What can I do about retailers selling below RRP

[kangalou]

I sell a product to retailers with a margin which is fairly normal for my industry. However, a couple of the retailers are selling the price below the RRP and this is annoying the other retailers. One of them has said that they will start selling at the lower price unless I ask the offending retailers to stick to the RRP.

Is it legal to ask retailers to sell at the RRP? If not, is there anything I can do to keep the retail price at the level which it should be?

Thanks

 

[benjamin_c]

I sell a product to retailers with a margin which is fairly normal for my industry. However, a couple of the retailers are selling the price below the RRP and this is annoying the other retailers. One of them has said that they will start selling at the lower price unless I ask the offending retailers to stick to the RRP.

Is it legal to ask retailers to sell at the RRP? If not, is there anything I can do to keep the retail price at the level which it should be?

Thanks

Stop selling it to the offending parties if its that much of an issue....

 

[Indigo Cherry]

There is NOTHING you can do, other than ask them to sign a contract saying that they won't sell below a certain price, which I doubt very much they will do.

The only thing you can do is stop selling to them! But as you say your margin are pretty avearge for the industry and product so they probably won't have any trouble finding another supplier.

Retail is a very cut throat industry and retailers undercut their competition all the time. I can't belive they are coming to you and whining about it!

 

[akirk]

I sell a product to retailers with a margin which is fairly normal for my industry. However, a couple of the retailers are selling the price below the RRP and this is annoying the other retailers. One of them has said that they will start selling at the lower price unless I ask the offending retailers to stick to the RRP.

Is it legal to ask retailers to sell at the RRP? If not, is there anything I can do to keep the retail price at the level which it should be?

Thanks

and ?!

if they want to sell at the lower price let them - as long as they are still paying you the same why would you mind what the complaining retailer sells at?

you make it sound as though they are threatening you - hardly - the more they sell cheaper, the more they will sell, which means more orders for you at the same price - you make more money...

it is called capitalism

Alasdair

 

[kangalou]

and ?!

if they want to sell at the lower price let them - as long as they are still paying you the same why would you mind what the complaining retailer sells at?

you make it sound as though they are threatening you - hardly - the more they sell cheaper, the more they will sell, which means more orders for you at the same price - you make more money...

it is called capitalism

Alasdair

I do mind a lot. It lowers the margin for all of the retailers who sell our product, making it less attractive to new potential retailers. And also it is damaging for the brand.

 

[Bri]

I do see a point here which I experienced when I had my shop. You have to be careful about devaluing the product which you are selling,eg I had a product which was essential to the person using it, it was high end product, however the internet stores were able to sell at as discussed above. I constantly argued with the manufacturers about this and nothing ever hapened.

 

[benjamin_c]

Is it a unique product? can only you supply it or do others supply it also?

 

[kangalou]

I do see a point here which I experienced when I had my shop. You have to be careful about devaluing the product which you are selling,eg I had a product which was essential to the person using it, it was high end product, however the internet stores were able to sell at as discussed above. I constantly argued with the manufacturers about this and nothing ever hapened.

That was the point I was trying to make, it devalues the brand, well said.

 

[kangalou]

Is it a unique product? can only you supply it or do others supply it also?

It is fairly unique and there is only really one similar product which has the same RRP.

We also want to get into bigger retailers in the future, hence the reason for not wanting to devalue the brand.

 

[Indigo Cherry]

My mother-in-law had a pretty successful chain of antique shops and was doing great UNTIL.......ebay came along! Poeple reaslised they could get the items she was seling on eBay for around her cost price or less! She had to close the shops!

There was NOTHING she could do about it! eBay couldn't ask it's sellers not to sell so cheapo because it upset my mother-in-law! lol

As I said, there is pretty much nothing you can do about it, short of stop selling to them and let them find another supplier or ask them to sign a contract which I know I wouldn't do!

Unless you are selling a very niche product.

