Manufacturer Price Fixing and Its Discontents: Online Stores Get Creative
A recent Supreme Court ruling has emboldened manufacturers of goods ranging from baby food to clothing to set minimum pricing requirements of their distributors. The case has inspired protest from most states’ attorneys general, as well as economists who identify such agreements as a cause of inflation.
The Wall Street Journal‘s political blog reports:
Attorneys general from 35 states — including New York, California, Massachusetts and Pennsylvania — wrote to Congress urging passage of a law to make policies like these illegal. “As the chief antitrust enforcers in our respective States, we know all too well the harm that can be caused” by pricing pacts, the letter says.
Such agreements are often particularly targeted to disadvantage online retailers by regulating the minimum advertised price. This allows bricks-and-mortar stores to discount prices further in person, while forcing public websites to post only the higher, manufacturer-determined prices.
A Creative Response Sends Sales Soaring
West Coast Golf Online was hemmed in by exactly this kind of minimum advertised pricing agreements. Their online store had to list the higher prices, while stores discounted these prices in person. Their answer was to create “The Haggle Button” and to post it right next to the manufacturer’s price.
Though customers were reluctant to call and demand a discount, they were willing to press the button, which automatically triggered an email to be sent with a lower-priced offer. In Marketing Sherpa’s post the retailer attributes this technique to driving an increase to their annual revenue of 685%. (How’s that for a first mover advantage?) The haggle button also drove word-of-mouth excitement among customers, who emailed their friends and increased the store’s site traffic dramatically.
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