Pricing laws

[scoota]

After building a new online business for 2 years i am now starting to get up other companies noses because i am under cutting them on price.
At the end of the day people using the internet are looking for the best deals around and as it happens i am the cheapest on the net.
I got fed up of all the companies bragging that they would beat anyone elses prices so i decided to set my prices at a level that could not be beaten. This has gone down well with the customers but the other sellers have started to complain to the main supplier.
The business i am in has been ripping people off for years and many of the people who started in the business 10 years ago have built quite big empires from it. So down to the question. Is there anyway that the main dealer can take away my agency for selling the product too cheaply.
I have a fantastic track record for delivering after sales service and i have never had any complaints about my company.
The products i sell are Mobility Scooters
This is a genuine question and not a plug for my company.
Many thanks in advance

Steve

 

[downsouth]

not aware of anything in particular other than the supplier deeming ur actions not to be in the best nature of a stockist of its products.

Have you thought that you might be devaluing the suppliers brand?

if the supplier wants to it can of course stop supplying you if you continue to sell cheap.

 

[cjd]

They can't tell you to increase your prices - not leaglly at least - but they can refuse to supply you without giving any reason at all.

You will normally get some 'read between the lines' chats if your supplier thinks there's a problem first though.

 

[scoota]

What i am getting at the moment is calls from the rep asking me to increase the prices because he is getting a hard time from other dealers.
This is a new rep and i think he rubs shoulders with the bigger companies. The last rep never bothered as he hated the big corperations.

They can't tell you to increase your prices - not leaglly at least - but they can refuse to supply you without giving any reason at all.

You will normally get some 'read between the lines' chats if your supplier thinks there's a problem first though.

 

[scoota]

Yes i wondered about the devaluing bit but i advertise that i sell the best quality products at the cheapest prices and it fact.

not aware of anything in particular other than the supplier deeming ur actions not to be in the best nature of a stockist of its products.

Have you thought that you might be devaluing the suppliers brand?

if the supplier wants to it can of course stop supplying you if you continue to sell cheap.

 

[lesliedocherty]

Weve had it in the past, the companies want their brand shown in a certain light and they have an idea of how they want it priced.

It can start with re-orders taking 6 weeks to arrive, then they forget to send you new catalogues, then no-one phones you back, stock doesnt arrive, customers get pissed off, you get pissed of and you then move to a different supplier.

There you go they have got rid of you without doing it themselves, it happened to me years ago, it wasnt till i met a rep later that he told me how they had forced me to leave them.

 

[scoota]

not aware of anything in particular other than the supplier deeming ur actions not to be in the best nature of a stockist of its products.

Have you thought that you might be devaluing the suppliers brand?

if the supplier wants to it can of course stop supplying you if you continue to sell cheap.

I have spent many many thousands of pounds building and optimising websites that are well placed on the front page of google for all their product range if you type in their company name i am even number one for that and they are second.

 

[scoota]

All very good points
Thanks for the heads up

Weve had it in the past, the companies want their brand shown in a certain light and they have an idea of how they want it priced.

It can start with re-orders taking 6 weeks to arrive, then they forget to send you new catalogues, then no-one phones you back, stock doesnt arrive, customers get pissed off, you get pissed of and you then move to a different supplier.

There you go they have got rid of you without doing it themselves, it happened to me years ago, it wasnt till i met a rep later that he told me how they had forced me to leave them.

 

[scoota]

I think my problem will be that other dealers wont buy the product from them while i am selling it so cheap. They will sell similar products from a different company. I think this is why the reps not too chuffed. The rep could just be taking out on me though because he is rubbish at his job, using me as a scapegoat.

 

[MH1]

Legally the cannot force you to sell at a particular price, but as mentioned you might find it harder to get hold of stock in the future.

Then again, they might value your custom more highly than the others, particularly with a recession hanging around, it might be worth considering another supplier as a back up though.

The rep is probably just passing on some comments, a more serious talk would come from the head office national manager type level.

If mentioned again I would say you will consider it, and then carry on as normal.

If it is not mentioned again, nothing to worry about.

 

[itaufait]

There you go they have got rid of you without doing it themselves, it happened to me years ago, it wasnt till i met a rep later that he told me how they had forced me to leave them.

Although if you had a proper supply contract in place there would've been legal implications to them for failing to supply...

 

[Paul Kelly ICHYB]

keep a record of all communications, verbal and written. If the delays and poor service creeps in there is recourse for restrictive supply practices, however, it can be slow and costly.

The consumer electronics industry went though many issues and the government stepped in a few years ago and decreed that it is now illegal for suppliers to offer RRP's or MRP's etc and restrict supply to discounting customers. However, only the brave and the waelthy take the supply restriction regulations to task.

I would say find other suppliers and, maybe, create you own brand and source direct. As someone who knows little about these items, I would not be aware of the brands, as, I guess, many other people.