 

[akirk]

unless you have the pulling power of a brand / product that retailers would cut throats to get hold of then you have little choice - if you do, you can dictate terms, if you don't then they will sell it for what they consider worth-while and no choice.

nothing stopping a product being sold at differing prices - happens all the time in the electronics world - a fridge sold online or in Harrods will be two very different prices - so it won't necessarily cause an issue...

also - who is determining the brand - you or the retailer - they will be selling cheaper to shift stock - part of your role as the supplier is to give them the brand / materials to allow them to sell it at the same rate at a higher price i.e. the brand value - if you are not giving them that, then there is no brand of the type you desire - that is your job, not the retailers job. Ultimately a retailer would rather sell at a higher price (assuming same rate of selling) as they make more money - you need to help them

Alasdair

 

[IInfluence]

I work with a company who had a very similar problem to yourself. Other retailers were selling to low on the Internet which was hurting them and a lot of their retailers.

Basically they asked their customer a few times to increase his price, pretty sure you can't force it (but I may be wrong, I thought that was price fixing, which I think is illegal).

Needless to say this customer refused and kept selling over the internet cheaply, amazingly then deliveries to this customer used to take a lot longer to get and ave certain items missing (if you get my drift). It basically came to a head until the manufacturer said they no longer wanted to deal with this bloke.

They are in a decent position as they have a strong brand and lots of money behind them. Not sure that helps you but it's a little anecdotal incident that is very similar to that of your own.

 

[Indigo Cherry]

Needless to say this customer refused and kept selling over the internet cheaply, amazingly then deliveries to this customer used to take a lot longer to get and ave certain items missing (if you get my drift). It basically came to a head until the manufacturer said they no longer wanted to deal with this bloke.

Personally I think that is disgusting! If a retailer is paying the going rate for the product, then what the hell gives a distributer the right to dictate how much the they can sell it on for?

If the retailer's competition don't like it, find another supplier or drop their prices.

This is business and what you are suggesting is not business, it's an underhand form of forced submission!

 

[Esk247]

There shouldn't be a problem normally. You get your trade/wholesale value for the items your selling anyway so you're not losing out.

If necessary, they can all drop the prices/markup.

Usually you only distribute to different cities or regions so that you don't end up supplying two shops in the same town with the same products.

 

[silvermusic]

Price fixing and cartels are ilegal in the UK, for heavens sake don't put anything in writing or you could find yourself in serious doo doo.

Having said that, I do apprciate your point as a small business, the easiest way is to stop the supply to those who do discount. The constant race to the bottom on price is killing retail, any fool can sell by undercutting price.

 

[Rhyl Lightworks]

RRP is illegal in Britain (has been since the 60s I think). Dyson has been trying (with little success) to stop people discounting his vacuum cleaners for years now. His latest ploy is to have recommended dealers (listed on his website) who guarantee to display and demonstrate his cleaners on their premises, and who register his 5 year guarantee for the customer (and get a cashback from Dyson for doing so). But there is little he can do to stop internet retailers selling them at what they choose. And quite right too. Retailers should be allowed to sell cheap, or add value added service to their product and charge more. (Incidentally, I think bagless cleaners, which he pioneered, are inferior products to bagged ones anyway, but that is another story.)

Barrie

 

[deniser]

RRP is illegal in Britain (has been since the 60s I think).

There's nothing illegal about RRP - which is only a recommmended price.

Requiring people to sell at the RRP is what's illegal.

 

[oldeagleeye]

The RRP was abolished over 30 years ago apart from one section. It is illegal to claim a higher price and then say you are offering a discount. Even that is a farce however especially for the big stores. All they need to do is advertise the higher price at some remote location 28days prior to the so call sale.

To all intents and purposes then there is no longer an RRP. What there is in many industries Hotel . Magazine Advertising etc and even Air Travel is a Rack Rate. In retail a SRP or Suggested Retail Price and there is no way a manufacturer or wholsaler can enforce this legally. What they can do however is make a commercial decission.

In todays; world there are basically 2 ways of offering a bigger than usual discount. One is when lets say a guy has low overheads and sells the odd one or two items on Ebay. The other generally speaking is the bigger the discount offered to the end customer the bigger order placed by the wholesaler.

The solution if you want to establish a quality brand is simple look at your volume discounts and construct then around the customers that you want to retain.

Those that stick to the price that you want to see get a loyalty bonus of some sort. Then view any high volume sales which are heavily discounted as your bread & butter sales.

Rob

 

[saxondale]

And also it is damaging for the brand.

no it`s not ........... you will think that, no one else will care about the "brand"

 

[saxondale]

It is fairly unique and there is only really one similar product which has the same RRP.

We also want to get into bigger retailers in the future, hence the reason for not wanting to devalue the brand.

it`s not "devaluing the brand" - it`s artificial price fixing ....... and that is against some law or other.

