When I was a kid, a lot of stuff sold in stores had pricetags affixed by te manufacturer-gilette razors come to mind. I also remeber jewelers would display watces, which had pricetages fixed by the maker. When did this practice die out? Is it a good strategy (for oems) to allow their retailers to compete on retail prices?
It still goes on. Go to any bookstore.
In addition, I just bought a candy bar today that said “2 for $1” on it.
But, basically, there was no way to force retailers to sell at the prices printed on the box. At one point, there were “fair trade laws,” that allowed for it, but those were overturned. Since any price was the determination of the merchant, there was really no reason for the manufacturer to continue to print a price on the item.
Books are different since authors are paid a percentage of the cover price; it would be an accounting nightmare for the publisher to keep track of who was selling a book for what and when.
What I really want to know is if it’s to stop stores from selling for less than the price, or for more?
I can see, maybe, why big companies would want to stop stores from competing with each other on price. With lower margins, fewer stores would want to carry the item. Also maybe the competition would put pressure on the manufacturer itself to lower the bulk price. Either way, the manufacturer makes more money by co-opting the market. But as for logistics… it would take a law, not a sticker, to force retailers to not drop the price. Was it really legally enforceable, as RealityChuck suggested?
But the other possibility… the manufacturer doesn’t want the store to charge more. After all… what’s the benefit to the manufacturer? The store sells fewer items, and doesn’t pass any profits back up. And as for logistics… a sticker will work perfectly, because who’s going to pay the store more than what it says on the box?
But either way, it’s an afforont to a free market and i’m guessing improved competition or other factors made the scheme less appealing or easy to pull off. It seems you only see on cheap snack items (bags of chips do this a lot) or books. Now, as for books… is the whole author-royalty thing a loophole to force bookstores to charge that much? I think snacks are about making the food cheap, but book publishers may have found a way to keep the price up.
Uh, book stores discount all the time. Amazon even has different prices for whether you’re logged on or not (really!). Authors don’t get a cut of the real sales price, 'cos that can’t be tracked. It’s either “wholesale” or “MSRP” neither of which affect the retail price.
This topic could fill a book.
In fact, I have a book like this sitting on a shelf upstairs.
There are thousands of manufacturers, and every one probably has a different take on what they’d like retailers to sell their products for.
Some manufacturers are very much in bed with certain retailers, and those manufacturers tend to work to keep prices high in order to protect said retailers. They also work hard to reduce pricing transparency, making it hard to know if the dealer you’re working with is charging you above or below market price.
Exercise: try to find the price on a brand new NCR ATM in the next 20 minutes. To exclude human factors, try to find the price for said ATM without installation or maintenance included.
Not easy, huh? You probably failed, unless you already know an NCR employee, contractor, or customer.
As far as books go, that’s a mixed bag.
Fiction titles generally have a price printed on the cover (or on the inside flap of the dust jacket) but many titles including most college textbooks and most university press specialty-type academic publications do not. In fact, the “MSRP” one finds in publisher’s catalogs for low-volume titles by publishers like Butterworth-Heineman change from year to year, even when they’re selling the same book, same edition, and in fact even the same printing.
Also, you should be aware that in the case of the new book trade, by no means is the cover price adhered to. When the most recent Harry Potter [ISBN 0545010225] came out, the the cover price was $34.95 but you would have had no trouble finding it for under $20 at any number of large bookstores.
Most books don’t get discounted that steeply, but a healthy percentage of titles (not remainders, either) can be found anywhere from 20 to 30% off at or shortly after release date.
Pricing new books above cover is quite rare, but discounting beneath cover price certainly is not.
Author royalties vs cover price vs price actually paid in stores is a mess too. The contracts can be odd, and remainders make the equation mind-numbingly absurd. If the auto industry worked like book publishing, Toyota would routinely manufacture 20 million Camry per year in excess of demand then paint black stripes on the doors of 10 million of those and sell them to their dealers for $2000 each. Afterwards they’d bulldoze the other 10 million Camry into the ocean for no apparent reason.
If Camry had an author, the author would get paid for none of those last 20 million Camry, but the sales of the non-surplus Camry would be negatively impacted by the 10 million Camry sold as remainders.
Balthisar,
I’ll want a cite for Amazon charging different prices based on whether or not you’re logged on.
I believe they dropped their advanced price discrimination heuristic when they had a ton of complaints.
Perhaps you’re talking about the items where they won’t actually show the price until you’re placed an item in your shopping cart?
Tell me where you can buy an Apple iPod that has a retail price that is significantly different (cheaper) than what Apple requires retailer to charge?
Good stuff, Mr Slant.
There are various reasons a manufacturer would want to try to set a retail price. Two important ones are (1) to use market power to extract downstream profits; and (2) to ensure quality.
In case (1) the powerful upstream producer can use different wholesale prices to extract rents from less powerful retailers.
In case (2) the manufacturer needs to get good exposure for their product or appropriate handling for things like food and tries to persuade retailers to do the right thing by the product by guaranteeing their margin.
Or for that matter, a game console?
There’s a decent history of resale price maintenance regulation here: http://www.ncjolt.org/content/view/171/62/1/1/
This discusses the Supreme Court’s *Leegin * decision: http://www.law.berkeley.edu/centers/bclbe/news/LeeginMemoFinal1.4-1-BCLBEinfo.pdf
different discussion: http://www.metrocorpcounsel.com/current.php?artType=view&artMonth=March&artYear=2008&EntryNo=7135
and here is the *Leegin * decision: http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=000&invol=06-480 (rule of reason analysis applies to policy of refusing to sell to retailers that discount its goods below suggested prices)
Gfactor,
AWESOME cites. Thank you so much for shedding light on this messy, convoluted, weird topic.
I used to work for Bose headquarters and they don’t allow discounting. Their promotions simply offer bonus things like pedestals. Bose tries to keep an extremely strong name brand and they refuse to have that damaged by consumers price shopping for any of their products.
“Due to company policy, we can’t discount your Acoustimass 16 Series II speaker system, Mr. Shagnasty, but buy one tonight and get TWO free!”
Greeting cards, Little Debbie snack cakes, and bagged snacks are other pre-priced items off the top of my head. These are all typically stocked by the vendor, though, not the store, so prepricing allows the vendor to put out product, rotate, remove incorrect prices, etc., and not involve store personnel.
Other reasons they’ve largely disappeared, though, besides the ones mentioned: the large discount chains prefer to keep prices fluid, and mark hundreds of SKUs up or down most every business day, and for efficiency, don’t individually mark prices in most states (Michigan and a few other locales excepted). Prepriced product would have to be caught and marked properly ,whereas nonpriced merchandise can just have a new shelf label printed. It also makes things simpler for the manufacturer-- the manufacturer can just keep churning out product without needing to redo packaging everytime they want to change their wholesale price.
That said, large customers can request prepriced packaging from suppliers; Dollar General’s merchandise is usually prepriced. Kmart at one point used to get prepriced peggables (Hot Wheels, rolls of Scotch tape), and may still do so. I suppose it would make sense for high volume items with historically stable prices.