Scubapro online sales

[scubatoys]

Yep.

The internet will change all retail in some form, but, Walmart ain't going away soon.

Larry, what are the specific reasons Scubapro (and any other manufacturers) gave you as to why they will not allow online sales from a retailer?

They say it is to help protect the local store with price controls on the product. I don't understand why adhering to a MAP policy and allowing net sales would not accomplish the same thing - but they say they are worried it would affect the local small dealer.

 

[yknot]

They say it is to help protect the local store with price controls on the product. I don't understand why adhering to a MAP policy and allowing net sales would not accomplish the same thing - but they say they are worried it would affect the local small dealer.

In general, any move by a retailer, manufacturer, dealer, etc., in which the end result is to "protect" the local store usually means some type of price control. BTW, what is "vertical price support"? The FTC has basically said that any move which is anti-competitive and not in the consumers best interest in these types of cases is illegal. Do a net search for Nine West and their former MAP pricing policy. The end result was a $30 million + settlement. In reading the basics, you could substitute "ScubaPro" for "Nine West" and not be far from the current situation. I bet a $30 million hit would be the end of SP. The dive equipment portion of Johnson Outdoor's revenues are listed as being down slightly for 2005. Incidently, I don't believe that there is any current link between Johnson Outdoors and Johnson&Johnson (floor wax).

 

[DivesWithTurtles]

... Please be aware, however, that MAP policies are illegal. I know this because the FTC's website specifically contains statements as to that fact. The reason is because MAP policies can never be defended as benefiting the public and only exist to restrict a market and decrease or eliminate competition. ...

Actually, MAP policies are not illegal. You can have "vertical pricing support" without breaking the law as long as things are worded right.

You are both sort of right it appears. And both sort of wrong it appears. Boy, is this gray territory. Look here for this very simplistic explanation:

Manufacturers have what are called the 'Colgate' rights with respect to their products meaning that they can maintain an 'MSRP' and refuse to sell to non-conforming retailers. However, they must enforce this policy fairly and without prejudice.

And look here for this statement from a former Commisoner of the FTC:

An agreement between manufacturer and dealer or retailer on minimum resale price levels is per se illegal.(4) However, under the Colgate Doctrine,(5) established by the Supreme Court in 1919, a manufacturer may lawfully suggest prices and stop dealing with those who discount those prices, as long as it does so unilaterally. For example, manufacturers may suggest minimum prices (unilaterally) using a number of techniques, including:

- providing lists of suggested retail prices;(6)
- pre-ticketing prices on the product;(7) or
- advertising suggested prices directly to consumers.(8)

A manufacturer may cut off a discounter in response to complaints from other retailers, as long as it makes this decision unilaterally.(9) Generally, the FTC does not challenge cooperative advertising programs in which dealers must use manufacturer-supplied information, including resale prices, in the advertisements. However, when dealers pay for their own advertisements, they must be free to price the product at whatever level they choose.(10)


In other words, (it seems to me [I'm not in any way an expert]) a manufacturer can suggest a price, but they can't tell a dealer what price to sell goods for by prior arrangement. But, they can cut off a dealer that doesn't sell at the price they suggest as long as they cut off all dealers that don't sell at the price they suggest. Clear as mud.

 

[DA Aquamaster]

I don't understand why adhering to a MAP policy and allowing net sales would not accomplish the same thing - but they say they are worried it would affect the local small dealer.

Setting a minimum price for on-line sales would be critical to making it work. But assuming it allowed enough margin for local low volume dealers to survive, it would work fine and the same price on-line or local would give the advantage to the local shop and it's greater level of service and lack of shipping costs to local customers and still allow phone/internet sales by both on-line and local dealers to people who are not near a scubapro dealer.

Changes like that would probably not please some local scubapro dealers, but it would allow them to compete and would be far better than the current systme with it's largely uncontrolled internet sales.

With regard to the impact on smaller dealers, part of the problem now is the different Scubapro dealership levels and the lower dealer costs given to large volume dealers. That needs to be addressed now and would also need to be addressed if on-line sales were allowed as it would prevent large on-line dealers from always having a few to several percent advantage in profit margin over local dealers who are already at a disadvantage in localities where they have to pay sales tax on local sales that are not also charged for internet sales. Add a few percent higher dealer cost paid by the low volume LDS to the 4% to 7% sales tax local shops often have to pay and you place the local dealer at a significant disadvantage even at the same selling price.

It's ironic that Scubapro is itself creating the incentive for small dealers to buy more than they can sell locally to improve their order numbers in order to qualify for higher dealership levels and lower dealer costs. You can bet the excess merchandise purchased ends up on the grey market as the smaller shop cannot afford to just sit on it.