 

[saxondale]

(Incidentally, I think bagless cleaners, which he pioneered, are inferior products to bagged ones anyway, but that is another story.)

Barrie

you`ve lost the plot.

 

[Drpepper]

RRP's ARE often put on products by the manufacturers (I have at least 12 items in my shop today with an RRP on, and yes it does say "RRP"), common practice and not illegal in any way - the clue is in the name "recommended"

However it is up to the retailer how much they want to charge, likewise it's up to the OP who he supplies.

Question is do you want all and every sale, or protect the perceived quality of your product?

RRP and SRP - same thing under different names

Also the OP may be overvaluing the brand and it will find it's own level in the open market place.....

 

Price fixing is illegal punishment can be imprisonment.

http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1074014670


Earl

 

[SamStones]

I have seen this many times before but I can only repeat what has been said before:

1. Price fixing is illegal - look for case studies on Tesco and the like, you will get found out.

2. The only thing you can do is to stop selling the item to someone who is selling it cheaper.

3. Don't bother with number 2 , unless you have the potential of some HUGE contract with one of the multi nationals. Just keep taking the orders from the supplier who is selling many of them "make hay whilst the sun shines" - Often these discounters don't stay around for too long or realise they have to put their prices up to make it worthwhile. If they're acting the "busy fool" then let them.

Let us know what you decide...

 

[IInfluence]

Personally I think that is disgusting! If a retailer is paying the going rate for the product, then what the hell gives a distributer the right to dictate how much the they can sell it on for?

If the retailer's competition don't like it, find another supplier or drop their prices.

This is business and what you are suggesting is not business, it's an underhand form of forced submission!

I never said it was right, I was giving the OP an example of a similar situation.

However I can totally understand why a manufacturer would do it, they spend 30 years building up a quality brand and sells in stores all over the UK, only for some bloke with closed warehouse premises start selling their products with tiny margins thus forcing their other retailers to stop selling their product.

As for your last line, surely you are being naive to believe this sort of thing doesn't happen daily.

Obviously the manufacturer needs to protect their own business and make profits for themselves so there was only going to be one winner. As said price fixing is illegal so companies get very creative within the law.

 

[akirk]

But we don't know the full details here...

We have only the supplier's belief that there is brand value in this product - is that what the market perceives?

as mentioned above - getting retailers to sell at a higher margin is fine if you can demonstrate to them that the product will sell as well (i.e. you as supplier build the brand) - no retailer objects to a higher margin - they do though object to products that don't sell:

a - high margin - not selling fast enough - no thanks
b - lower margin - selling well - yes please
c - higher margin - selling well - ideal

my supposition is that we have a choice between options a and b currently and the retailer is rightly choosing option b - retail is about working your space - it is a formula based on:

profit x square inch x year

so high profit, but not selling is far worse than lower profit and selling.

the retailer would love to have option c as overall they will make more money - but the retailer is not the company which can create the environment for that - it is the supplier / manufacturer who creates that market - they do it by building the brand and making the consumer prepared to purchase at the higher price - then the retailer will happily go for option c.

you will always have some retailers offering deals /discounts etc. but brand is not established by the supplier saying we are a high level brand and therefore we set brand by price - brand is established by marketing / advertising / etc. etc.

My belief, based on the info we have here which of course is limited, is that there is a fundamental business error here in understanding about brand / pricing / markets etc. which needs to be resolved first - the rest will then fit in that...

Alasdair

 

[silvermusic]

I think some folk are getting mixed up with RRP (Recommended Retail Price) and Retail Price Maintenance which was abolished in 1964. Not that I'm quite old enough to remember it, I was only 1 y/o.

RRP's are some figure plucked out of the air in most cases and mean nothing. Put the price up for 28 days, or less with a discalimer and then show some rediculous saving. It's nothing new, it's been going on for years.

 

[saxondale]

I can remember the grocer having a little printed book of prices at the side of the till even in the 80`s

 

[silvermusic]

I can remember the grocer having a little printed book of prices at the side of the till even in the 80`s

So do I, that was in the days before most shops had computers, I use to work in a major high street store that did exactly the same thing in the early 80s. It had nothing to do with Retail Price Maintenance.

 

[BeeDub]

We have retailers selling our products for less than their competitors, and even our direct sales BUT to my mind, it is their choice to sell at that price and hence make smaller profit.

