Guitar Shop Rant (Online/Offline issue)

[nfe]

Regarding the price dictates (or minimum prices) of manufacturers, this is illegal. If a manufacturer is telling retail how to set a price, a call to the competition law administration of the EU can make this a very inconvenient and expensive experience for that manufacturer. Many big companies have made that experience.

Really? Because a lot of high end PA manufacturers do it, Bose particularly will simply withdraw your dealership if you're selling their gear cheaper than they dictate.

[mikeluke]

With Twinfan on this one - I use the Net to benchmark the going rate and then see if my local shop can get close - if they can, then they get the business - does not mean they have to meet or even better the price, just get close enough to remove the hassle factor of going elsewhere.

Not just for guitar stuff - I do the same for white goods, electronic items, etc. I am usually upfront with them too - along the lines of "This is what I can get it for on the web. I'd prefer to deal with a local supplier. How close to this price can you get?"  It works most of the time too.

[Plexi Ken]

A Cartel is illegal in most (all?) countries where there are free-markets. As free-markets are intended to reduce price and increase quality (Adam Smith), Cartels act against the free-market. If you believe in that stuff  :P

Cartels exist in all free-market economises, the problem is obtaining sufficient legal proof that the Cartel exist.

In nfe's example, Bose will refuse to supply a seller with goods they suspect are being sold bellow RRP but will give some-other reason in the official record. This is common in the car industry. Didn't the VAG Group receive a large fine from the EU for doing something similar.

Some years ago I was a moderator for a USA based Flash developers forum that had a 'jobs' section. We needed to be very careful about posting cash quotes for jobs, i.e. how much would you charge to do the following web site. If other developers posted prices, this could be taken as collusion to fix prices.

[ToneMonkey]

Not just for guitar stuff - I do the same for white goods, electronic items, etc. I am usually upfront with them too - along the lines of "This is what I can get it for on the web. I'd prefer to deal with a local supplier. How close to this price can you get?"  It works most of the time too.

I'm exactly the same for my local hardware shop.  He does me a deal if I know I can get it cheaper elsewhere, normally he can't match people like RS (just had to buy a load of plug sockets) but I'd much prefer to give him the money than anyone else.  If you don't use it then it'll dissapear and I'll have to buy screws and sandpaper from places like B&Q where they just take the piss something royally.  Same goes for guitar shops.

[Ratrod]

Like Feline mentioned, some manufacturers do not allow the retailer to advertise below a certain price.

I would like to see that change. At some point the retailer has to mention a price. Might as well post it and be done with it.

[mikeluke]

Don't know if it still the case but PRS used to be like this - you see it in the USA when retailers cannot advertised discounted prices on PRS...

[dave_mc]

Regarding the price dictates (or minimum prices) of manufacturers, this is illegal. If a manufacturer is telling retail how to set a price, a call to the competition law administration of the EU can make this a very inconvenient and expensive experience for that manufacturer. Many big companies have made that experience.

Really? Because a lot of high end PA manufacturers do it, Bose particularly will simply withdraw your dealership if you're selling their gear cheaper than they dictate.

yeah, hunter's right. As i suggested in my earlier post. :D As i said, there are probably a ton of loopholes which they can use to get away with it in practice- but it is technically illegal. Cartels are illegal, as they should be.

Regarding those things feline posted: I agree that many of those reasons are probably justified. However, you run the risk of alienating the good customers to avoid getting screwed over by the bad. Look how many members here said they'd be put off by seeing no price- most (if not all) the members here would presumably qualify as "good" customers.

That thing about the dealer advertising at an unrealistic price while not even stocking it was ridiculous, though, that should be illegal too (if it's not already).

Personally, I'd buy online if I were making a big saving, but I wouldn't do it for a fiver or tenner (depending on the overall price of the item, of course- if i can get it for 99p online, I'm not paying £10.99 in a local shop!)- that's daft.

