I'm paying retail for equipment from LDS

[Swan1172]

Isn't MAP == Minimum Advertised Price? IE they can sell at whatever they want, they just can't advertise it.

Rob,

MAP is only part of the problem, as manufacturers such as ScubaPro set a MAP and, through the terms of their dealer agreements, prohibit dive shops from discounting beyond a certain percentage. From what I have heard, in the case of ScubaPro dealers, they are not allowed to discount ScubaPro gear more than 10% below MAP.

The reason the manufacturers use MAP and discount restrictions is an attempt to level the playing field between dive shops. Larger shops are able to buy from the manufacturer at a bigger wholesale discount due to the volume of the merchandise they move. This gives the larger shops an inherent advantage in being able to discount below the MSRP. MAP and discount restrictions take this advantage away by requiring them to sell at the same retail price. In essence, what this gives the larger dive shops is an increased profit margin.

If you really look at these policies, you will see that this is where the gray market fits in. Smaller shops will buy more merchandise in order to qualify for volume discounts, but rather than keeping this merchandise in inventory, they turn around and sell it for a small mark-up to a gray market seller like Leisure Pro. Since Leisure Pro is not subject to the manufacturer's dealer agreement, they can sell the products for whatever price they want.

If the manufacturers wised up and got rid of outmoded policies like MAP and discount restrictions, they would essentially dry-up the product flow to the gray market. Their policies are the ones that allow the gray market to exist, which is why I really don't think it matters to them that places like Leisure Pro stay in business. After all, the manufacturer is making the same amount on a piece of gear that is sold through Leisure Pro as they do on one that is sold through one of their authorized dealers.

 

[robzr]

Rob,

MAP is only part of the problem, as manufacturers such as ScubaPro set a MAP and, through the terms of their dealer agreements, prohibit dive shops from discounting beyond a certain percentage. From what I have heard, in the case of ScubaPro dealers, they are not allowed to discount ScubaPro gear more than 10% below MAP.

How does ScubaPro know if ScubaToys gives me 15% off when I call them? Seems unenforceable... I bet if I call now I can get more than 10% off a Scubapro item on a LP pricematch. Sounds like posturing.

The reason the manufacturers use MAP and discount restrictions is an attempt to level the playing field between dive shops. Larger shops are able to buy from the manufacturer at a bigger wholesale discount due to the volume of the merchandise they move. This gives the larger shops an inherent advantage in being able to discount below the MSRP. MAP and discount restrictions take this advantage away by requiring them to sell at the same retail price. In essence, what this gives the larger dive shops is an increased profit margin.

Well yeah, advantage = big store. If the manufacture wants to help out the little guy, why not offer flat dealer pricing with no volume incentives. They don't, because their bottom line is their bottom line, corporations function as corporations are designed to function.

If you really look at these policies, you will see that this is where the gray market fits in. Smaller shops will buy more merchandise in order to qualify for volume discounts, but rather than keeping this merchandise in inventory, they turn around and sell it for a small mark-up to a gray market seller like Leisure Pro. Since Leisure Pro is not subject to the manufacturer's dealer agreement, they can sell the products for whatever price they want.

If the manufacturers wised up and got rid of outmoded policies like MAP and discount restrictions, they would essentially dry-up the product flow to the gray market. Their policies are the ones that allow the gray market to exist, which is why I really don't think it matters to them that places like Leisure Pro stay in business. After all, the manufacturer is making the same amount on a piece of gear that is sold through Leisure Pro as they do on one that is sold through one of their authorized dealers.

Call me cynical but I bet Scubapro is happy to sell LP as much as they want, then turn around and posture on their website as if they are upset that LP sells so cheap. Its simple motivations, the more Scubapro that sells, the more cash in Scubapro's pockets. And if they don't have to provide warranty service when something breaks, then it's all the more profitable. Whats their motivation to care that LP sells it cheap?



Rob

 

[Swan1172]

Rob,

You are correct that enforcing discounting policies is difficult, and smart LDS owners take advantage of that all the time. If I can only discount ScubaPro by 10%, what prevents me from bundling items (tanks, air fills, certification classes) with ScubaPro and discounting the entire package by 25%? Nothing, because the LDS can always say that the ScubaPro gear was only discounted 10% and that the other items in the package were discounted at a bigger discount. It's really just creative accounting.

 

[joe rock]

The price of oil is set by the movements on the three major international petroleum exchanges, NYMEX,IPE and SIMEX. OPEC has not set prices since the mid 80's but can control production, which obviously affects prices.

I was responding to a question of what is price fixing. The cartels setting price of crude oil is an example of price fixing.

 

[PhilEllis]

Price fixing is when ALL vendors of a particular product do it. Like if ALL the cable tv and satalite tv companies got togethor and decided on a minimum price to charge their customers.

Aqualung and Scubapro can dictate prices for their own equipment, but if they got togethor ALL of the other major scuba manufacturers and set a minimum price, then it'd be price fixing.

As it stands now, Aqualung can force all their vendors to charge $10,000 for all their regulators, and people simply would buy a different brand.

When competing product lines set an agreement with each other to charge a certain price, then it's price fixing as competition has been effectively eliminated.

Horizonal price fixing is when two or more competitors get together and fix the price of an item or commodity. In the scuba industry, the main concern is VERTICAL price fixing, a practice that can be both legal and illegal. The legal status of VERTICAL price fixing depends completely on existence of an AGREEMENT to do so, either written, spoken, or "understood".

The scuba companies (or any supplier) is allowed to dictate a retail price as long as such is a normal part of their policy. What they CANNOT do is enforce is unevenly, enforce it on some dealers but not others, and they CANNOT "negotiate" with a dealer to "never violate it again" if that dealer is caught. They are required to enforce whatever penalty they proscribe for such a violation across the board.

Phil Ellis

 

[RJP]

d) Dealers are, by law, able to establish any actual retail selling price they choose, as long as prices lower than M.A.P. are not advertised in any media including the internet.

Yup - and manufacturers are within the law if they decide to pull your dealership status if you DO discount beyond the terms of the dealer agreement. (Not opening debate about whether it's right or wrong, it's just that it's not illegal.)

 

[Scuba Brad]

Don't forget us we are the little guys but are "trying harder". We also offer the same discount that Larry does at Scuba Toys.

We hope you all have a great holidays!

Happy Diving

 

[Cheekymonkey]

I'll stop by and check you out Brad, havent seen you around here before.

 

[Scuba Brad]

Thanks! We just finished our second year. Thank you Christmas!!!

Happy Diving

 

[PhilEllis]

Yup - and manufacturers are within the law if they decide to pull your dealership status if you DO discount beyond the terms of the dealer agreement. (Not opening debate about whether it's right or wrong, it's just that it's not illegal.)

RJP, your statement is both correct and incorrect. The METHOD of implementation and enforcement of their policies is pivot around which the legality or illegality of the issue turns.

Phil Ellis