 

[bovine]

this is an interesting subject and one that has had an impact on my industry.
Online sales has completely devalued a sector of our market - where we used to make £200 per unit, now you are lucky to make £30! This has led to several companies not moving with the times and collapsing. All because of easy access to online prices and the prices falling through the floor. These products are best used when they have been professionally installed and staff trained. Unfortunately customers often only see price.
In fact so of the high end kit, which must be setup by a professional is also finding its way onto online sales. In this instance it is completely inappropriate and the customer would not stand a chance at setting them up. This devalues the brands and the manufacturer are actually quite good at stamping this out.

Looking at your posts, i would imagine my biggest concern would be the long term survival of your supplier. If the other dealers are not buying because you are undercutting them, then they are not going to make any money, r & D will diminish, no new products will come through and eventually they could go out of business. Extreme i know, but possible.

As long as you are viable as a business, then there is no reason for you not to continue with you pricing strategy, but i would try putting the price up to just below the other competitors. That way you are still the cheapest and would make more margin on each product.
And if you are high ranking on the web, you only need to be a little bit cheaper than everyone else and trade on your good service and references.
Sounds like you have them scared. Now you just need to consolidate your position.

 

[scoota]

The thing is. I am more than happy to make a profit of £125 for an outlay of £285. The companys complaining have been used to making over a £1000 for the same outlay. They have not moved with the times.
They employ too many people and waste far to much resources. Times are hard and the customer and the price is King. Some of the products i sell also need setting up professionaly and in the clients home but the client is offered that service at an extra cost if they require it. Not all do.

 

[bovine]

But what you are doing is upsetting the apple cart of an industry that has been fixed in its ways - very similar to what we have experienced.

I come from the other view, because i have seen this happen and have adapted. We concentrate on the higher end kit and do some "box-shifting". Have reduced staff and overheads and we are an efficient operation. Doesnt mean i agree with the erosion of price integrity that has been caused by the web. I would push your prices up to a bit closer though. If they were making £1000, why do you not make £700? Run some numbers and see what happens. If you double your margin and are still below everyone else you may lose some sales but you will be making much more money while not annoying your suppliers.

And i would disagree slightly with your comment that customer and price is king. Making enough money to have a sustainable business and pay the bills is king! There are many ways to do this, treating customer as king is part of it.

just my opinion.

 

The thing is. I am more than happy to make a profit of £125 for an outlay of £285. The companys complaining have been used to making over a £1000 for the same outlay. They have not moved with the times.
They employ too many people and waste far to much resources. Times are hard and the customer and the price is King. Some of the products i sell also need setting up professionaly and in the clients home but the client is offered that service at an extra cost if they require it. Not all do.

The internet for most products is a price war,people are quit canny now and know they can search for the best price for a given product.

I can't see your supplier doing anything,and the rep had no right even talking to you about your prices.

We like you are quite happy to take a smaller profit per sale,but more than make up for it in quantity of sales.

Earl

 

[Paul Kelly ICHYB]

Bovine does raise a valid point. If you are currently several hundred pounds cheaper than everyone else, what would you lose if you were a couple hundred pounds cheaper?

You would actually end up making more profit!

The additional problem you have is that if you drive everyone down to your pricing, your immediate competition would increase, that may then force you drop your prices even further!

 

[scoota]

Everone of my competitors advertise on their websites that they will beat any price.
the biggest problem is that some-one somewhere has to be the cheapest. Now i might be wrong and would be interested to hear other peoples opinions on this but this is how i see it.
I have spent 1000,s of pounds and many many hours getting my websites into the top slot of Google. I want to sell to every serious person that calls me about buying a product from me. As i am aware that they will ring round for better prices before making a purchase and there are some sellers out there that will tell them i am not trustworthy or that i sell inferior products. I do not tell lies so i am at an immediate disadvantage. Some customer come back to me and tell me whats been said. I am being forced into selling cheaper than i would like to because i have to make it worth the risk for the customer. The facts are i am the best in the business but it difficult to get over on the phone.

 

[scoota]

My philosophy is that if i sell the best quality products at the cheapest prices and offer the best back-up service in the industry i cant go too wrong.
I do not spend any money on advertising apart from seo on my websites. i do not do pay per click and i definatley dont take out full pages in glossy mags. I keep my overheads to a minimum. I do not want to be the richest man in the graveyard nor do i want to end up in the poor house. Why cant i just get on with it and be left alone.

 

[Paul Kelly ICHYB]

we're not talking Tesco or Argos here, your products are specialist and, for a new purchaser, all suppliers will be new and no opinion has probably been made about anyone!

You have to be commended for getting the number one slot and having a good business, and believing you have to be the cheapest is not a bad platform. But, undercutting by a big percentage just dilutes your returns on the effort.