We have structured our wholesale pricing based on the order volume, so all retailers have that carrot to purchase for less if they choose to - it is THEIR choice. Sales are sales and to crow about de-valueing the brand? Behave.....Businesses sell products for what they think THEY can get for it, not how much YOU think it's worth.

 

[saxondale]

So do I, that was in the days before most shops had computers, I use to work in a major high street store that did exactly the same thing in the early 80s. It had nothing to do with Retail Price Maintenance.

these were corner shops



but if you sold a Mars bar below the price in that book you would suddenly find you had no Mars bars to sell the next week



other chocolate bars are available

 

[kangalou]

Thanks for all the info, and i'm very glad I asked as I had no idea about price fixing etc.

It is only one retailer who is selling the product cheap so far so I don't think it is the market's perceived value of the product.

Seems like the only solution is to stop supplying them because my objective is to get into bigger retailers who, from speaking to others in the industry, will mind if the product is being sold cheap on the internet.

 

[octopusgarden]

I'm a retailer and one of my suppliers faces this problem (and they do have some valuable brands).

They have started offering a "discretionary discount" on their branded goods. If you comply with certain terms then you get the discount, otherwise you don't. And if you're not getting that discount you're unlikely to be able to undercut those that are, no matter how low your overheads might be.

From memory, to qualify for the discretinary discount you have to have a bricks and mortar outlet not just be online, you have to order above a certain amount per annum, and you have to stock a certain percentage of the goods they sell.

This seems to work quite well and gets around the price fixing issue.

 

[kangalou]

I'm a retailer and one of my suppliers faces this problem (and they do have some valuable brands).

They have started offering a "discretionary discount" on their branded goods. If you comply with certain terms then you get the discount, otherwise you don't. And if you're not getting that discount you're unlikely to be able to undercut those that are, no matter how low your overheads might be.

From memory, to qualify for the discretinary discount you have to have a bricks and mortar outlet not just be online, you have to order above a certain amount per annum, and you have to stock a certain percentage of the goods they sell.

This seems to work quite well and gets around the price fixing issue.

That is a very good idea, is it totally above board to do that? Guess you just have to be careful about what you say

 

[IInfluence]

I'm a retailer and one of my suppliers faces this problem (and they do have some valuable brands).

They have started offering a "discretionary discount" on their branded goods. If you comply with certain terms then you get the discount, otherwise you don't. And if you're not getting that discount you're unlikely to be able to undercut those that are, no matter how low your overheads might be.

From memory, to qualify for the discretinary discount you have to have a bricks and mortar outlet not just be online, you have to order above a certain amount per annum, and you have to stock a certain percentage of the goods they sell.

This seems to work quite well and gets around the price fixing issue.

I think lots of manufacturers/distributors are beginning to do this sort of thing. Basically on the Internet you could end up with one or two really big players and no real presence in other shops.

In the long run you could end up with the internet retailers having more power over a product than a supplier.

 

In the long run you could end up with the internet retailers having more power over a product than a supplier.

And you think we don't now a la Tesco ,M&S e.t.c.

Earl

 

[IInfluence]

And you think we don't now a la Tesco ,M&S e.t.c.

Earl

Good point, but thy atleast have stores all over the country so you'll get a presence everywhere.

 

[akirk]

Good point, but thy atleast have stores all over the country so you'll get a presence everywhere.

and internet companies don't?

no stores within miles of me - but internet right here at my desk...

Alasdair

 

[IInfluence]

and internet companies don't?

no stores within miles of me - but internet right here at my desk...

Alasdair

From a manufacturers point of view, you don't want your customer having more power than you over your product, Tesco's, boots etc are already in tehse powerful situations, but it would be silly for a manufacturer to allow themselves to be forced into that same corner by someone with little power currently, thus hurting their own business.

At the end of the day someone running a business needs to look out for that business first and foremost, the company I talked about earlier have over a hundred customers in the UK selling their product, and one customer who was discounting it hugely over the internet thus hurting these hundreds customer. Obviously the company didn't want this one internet customer to become so strong that he could dictate their policy too them, therefore they nipped him in the bud early(ish) on.

I can't see many companies being able to nip Tesco's in the bud personally.

 

[m4ttch4tt]

Dont know how to delte so this will have to do.