With Twinfan on this one - I use the Net to benchmark the going rate and then see if my local shop can get close - if they can, then they get the business - does not mean they have to meet or even better the price, just get close enough to remove the hassle factor of going elsewhere.

That's exactly what I do, too. I did that with my valve junior- I paid more than it was online, but they got close enough to make it worth my while. :)

Big problem is that 95% of the time a local shop won't have what I want in stock- and I've had bad experiences in the past with getting stuff ordered in (had to wait for months), so I'm not doing that again. Plus getting something ordered in removes a lot of the advantages of buying locally in the first place (other than it being easy to return if it's faulty)...

A Cartel is illegal in most (all?) countries where there are free-markets. As free-markets are intended to reduce price and increase quality (Adam Smith), Cartels act against the free-market. If you believe in that stuff  :P

Cartels exist in all free-market economises, the problem is obtaining sufficient legal proof that the Cartel exist.

In nfe's example, Bose will refuse to supply a seller with goods they suspect are being sold bellow RRP but will give some-other reason in the official record. This is common in the car industry. Didn't the VAG Group receive a large fine from the EU for doing something similar.

That's what I'm talking about. :)

[jpfamps]

There are a number of reasons for this practice

1) the shop wants to show a cheap competitive price undercutting everyone else, except the manufacturer would withdraw their dealership if they did that.
BKP for example don't want to see the "street price" of their pickups lowered to £65 just because some shop is willing to take a loss or make bugger all, as then no other shop will get away with selling them for a workable price and decide its not worth stocking that brand as you cant earn a living and BKP has no stockists.

I was once 100% sure that there was a large store that didn't actually bother to stock a particular line that I was selling , but they advertised it at a rock bottom price which ensured that I couldn't shift a single item at the sensible price I had them at.
They didn't care as they didn't have any to make a loss on anyway IMO, but they spoilt it for anyone else.
The Uk distributor confirmed that they hadn't been buying any and in the end got some lawyers to send a cease and desist letter to them over it as it almost caused sales of that line to dry up in the UK as every punter expected it for half the real price and chose to buy something else instead.

2) Sometimes it takes a long time to go from giving the advert ideas to your artwork guy to it finally appearing in print in a magazine, and exchange rates  or item prices can change quite a bit - either up or down and you either make a loss or are uncompetitive as a result.

3) A lot of companies would hate to print a price like New Les Paul £1599 (which might be a very reasonable price) and have Jonny ring around to see who will beat it, and end up losing the sale to another store who went to £1575 to get the sale.

4) Most shops want to sell to you on a mix of price and customer service rather than just low price alone.
So they may list the price as £15xx or £ring for best price in town.
Then it would be up to highly motivated and friendly sales staff to close the sale , maybe offering a good price with a setup and some extra strings type of deal which would be a really good deal for the customer, but isn't entirely about price.

5) it is true that sometimes the shop may try to "switch sell"  the customer onto another similar product (having established that it may be even more what the customer was after. Or tell them about a newer version of the model thay were asking about which has only just come in.

I have to confess that I have been deeply offended when a customer has come in to talk pickups with me , spend an hour of my precious time discussing their needs , played every guitar in my shop to explore what will be right for them, and having worked out a perfect setup for them, they say thanks - I'm just off home to get it £10 cheaper on the web (from a shop that wouldn't have my experience or give them the opportunity to try stuff out.)

So sometimes the discussion of the price needs to be held back till more discussion is had - not because you want to take advantage of the customer, but rather that the customer doesn't take advantage out of you. You want to be fair,  but a mix of service and price is usually the best mix for everyone

I would agree with all of this.

I would add that vintage dealers often don't put a price on commission sales so that the owner doesn't know how much the shop are making on the sale...........

Unfortunately most consumers only ever look at price, and want the cheapest regardless of quality. This is why Ryan Air are still in business.

