who can't operate at those margins from carrying the product. If they can't be competitive on price, there is no reason for them to stock the product, therefor overall sales to the wholesaler go down.
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Tom wrote:

It does make sense but it's not exactly straight forward. The manufacturer often creates a "pricing structure" that incents resellers to buy (and sell) more product. In other words, the more you buy the bigger your discount. So, for the same exact item, big resellers pay less than little resellers do. This means that big resellers can afford to offer lower prices to their customers. The lower prices attract more business, which means buying more product which leads to greater discounts. This spiral of prosperity for the big reseller is the spiral of death of the little guys. Whatever business they have gets stolen away by the ever growing big reseller. So they dump the product line or don't bother to sign up.
Generally, the total sum of smaller resellers is greater than any one large reseller. They tend to reach niche markets which the large resellers don't. And they often provide service and support that saves the manufacturer a lot of money. So, a manufacturer has some interest in protecting small resellers. One way to do this is to attach a minimum advertised price clause to the comps section of the contract. It doesn't stop the super preditory resellers but it stops most. Another protective measure is to restrict the big reseller to certain products. WalMart, Costco, Sam's Club, Home Depot, etc. all have unique low cost versions of popular brand name products. The little guys get to sell the higher priced but usually higher quality items.
Some manufacturers just don't care. One of the product lines that I sell is a good example of this. The manufacturer offers such a huge discount to the big reseller that their everyday retail price to the public is *LESS* than my discount price from the manufacturer. So, I am forced to buy from the big reseller and my price must be significantly higher to make it worth while. Fortunately, I am selling to a niche market that the big reseller cannot reach (woodworkers). Even so, I'm sure that there are some people who know the big reseller's price. They probably look at my price of the one product line and think that I'm running a scam - charging outrageous prices for everything I sell. They think that all resellers - big and small - buy the product line for the same prices. Ain't so.
Ed Bennett snipped-for-privacy@ts-aligner.com http://www.ts-aligner.com
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Nice explanation Ed.
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Good explanation. Sometimes, more business is not a good thing. Look how increased volume bankrupted Vlasic Pickles. http://www.fastcompany.com/online/77/walmart.html
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"Edwin Pawlowski" wrote in message

Often success can be a bad thing.
Many a small record company has folded after a regional hit because they had to borrow the money to satisfy the demand for the product, and being small, the record distributors have them last on the list to get paid from store sales, after the big boys get theirs ... generally months after the loan is due and the interest has piled up.
Exact same thing for a small oil company/operator. Everyone wants to drill and complete an oil/gas well but the minute you do is when the expensive problems start ... from legal and environmental, to marketing.
IOW, sometimes all you get out of a "successful" business venture is bragging rights. DAMHIKT.
--
www.e-woodshop.net
Last update: 10/29/06
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Tom wrote:

Because, let's say for example that Woodcraft sells Festool at 10% less than everyone else. That puts pressure on all the other retailers to lower their price as well, which means lower margins for them. Means the other retailers are less happy and might cease ordering Festool products.
The fixed pricing means that everyone is fat and happy. The consumer is forced to pay a premium if he really wants it.
Also, part of the whole appeal of high end stuff like Festool is partially a status symbol.. knowing that you have "the best". If Festool were priced at the Ryobi level, it wouldn't be as cool or sexy to have one. Just like if a Mercedes cost as much as a Chevy, some potential buyers wouldn't think the Mercedes was as good (even if the quality was identical).
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[snipped for brevity]

In many cases with other brands/products you would be correct. In most of Festool's comparisons, you'd be dead wrong. I can't speak for the entire Festool product line, but the pieces I own are simply superb. I'm not saying that because I own them, I own them because they are superior. Same thing goes for Fein. A quality tools costs money. Period.
Mercedes has made some really shitty cars in their day. DAHIKT
Nice troll, btw.
r
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Robatoy wrote:

Dude, it wasn't a troll. I'm not saying Fine or Festool isn't worth the price. I don't own one, but I'm sure it's good quality. I'm just saying that part of maintaining brand image is the price. It's not a slam on the tools. Geez. Note I said "PART OF THE APPEAL" is the brand. I know someone who brought a Delta unisaw. He hardly ever uses it, but loves taking people down to his basement to show it off. To him, it's like an antique car he likes to show off. He gets enjoyment and pride out of it, and can afford it, so it's no big deal.
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I own NO Festools.
I used a Festool jigsaw a few weeks back, which was a replacement for a 20 year old Bosch. I'd buy it in a minute if I needed to replace my Bosch.
It's more than status...
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I can't comment on the woodworking supply industry, but in my industry, this happens very rarely.
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It does vary from industry to industry. For example, it's quite common in the retail computer and electronics industry to "comp" for newspaper, magazine, and TV advertising. Surely you've seen the "Intel Inside" at the end of a computer ad with the little logo and musical jingle? Well, they did that so they could get "comped" by Intel. Ever see a CDW ad that "featured" a particular brand of computers or printers? They do that to get comped.
Manufacturers also comp stores for shelf space. Even individual sales people get comped for pushing products. It's usually called a "SPIF" (I think that's the right spelling. it's amazing you never see these things in print but talk about them all the time).
I've been asked to comp resellers for placing my products in their catalog, web site, or yearly flier. If you see a product on the cover of a woodworking catalog you can be sure that the manufacturer paid dearly for it. It's why you always see the latest and greatest tools from large manufacturers but rarely (if ever) from the small guys.
Grocery stores get comped for shelf space with a premium going for "end caps" (an elaborate display of product at the end of an asile). Retailers have figured out how to get comped for just about everything. Any industry where there are low margins you'll find retailers looking for a lot of comps. And manufacturers use them to manipulate how product is presented, advertised, and sold (including minimum advertised price).
Ed Bennett snipped-for-privacy@ts-aligner.com http://www.ts-aligner.com
Locutus wrote:

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On 2 Nov 2006 15:16:17 -0800, snipped-for-privacy@ts-aligner.com wrote:

Ed, if you distributed to retailers rather than selling directly to the consumer how would MAP be helpful/profitable to you?
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