Discounting may soon disappear online and offline! Recently the Supreme Court overturned a nearly 100 year old rule that prohibited price fixing by manufacturers (also known as setting a minimum price a product can be sold for in a retail store). In reality to a certain extent price fixing was happening anyway.
If you try to buy Bose Quiet Comfort headphones, Microsoft Windows or an Apple iPod or for that matter a new iPhone you will find uniform prices everywhere. (btw- iPod, iPhone, iMac, iTunes --- see how cool our iFLOOR brand is?)
Until this recent decision a retailer of flooring or any other product could generally set the prices they advertise at or sell for on their own for their own store. The basic premise is that as companies are more competitive they can offer a lower price and that price competition is good for the consumer and ultimately good for businesses as well because it forces efficiencies.
The new Supreme Court decision now has a different take on that concept. Basically unless there is a risk of monopoly a manufacturer has the right to set the retail price of each of its products. If a retailer fails to adhere to the Manufacturers Suggested Retail Price (MSRP) then the manufacturer can stop selling to them and enforce that rule through the distribution chain without fear of a price fixing anti-trust litigation as before.
This theory is that when a brand invests heavily into their name to have a premium brand they should be able to sell it at a premium price AND not have discounting associated with the product in anyway. Think about it in the context of Gucci or Nike or Louis Vuitton – all of whom would freak out if someone tried to discount the products because of the premium positioning.
What does this mean to you? Well in the future (I suspect the near future) most manufacturers will arrive at a MSRP for their product that iFLOOR and every other retailer including Carpet One, Abbey, Prosource, Carpets of Dalton, Becklers and EVERYONE else will be forced to maintain.
There will be no variance on prices whatsoever. Short term this will hurt consumers because the prices that you can buy at today are going to go up. This increase will be felt especially by those that have had the opportunity to work with iFLOOR prices in the past.
You may be asking yourself, “Won’t this cause massive price increases and inflation?” Part of the court’s logic is that a manufacturer would not be wise to raise their price too high if they have competition in the market from other companies. For example Bruce hardwood is not likely to go up too high if it is worried about Columbia hardwood’s market position. BR111 is not likely to set their prices too high if they are concerned about Award or Westhollow offering competing products at a lower price.
The good news is that companies that are value added in the buying process will benefit in the long run and so will their customers. The consumers will benefit because there will be less price confusion in the market and allow an end user to buy at the place they feel like adds the most value to the job. What is a value add? Well some things that iFLOOR has offered for years would be considered value adds like:
· Expert advice about the job on a one to one basis. Many Internet companies just want you to place an order online and encourage you not to try to call them. iFLOOR offers live chat, telephone service 24 hours per day as well as store locations.
· Sample support through iFLOOR stores and direct sample shipments.
· Post Sale Service has always been something we have invested heavily in. iFLOOR has dozens of people that handle post sales questions and pro-active tracking of orders.
· iFLOOR’s financing offers are very aggressive to help you get the job done right now, but pay later.
· iFLOOR offers installation in most major cities and surrounding communities. This is a HUGE value add and NO other Internet company can offer that. This is a challenge, but we believe continued investment in this area is good for our customers.
· IFLOOR has dozens of locations in the United States that can offer in person service as well. This is another value add that Dalton brokers and Internet low price sellers can’t compete with.
The basic summary that I believe is that the court has thoroughly considered this nearly 100 year old law in light of the present day situation consumers face. The awareness of general competition and in particular global competition will keep brands sensitive to price is part of the equation. I should mention that my own awareness that this is now the law of the land gives me additional perspective on this matter. Companies who offer brands who have a set MSRP will have a higher margin and therefore a more profitable contribution to continue to add additional services that should benefit consumers directly.
There is a part of me that is all too aware (and sad) that discounting – particularly on the Internet will be hit very hard. This could impact prices not just of flooring, but prices of cars, books, DVDs, TV’s, furniture, MP3’s, jewelry, camera’s, tools, apparel, GAS, tires and basically anything sold that is a recognized brand. EBAY, Amazon, Overstock and other discounters could be devastated by this new rule depending on how the manufacturers decide to adapt to this ruling. iFLOOR is uniquely positioned to benefit from this ruling as a large value added player in the flooring market. Other companies that just "pirate" sales away from companies like iFLOOR based on a promise of a lower price who do not have a value add to the buying process will likely disappear.
So the days of scouting for a deal may be coming to an end. However, this negative is offset by the understanding that competition will keep pushing manufacturers to be realistic about what prices to set and that fundamentally consumers will receive a higher level of service from companies that invest in a value added buying experience.
Here are some news references to the story:
Supreme Court lets manufacturers set minimum prices
Supreme Court Reconsiders Price Fixing
After 96 years, the (price) fix is in
Supreme Court Overturns Age Old Ban on Resale Price Fixing: Ruling to Raise Retail Prices, Costing Consumers Billions
Supreme Court hands business groups victory