My understanding is this year they moved the required sales numbers up and basically eliminated a middle dealership level which again provides even more incnetive for smaller shops to purchase excess merchandise and sell it to grey market retailers.

It's frustrating that the company's policies and stated objectives are such a mass of contradictions. You would think someone there could look at things from a systems perspective and understand the real impact these policies have. It's also a bit insulting that SP apparently thinks their dealers are too stupid to figure out how it really works.

 

[mdb]

It's also a bit insulting that SP apparently thinks their dealers are too stupid to figure out how it really works.

They are figuring it out-Like www.scubatoys.com

 

[redacted]

In other words, (it seems to me [I'm not in any way an expert]) a manufacturer can suggest a price, but they can't tell a dealer what price to sell goods for by prior arrangement. But, they can cut off a dealer that doesn't sell at the price they suggest as long as they cut off all dealers that don't sell at the price they suggest. Clear as mud.

Does the concept of "dealers" include both authorized and unauthorized dealers? Does it include US dealers only or would the concept of dealers apply globally for a network of company supported international dealers? Obviously no rulings, just opinions.

 

[StSomewhere]

awap, part of the "problem" (and I'm using that word creatively here) is that the EU has a different set of governing rules than what is permissible in the US. So the global network with one set of rules doesn't work because there's more than one set of rules.

It was no accident that Aqualung (a French company that does business in the US) only bought the *US* marketing rights to Apeks and Suunto.

 

[DivesWithTurtles]

Does the concept of "dealers" include both authorized and unauthorized dealers? Does it include US dealers only or would the concept of dealers apply globally for a network of company supported international dealers? Obviously no rulings, just opinions.

SP can't cut off their unauthorized dealers under Colgate rights, because they don't sell to unauthorized dealers... Uh, directly.

Sales to and by non-U.S. dealers are controlled by law in the dealer's contry, not the manufacturer's country.

 

[yknot]

Setting a minimum price for on-line sales would be critical to making it work. But assuming it allowed enough margin for local low volume dealers to survive, it would work fine and the same price on-line or local would give the advantage to the local shop and it's greater level of service and lack of shipping costs to local customers and still allow phone/internet sales by both on-line and local dealers to people who are not near a scubapro dealer.

Changes like that would probably not please some local scubapro dealers, but it would allow them to compete and would be far better than the current systme with it's largely uncontrolled internet sales.

With regard to the impact on smaller dealers, part of the problem now is the different Scubapro dealership levels and the lower dealer costs given to large volume dealers. That needs to be addressed now and would also need to be addressed if on-line sales were allowed as it would prevent large on-line dealers from always having a few to several percent advantage in profit margin over local dealers who are already at a disadvantage in localities where they have to pay sales tax on local sales that are not also charged for internet sales. Add a few percent higher dealer cost paid by the low volume LDS to the 4% to 7% sales tax local shops often have to pay and you place the local dealer at a significant disadvantage even at the same selling price.

It's ironic that Scubapro is itself creating the incentive for small dealers to buy more than they can sell locally to improve their order numbers in order to qualify for higher dealership levels and lower dealer costs. You can bet the excess merchandise purchased ends up on the grey market as the smaller shop cannot afford to just sit on it.

My understanding is this year they moved the required sales numbers up and basically eliminated a middle dealership level which again provides even more incnetive for smaller shops to purchase excess merchandise and sell it to grey market retailers.

It's frustrating that the company's policies and stated objectives are such a mass of contradictions. You would think someone there could look at things from a systems perspective and understand the real impact these policies have. It's also a bit insulting that SP apparently thinks their dealers are too stupid to figure out how it really works.

First, wouldn't the minimum sales price just be north of cost? Any attempt by SP to justify uncompetative business practices is going to backfire. Consumers now have substantial options to SP. Can anyone here confirm the type of year the dive industry has had, at least in general? It seems (to me, anyway) that recreational spending has increased in the last year but SP's parent company reports that dive equipment sales are down slightly from last year. Could this be at least partially due to their unwillingness to compete? Further verbage in their sales agreements and further restrictive practices won't increase market share.

 

[Wayward Son]

Competetive markets works. SP, Aqualung & others that are still sticking to the no online sales & other policies are going to lose market share to companies that choose to be more competetive.

It may take some years more, but assuming they feel it on their bottom line, at some point they will have to make changes & adapt.

The other option woul be that do not make any changes. If they can maintain enough market share & profits, they will be justified in doing so. Personally I think that if they do they will at best maintain, where most business would rather grow.

Oceanic made such changes last year. Other companies may do so next year.