With brick and mortar locations being swallowed up by e-commerce organizations (in the case of Whole Foods and Amazon) or being shut down completely (Toys 'R Us) within the last year, there's a rising concern over one question: is the pet industry next?
With recent events in mind, it's more important than ever for pet product manufacturers to support independent pet stores that make up the backbone of the industry. This includes the rising consideration of pricing policies designed to protect the margins of both manufacturers and retailers.
In fact, according to Pet Business Magazine's Mark Kalaygian:
"...pet food companies that have demonstrated a commitment to the independent pet specialty channel, including installing policies that prevent price erosion, have enjoyed above average growth compared to companies with broader channel strategies and less controls on pricing."
MAP policies are a great way to help level the playing field in terms of pricing and discounts both on and offline. However, there is the question of how these policies affect the pet industry, especially as they begin to grow in popularity among manufacturers of all pet product types.
To gain a fair understanding of this topic, let's first explore the up and downsides to implementing these policies on the retailer side.
The Benefits of MAP Policies
- Competition not solely based on price - In other words, the playing field has been leveled between e-commerce and brick & mortar retailers. Without MAP pricing, many online retailers are content with not being profitable in order to gain market share; a strategy that independent pet stores simply can't compete with. With MAP in place, online retailers must sell at the same price as everyone else and find different ways of competing.
- Protects the brand image - Because prices can't be undercut as easily, manufacturers' brand image is protected from being viewed as "cheap." This reflects on the retailers selling the brands' products as well, especially those who have positioned themselves as high-end boutiques.
- Maintains profitability of products - With a higher retail price, the margins are protected for both the manufacturer and the retailer. While online retailers may be able to give up profitability for market share, the same cannot be said for independent pet stores.
The Arguments Against MAP Policies
- They violate free market principles - At first glance, it's easy to misunderstand MAP as a form of price fixing. However, it's important to note that retailers can still sell products under a set MAP price. Furthermore, while these policies may have been in violation of the Sherman Anti Trust Law of 1890 or the 1914 Federal Trade Commission Act, a recent Supreme Court Case in 2007 (Leegin Creative Leather Products Inc. vs. PSKS, Inc.) held that "manufacturers could, under certain circumstances, establish binding retail selling prices Henceforth, retail price setting restrictions will be subject to a rule of reason evaluation" (Ronald J. Adams, 2011).
- They're difficult to enforce - MAP violations are a problem for manufacturers because retailers following the policies will become frustrated. Plus, these violations can make independent pet shops irrelevant (in price wars) and even erode the company brand. To prevent this, it's crucial to step up the enforcement of these policies.
- They may skew the customer journey - Because these policies prevent products' prices to be advertised lower than the set MAP, customers who shop purely from a value perspective may not get the low prices that he/she is looking for. On the other hand, Mark Witriol, one of the owners of Pet Food Express in California, states that it gives them choice in the long run by giving independent pet stores a chance to succeed.
Love them or hate them, the popularity of minimum advertised price policies are certainly on the rise within the pet industry. While many independents are happy to comply, there can be an issue when they are not properly enforced. This causes a headaches for all sides, except for those who are not in compliance.
So, what do you think about these policies? Leave your responses in the comments below!
- Pet Business Magazine - How do MAP/MRP Policies Help Pet Owners?
- Pet Business Magazine - Hidden Dangers in Pricing Parity?
- All Points Marketing - The Key to Enforcing MAP Policies in the Pet Industry
- Pond Trade Magazine - MAP Pricing Debate-In Depth
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ABOUT THE AUTHOR
Ashley Hoffman is a freelance content marketer in the pet and design industries. Growing up in the pet industry, she has keen insight on market trends and a passion for helping small businesses grow. Her portfolio includes various topics from pet food trends to using technology and marketing strategies to boost pet business sales. When she's not writing articles or working her day job, she's playing with her two cats (Kitty and Chewbacca), reading a book, or hiking one of Washington's many trails.
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