Regarding manufactures setting the minimum retail price of there products (Bose was mentioned), well I don't see that as anti-competitive per se.

If a manufacturer wants to maintain a retail price for their product so that all sellers  provide the product at the same price and thus can compete on after sales service etc., that is fine as far as I am concerned. Indeed, in the long run this is probably much better for the manufacturer as their product will ultimately be sold by retailers who compete on the basis of service rather than price.

If the customer thinks that the product is too expensive, they have the choice of buying a rival companies products. How many brands of pickup are there out there?

What would of course be anti-competitive would be for all the pickup manufacturers to collude together to fix the price of all their products across the market, ie a cartel. Several industries have been pulled up on this one under EU legislation, including car manufacturers, airlines and software writers.

"Price fixing" is illegal under EU legislation; however so is predatory pricing ie selling goods at a loss either to destroy competition, or as a "loss leader" to try get other sales off the back of the initial sale.

I was chatting to a shop owner the other day who told me Thomann are selling SM58s for less than Shure sell them to him! All the guys I know who work in guitar shops regularly get someone trying an item out and then saying "I can buy this for £X in the internet so can you sell this to me for £X." Ultimately it is impossible for a small retailer to compete on price with a very large internet retailers such as Thomann.

Shops selling predominantly new low to medium value guitars/ related goods are definitely suffering from internet-based retailing.

For many areas of retail, Cds/ books, many electric goods etc, other than having the convenience of being able to buy these item and have it in your hand straight away the retailer really doesn't add any value. A lot of retailers selling these type of goods have gone bust and I expect most of the slack has been taken up be internet-based retailing, and quite frankly good riddance to many of them as they often provided appalling service.

Good guitar shops add value to the items they are selling buy providing specialist advice, repairs, set ups etc, so they hopefully should survive.




 

[MDV]

Some interesting points in here.

One thing that JPF suggests - thomann selling gear for less than a little guy can buy it for: that, seems to me, is in the interests of fairness, so long as the price the manufacturer sells it to the dealer for is pretty level as the amount they buy goes up. Its tescos syndrome - vast buying power allows bulk purchase at a lower rate than the little guy pays, but in far greater quantity than the little guy can afford - little guy is priced out of the market.

Which begs a question we arent seeing here - are the cartel manufacturers selling to everyone for the same price per unit? If thats the case then I think that a retailer can set themselves whatever profit margin they want or dare and come what may from it. There are lots of rationales for everything from barely breaking even (even making a loss, so long as its not on everything) to huge markups, and its not the manufacturers place to dictate that. That said, it is up to the manufacturer to withdraw dealership if they wish, so what are you gonna do?

Manufacturer wants a good price for the gear, plus profit margin
Dealership wants a good profit margin
Punter wants lowest price possible
Lots of different people are selling, in shops and online
Punters will shop around

Its a tough one. Driving prices down at the retail end will also invariably drive materials and construction spending down at the manufacturing end, so how do you know if a manufacturer is fixing the prices to maintain quality or because they're greedy? Some builders probably do both. I think that when a punter sees a witheld price they probably assume the latter, and probably (rightly) assume that its very expensive, in general and compared to other places as well, and look elswhere pretty automatically. I know I do.

As far as the guy in the shop goes, I agree with feline and nfe totally. Never, not $%&#ing once, have I gone in a shop, played the gear, quizzed and pestered the staff, driven away other customers with teh br00talz that "I HAVE to play for a least a little while at gig vol or I'm buying nothing" and gone and bought it online. Aside from all the (correct) reasons stated - its just rude. (I also like to get that exact one, for various reasons, and wont buy guitars online at all)

[dave_mc]

i'm not talking about loss-leaders; that should be illegal too. Good point about tescos syndrome too, mark.

assuming we're not considering loss-leaders and tescos syndrome (which, granted, is a pretty big assumption), allowing manufacturers to set the price IS anti-competitive.

