Brands love ecommerce. But as this reinvention of retail evolves, many of those brands have discovered it's a double-edged sword. One side of the blade is a dramatic increase in top-line sales. The other side of the blade, however, presents challenges that can be catastrophic to distribution strategies, retail margins and overall perceived value.
Those downside risks aside, ecommerce is still growing so brands are developing strategies to decrease threats presented by online retailers. To dull the other side of the blade, as it were. Many of these strategies involve the adoption and enforcement of stronger policies and agreements. The most widely adopted of those is a MAP policy (minimum advertised price policy).
Unfortunately for both brands and retailers alike, there are many misconceptions about this strategy. So, in addition to explaining what a MAP policy is and what it aims to accomplish, this article will explain several other key points.
WHAT IS A MAP POLICY?
MAP is an acronym for “Minimum Advertised Price”. Contrary to popular belief (and some apparent inaccuracies found online regarding MAP policy meaning), a MAP policy does not tell retail partners how much they can sell a product for. Rather, it tells them the lowest price at which they can “advertise” a product. The final purchase price is not a consideration.
IS MAP PRICING LEGAL?
In 2007, the U.S. Supreme Court determined that MAPP was not per se illegal. The decision was made in an attempt to prevent discounting retailers from getting a "free ride" on non-discounting retailers that generate increased consumer demand by furnishing consumer services and enhancing inter-brand competition.
The Court determined that without some price protection to prevent the loss of sales to a discounter, full-service brick-and-mortar stores may be forced to cut services (to the detriment of the consumer) in order to be price competitive.
Without going down a legal rabbit hole, there are a few big picture items that brands should avoid to not get in hot water:
- Caution should be used to ensure that the brand is enforcing the “list” price, not the “selling” price.
- MAP Policies must be made unilaterally, so making deals or policy decisions with retailers (boycotting and/or collusion) must be avoided.
- Never negotiate with a seller.
- Treat all retailers equally.
WHY DO BRANDS ADOPT MAP POLICIES?
In addition to having optimal images, accurate product information and reviews, consistent pricing is essential to a unified, online brand presence. Objectively, it means predictable and acceptable margins for authorized sellers. It means a level playing field and less “showrooming” for the brick and mortar trade. And it makes consumers feel the product is worth the price.
Seeing a wide range of pricing, including hyper-discounted listings, is very confusing and makes consumers question a product’s value. So, in a nutshell, MAPP is a strategy to protect the price side of a unified brand presence.
MUST MAP POLICIES BE SIGNED?
The simple answer is “no.” Policies are not signed, agreements are. This may seem to be inconsequential but it’s not. A signature constitutes an agreement and, by their nature, agreements can be negotiated and amended. A policy cannot. A policy is a unilateral statement of fact. It is non-negotiable. Another thing to consider is that while policies or agreements are subject to rule-of-reason on the federal level, certain states prohibit MAP agreements. Do your homework and check with your attorney on this.
KEY CONSIDERATIONS FOR CREATING A MAP POLICY
A good MAP policy should be user-friendly and easy to understand. Creating and implementing a MAPP is fairly in depth and should be done in consultation with a lawyer. At the very least, it should cover the following three key points:
- Why is the brand adopting a MAPP? Describe the brand’s value proposition and what it’s trying to protect (e.g., level playing field, perceived value, sustainable margins, etc.)
- What constitutes a MAPP Violation? Determine if it’s listing price, listing price plus shipping, etc.
- What is the penalty for violating MAPP? There need to be consequences for continued non-compliance. What is the brand comfortable doing?
HOW ARE MAP PRICING VIOLATIONS ENFORCED?
Before launching a MAPP it’s important to distribute the policy to all stakeholders. That includes online retailers, brick and mortar stores, independent sales reps, and wholesale distributors. Additionally, it should be distributed to internal staff; especially accounting and shipping. That’s the best way to avoid shipping products to suspended companies. Distribution can be done via email or regular post.
With MAPP every retail account must be treated equally. A company that responds inconsistently to MAPP violations invites disputes and potential litigation. Act unilaterally, not collusively. U.S. price fixing laws prohibit collusion between the vendor and retailer. Brands should set their own policy without the influence of any retailers.
Omni-channel ecommerce means that products are being listed in many places so it’s nearly impossible to do price monitoring manually. To do so effectively and efficiently you need to engage with a company like MAPP Trap. As a full-service company, we begin by running daily searches to see who is listing a brand’s products and at what prices. We then identify the true identity of sellers. This includes corporate names, addresses, emails and more. After all, if you don’t know how they got the product, you can’t stop them from selling it. Lastly, brands must contact non-compliant sellers in a consistent way with reliable tracking. MAPP Trap’s enforcement department does this as well.
Enforcement of a MAPP can initially lead to lower top-line sales. That’s because the brand is suspending MAP violators and tightening its distribution. But in a relatively short period of time, online pricing stabilizes and the remaining sellers begin selling more products with sustainable profit margins. If a company doesn't have the stomach for it, they should avoid this strategy.
Having a well-written, legal and properly enforced MAP policy is one of the best things a brand can do. Price-matching algorithms destroy profit margins, create an unlevel playing field for brick-and-mortar and make quality products look like cheap commodities. While ecommerce has provided brands, retailers, and consumers a fantastic new arena to buy and sell, there do need to be some rules. Ecommerce will always be a double-edged sword, but enforcing a MAP policy can help to blunt one of those edges.
For help with price monitoring and enforcement, contact email@example.com to schedule a free consultation.
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