I wouldnt be surprised that if you put all of your prices up £50, but still remained a few hundred quid cheaper than the competition, then only thing that would be affected is your profitability, in a positive way!

As for your competition, they probably have to sell half or a third of the products to make the same profit you do - that isnt a bad thing either!

 

[scoota]

I do have intentions of raising my prices when the season kicks off, that wont be for another Month yet though. The more i am pestered from the rep though makes me want to keep prices the same. I am meeting him next week and now i have discussed things on here i feel a bit more confident on how to handle him. I need to change my whats it got to do with you attitude a little bit. I mean no one like being dictated to do they.

 

[cjd]

You get away with deep discounting if you call it a 'special offer' which is obviously a legitimate marketing tool.

If you regularly have big offers for limited periods whilst also selling at a small discount to your next nearest competitor across your range you can achieve more profit, keep your supplier happy(er) and be able to flex your prices at will.

It's hard to put prices up unless you've made it clear that it is a limited offer.

 

[downsouth]

I am being forced into selling cheaper than i would like to because i have to make it worth the risk for the customer. The facts are i am the best in the business but it difficult to get over on the phone.

Who is forcing you to sell cheaper??? its only you thats forcing youself. As you say other firms make more profit per item than you. You are taking great satisfaction from these claims of being the cheapest around.

Why do you think items cost different prices in different stores? Some people solely buy on price, others buy from reputable dealers, household names etc

It would only take a new business to appear on the market that only wants to make £50 a sale to blow you out of the water, but that sort of competition leads nowhere. You'll be working very hard to get any sales and make enough profit to make the business worthwhile

I would rather work half as hard and make double profit than continually strive to be the cheapest around by not making much per item.

Why do you need to make the customer feel that they are taking a risk purchasing fom you?

 

[deniser]

I agree with Downsouth. I was just going to say what happens when the next person comes along and undercuts you? Where will it end? Best to stick to a reasonable margin which is only slighly below the competition otherwise you will end up in a downward spiral and destroy the business. for everyone by devaluing the product.

 

[scoota]

I think you slightly mis-understood what i was trying to say.
My long term intention is not to be the cheapest. but as long as all my competitors are advertising that they guarantee to beat any one elses prices. i will continue to throw down the gauntlet.
As for the risk question i dont make my customers think they are taking a risk. My competitors bad mouth me to them and try and put them off buying from me. Now the temptation of getting such a great deal makes them come back to me. If i was only £10 cheaper i would lose out because i dont rubbish the other shops as they do me.

Who is forcing you to sell cheaper??? its only you thats forcing youself. As you say other firms make more profit per item than you. You are taking great satisfaction from these claims of being the cheapest around.

Why do you think items cost different prices in different stores? Some people solely buy on price, others buy from reputable dealers, household names etc

It would only take a new business to appear on the market that only wants to make £50 a sale to blow you out of the water, but that sort of competition leads nowhere. You'll be working very hard to get any sales and make enough profit to make the business worthwhile

I would rather work half as hard and make double profit than continually strive to be the cheapest around by not making much per item.

Why do you need to make the customer feel that they are taking a risk purchasing fom you?

 

[Paul Kelly ICHYB]

if the rep comes on strong, you could try a peverse negotiating tactic - "I will increase my prices if you lower yours!"

 

[Paul Kelly ICHYB]

your gauntlet is bouncing back and hitting you in the face!

Do not stoop to your competitors levels, indeed, play them at their own game - supplier potential clients with a list of the competition to do a price check - even onit on your website! When speaking to clients, say that the competition is peed off with you as you are the cheapest and they may say bad things, but you do not stoop that low!

Also, when you put your price up, also have a price promise!

I fear that you are so wound up about the competition, you may lose sight of other bits of your business!

 

[scoota]

This is all good advice and i shall be taking it on board.
Thank you.
Now! off to compile that list.

your gauntlet is bouncing back and hitting you in the face!

Do not stoop to your competitors levels, indeed, play them at their own game - supplier potential clients with a list of the competition to do a price check - even onit on your website! When speaking to clients, say that the competition is peed off with you as you are the cheapest and they may say bad things, but you do not stoop that low!

Also, when you put your price up, also have a price promise!

I fear that you are so wound up about the competition, you may lose sight of other bits of your business!

 

[downsouth]

add a service of value to the price increases, such as providing access to half price annual services on these scooters. Is there an after care service product you can offer?

all things which you can add to your business so customers take less interest in negative competitor comments

prob lots of other things can be done, but obv scooters aint my spec subject!! well not yet!

 

[MH1]

With the further details posted I would agree with downsouth comments, raise your prices too the average, have a price match promise and possibly offer a free service etc as a bonus.

A lot of people watch their competitors too much and believe the cheapest price means more business and more profit, which is not always the case. Your target market will consider high quality service of paramount importance, as highly valued as a fair price.