I dunno. Like most things, it's a balancing act. While I hate tesco, I'm also aware that if you prevent bigger concerns from buying in bulk at a lower price, prices will rise. Of course, stores like tesco aren't passing on all the savings to the punters or they wouldn't be making multi-billion pound profits year on year, either.

[jpfamps]

Vast buying power has its downside for the manufacturers/ suppliers.

Supermarkets are an example of companies that put massive pressure on suppliers to cut prices, even to the point where they are selling produce at cost or less. This has been of massive detriment, for example, to the UK farming industry (and indeed ultimately to the consumer).

Additionally, supermarkets have put loads of independent traders out of business. Many town centres are now full of empty retail space due to out of town shopping.

Generally if there is an opportunity for big businesses to make more money by shafting a small business they will take it.

[dave_mc]

Mark's point about it being rude not to buy from a local shop when you've used its facilities is fine, except for two things- it assumes your local shop(s) stocks what you want (mine frequently don't), and it also assumes the local shop isn't charging extortionate prices. Frequently my choice is between buying something in a local shop which i consider to be mediocre, or buying something online which I can't try, but which I suspect I would like much, much more. :( I would also say it's not rude not to buy if the normal street price on something is £500, while in a local shop it's twice that. Better service is worth a slight upcharge, if you ask me- not a gigantic one.

and yeah, i hate tescos etc. too. They make something half as good and charge 95% of the same price, then say they're great value.

[jpfamps]

i'm not talking about loss-leaders; that should be illegal too. Good point about tescos syndrome too, mark.

assuming we're not considering loss-leaders and tescos syndrome (which, granted, is a pretty big assumption), allowing manufacturers to set the price IS anti-competitive.

I dunno. Like most things, it's a balancing act. While I hate tesco, I'm also aware that if you prevent bigger concerns from buying in bulk at a lower price, prices will rise. Of course, stores like tesco aren't passing on all the savings to the punters or they wouldn't be making multi-billion pound profits year on year, either.

Mark's point about it being rude not to buy from a local shop when you've used its facilities is fine, except for two things- it assumes your local shop(s) stocks what you want (mine frequently don't), and it also assumes the local shop isn't charging extortionate prices. Frequently my choice is between buying something in a local shop which i consider to be mediocre, or buying something online which I can't try, but which I suspect I would like much, much more. :( I would also say it's not rude not to buy if the normal street price on something is £500, while in a local shop it's twice that. Better service is worth a slight upcharge, if you ask me- not a gigantic one.

Allowing a manufacturer to set the retail price of their products is NOT anti-competitive.

Allowing a group of manufacturers to fix the retail price of a type of product IS anti-competitive (and is the correct definition of a cartel).

[hunter]

Regarding the price dictates (or minimum prices) of manufacturers, this is illegal. If a manufacturer is telling retail how to set a price, a call to the competition law administration of the EU can make this a very inconvenient and expensive experience for that manufacturer. Many big companies have made that experience.

Really? Because a lot of high end PA manufacturers do it, Bose particularly will simply withdraw your dealership if you're selling their gear cheaper than they dictate.

If you provide evidence for this to the EU competition department (I think it's called "DG 5"), Bose will suffer first and then stop this practise.

[Plexi Ken]

Allowing a manufacturer to set the retail price of their products is NOT anti-competitive.

Are you sure? Isn't that exactly what VAG got in trouble for?
It's my understanding that wholesalers can suggest a RRP but enforcing one is illegal price fixing?

I worked in high volume wholesale for over a decade and we were always careful to point out that any retail price published in our literature where only examples of suggest selling price.

We used a complex discount system that resulted in large customer purchasing large volume could get the item for almost cost price. Small customer buying low volume could be paying 25%+ more for the same item. I presume most wholesalers operate a similar system. This means that large resellers can sell product at a lower price than the small-guy and make larger margins. I don't like it but that's how the fee-market works.