Best of luck.

 

[scoota]

I have decided to increase my prices to apease the rep and all his cronies but in return i have also decided to give away free accessories to compensate.
The companies who`s accessories i am giving away are delighted and have offered me special prices. Not too sure how the competition will react but i can guess they will continue to slag me off. Nothing different there then.

 

A lot of people on here don't seem to live in the real world.

On the internet Price is king,thats why the internet is so popular for a lot of people.

Talking about added value and quality of service don't cut it for most.They want low prices .

The only area you can get away with higher prices is if you have a niche market,but for most its being competative price wise.

I been flogging stuff on the internet for 12 years and a great variety of products in different industries ,and believe me 98% of the time its price.

Earl

 

[downsouth]

who says price is king????

there are lots of factors that go towards constructing the right price for your business, how much you sell, overheads to cover

some products will be suited to be involved in a price war other not. If price was the be all and end all then many many business would not exist. Very much like trading on ebay, if ur happy only making a pound carry on.

Build ur business up correctly and make better profits. theres a market for all types of buyers and budgets.

trading on the internet simply gives people more opportunity and flexibility to compare prices, believe it or not businesses have been around far longer than the internet.

 

[bovine]

sirearl, i assume you are aiming your comment at me and i can assure you i do live in the real world!

If price is king then i assume your next car will be a tata nano then will it? thats the cheapest car in the world. No? oh but that would fly in the face of your comment. Lets look at rolex and breitling watches - not particularly cheap but still popular im sure you agree. These companies do not compete on price. Price is one factor that a business has to look at and is important but it is not necessarily the only defining factor to everyone and every product.

For some products then yes i agree i will go for the cheapest. For others, no i wouldnt go for the cheapest, but the one most suited to my requirements and one that can offer best backup. Buy cheap replace often is something i tend to consider.

But going back on topic, the advice offered to the op was not to become more expensive than his competitors, just close the gap a bit.

 

[Paul Kelly ICHYB]

bovine, not that I defending sirearl, but what he may have been saying, in your context, is that if you want a cheap Rolex, you would probably find it on the web!

Low prices amd low products are not the same thing!

 

[Kev Berry]

do your competitors work from a pc or do they have proper retail premises?
If like many "retailers" you only have a light bulb and a computer to run and pay for , you can drop the price of your goods to almost zero margin
In my business (fishing tackle) the internet is killing it off slowly, shops are closing. But the customers don't realise that when we are all gone , where are they going to get their bait/advice/help/repairs from, or those last minute necessaties.
you are de valuing a product which your supplier and the other retailers think warrants a price of £xxx
the other retailers are going to stop selling this product unless they can make a decent profit. This means the supplier/manufacturer is going to sell less---- get the picture of what this means will happen?
Any idiot can undercut prices, it dosn't make you clever or better than someone else selling at a higher price--- it makes you tired from having to work harder and longer to make a living
In my trade many wholesalers /manufacturers are now refusing to sell to anyone without proper retail premises
I think its time that more did the same

 

[cjd]

do your competitors work from a pc or do they have proper retail premises?............Any idiot can undercut prices, it dosn't make you clever or better than someone else selling at a higher prices...........In my trade many wholesalers /manufacturers are now refusing to sell to anyone without proper retail premises

'Any idiot' can't sustainably sell at low prices. If they are able to do so long term, it means that the business model for your sector has changed and you either have to join the party or, as you say, be killed off slowly.

I have a lot of sympathy for the fishing tackle retailer, there is simply no substitute for a really good one; but even before the internet, catalogue shopping was hurting it - buy a fishing magazine today and you get at least 3 catalogues drop out; now backed up with a web site and shop.

If you want a rolex, price is not your concern but if you want a generic product like a book, a washing machine, a camera or a Daiwa reel you might as well look for the best price you can get - subject to things like convenience, trust etc.

I'm convinced that a good bricks and mortar retailer can still survive but they have to give added value AND good prices - quite a challenge.

 

[scoota]

1st off i am no idiot.
I provide all the comforts and back-up that my competitors offer with one exception. I do not have a fancy high street showroom. I do however have a workshop/warehouse with great parking facilities. Customers are always welcome to call at the premises to test the products but with a slight difference. They must call for an appointment. I do not pay staff to sit on their bums and wait for the customers to turn up. I waste no money whatsoever my overall profits are probably more than most cos my outgoings are far less. I also do not sell inferior products. The products i sell are the best quality that are available and this also saves me money on after sales service ie warranty claims and damage in transit claims.
The industry i am in is living in the past. Their outdated actions are costing them dear and its because of this that they need to slag the cheaper companies off instead of getting in with the programme and cutting overheads. The days of 5/600% profits are gone and if you cant survive on 30% its time to get out before you find you have no business left.