Price fixing
- Thread starter zayd
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This is being torn completely out of proportion. I am the one who found the price on Marco's thread and was discussing option with a local LFS to get an in-sump skimmer. Trying to get footprints, Marco's website came up and there was a great price. Obviously, if I can save a few thousand rand, I raised it with the local LFS.
Well anyway, the in-sump skimmer I wanted can't fit and I will just be changing the skimmer pump on my existing skimmer as I don't like the mesh wheel. Too much maintenance.
The money is not the issue, On my current system, I have spent close to R100,000.
It is the anti-competitive nature of the industry that I have an issue with. And it could be illegal.
Well anyway, the in-sump skimmer I wanted can't fit and I will just be changing the skimmer pump on my existing skimmer as I don't like the mesh wheel. Too much maintenance.
The money is not the issue, On my current system, I have spent close to R100,000.
It is the anti-competitive nature of the industry that I have an issue with. And it could be illegal.
Marco, I understand your position.
My opinion, regulated or suggested retail price, at the end only benefit everybody. Referring back to the Sareefkeeping article. I understand it.
Overheads, like salaries and rent MUST be covered every month out of all sales.
Take example, small LFS, 2 owners. Salary (bruto) of R20 000 per month. (hell guys, they want to be able to put food on the table.) Plus rent, lets for simplicity take R10 000 (and that is very under the market) That means that 50K is the minimum profit that they MUST make EVERY month. I'm excluding all other costs, like salt, electrical, security, PC, internet access, telephone. Well, lets make this another 10 grand total.
So for 60K profit a month, at 30% profit margin, the shop must sell at least goods to the value of R 200 000 selling price every month. For a premium skimmer of say R5k, that means a total of 40 units a month. Monday to Friday, 2 units a day.
Now, reducing the profit to 20%, and gross jumps to 300K and 60 skimmers a month.
Still the same retail market. So how will the shop survive?
Not sure what rate the distributor mark up goods he import and delivers to the LFS. But his market or volume should be enormous, supplying all the LFS in the country. Yes agree, the distributor got other costs, like warehouse and backup support. But I believe that the distributor mark up rate should not be above x% (rather not give an actual value - I would be totally wrong.)
But at the end of the day, each LFS got a family at home to feed. The distributor included. And what is the point of a business, if you do not make some money out of it? Have to be worthwhile.
My opinion, regulated or suggested retail price, at the end only benefit everybody. Referring back to the Sareefkeeping article. I understand it.
Overheads, like salaries and rent MUST be covered every month out of all sales.
Take example, small LFS, 2 owners. Salary (bruto) of R20 000 per month. (hell guys, they want to be able to put food on the table.) Plus rent, lets for simplicity take R10 000 (and that is very under the market) That means that 50K is the minimum profit that they MUST make EVERY month. I'm excluding all other costs, like salt, electrical, security, PC, internet access, telephone. Well, lets make this another 10 grand total.
So for 60K profit a month, at 30% profit margin, the shop must sell at least goods to the value of R 200 000 selling price every month. For a premium skimmer of say R5k, that means a total of 40 units a month. Monday to Friday, 2 units a day.
Now, reducing the profit to 20%, and gross jumps to 300K and 60 skimmers a month.
Still the same retail market. So how will the shop survive?
Not sure what rate the distributor mark up goods he import and delivers to the LFS. But his market or volume should be enormous, supplying all the LFS in the country. Yes agree, the distributor got other costs, like warehouse and backup support. But I believe that the distributor mark up rate should not be above x% (rather not give an actual value - I would be totally wrong.)
But at the end of the day, each LFS got a family at home to feed. The distributor included. And what is the point of a business, if you do not make some money out of it? Have to be worthwhile.
apologies zayd........
No problem and my apologies for the hassles I caused you.
i hear tis argument and agree that guys who own businesses have the right to make money, no problem. But now what if all the electricians in your area got together and started setting the rates they would charge, does this not move away from free enterpize, and all this to do away with unfair compitition.... would you buy this story?
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Apologies then. It seems like you were implying that the "moulding" of the thread had something to do with the deleted posts. As you know the contents of those posts weren't really anything to do with the topic of the thread anyway. The threads moulded by the participants, and just the sharp corners trimmed by the mods
i know who's MAP you are talking about and wonder why you have to post the oldest MAP policies
here is the latest MAP policy from them
All I want to know is this legal?
Yes I see what you saying but this is not the situation. The wholesaler you all speaking about has out laid his money and imported goods, he is supplying these goods to his customers and setting RRP MAP whatever you call it for his goods. He has not gone to another wholesaler and said lets collude. He is running HIS business how he wants to. Who are we to say he is doing it wrong. Its his business.
@ zayd i get it...........i hope you read this post well and the point i wann a make with you sticks and anwsers the question of your thread.....
lets take a step back and not look at another wholesaler.....lets look at me for instance......just rememeber i can advertise my r.o.units at whatever price i feel like because i make them from scratch.........(seriously....i put every piece together myself, and import every little component......its called passion, i know its crazy....lol).......but i dont advertise them at ridiculously low prices because stores that buy from me need to also make a living .....otherwise they would not sell my product...... everyone would only buy from me......i would not get my brand across, i would not generate profit to grow, cash flow etc etc
but lets take products we sell from other importers.
i have the reputation i have with this trade because i have that salt water itch like you, i have ALWAYS chosen the right direction to follow. reefers first.
i get great discount structures because i buy bulk, pre-order etc etc.
but i have to respect the importers advertising price structure otherwise no one would buy from them because i would be advertising ridiculously low prices all the time.....
thus the wholesaler would only make sales to me and thus not generate enough profit to stay open, eventually close and then what......where does product come from?
you just said my pricing was gonna save you thousands of rands and money was not the issue.....so why go and hussel your lfs for a better deal than mine if you were already saving so much.
and then still buy from them???
so i negotiated the deal with the wholesaler, bought the volumes to get the deal, spent the money opening a online store to negotiate deals.....and you bought the product elsewhere at the same price.
you get my point and the point of the wholesaler?
i see your point very clear....and take it into consideration....but i also would like to see great suppliers grow, not dissapear.
hope you get it.....and hope to hear from you soon.........i mean...sorry, hope to be swiping your card soon
lets take a step back and not look at another wholesaler.....lets look at me for instance......just rememeber i can advertise my r.o.units at whatever price i feel like because i make them from scratch.........(seriously....i put every piece together myself, and import every little component......its called passion, i know its crazy....lol).......but i dont advertise them at ridiculously low prices because stores that buy from me need to also make a living .....otherwise they would not sell my product...... everyone would only buy from me......i would not get my brand across, i would not generate profit to grow, cash flow etc etc
but lets take products we sell from other importers.
i have the reputation i have with this trade because i have that salt water itch like you, i have ALWAYS chosen the right direction to follow. reefers first.
i get great discount structures because i buy bulk, pre-order etc etc.
but i have to respect the importers advertising price structure otherwise no one would buy from them because i would be advertising ridiculously low prices all the time.....
thus the wholesaler would only make sales to me and thus not generate enough profit to stay open, eventually close and then what......where does product come from?
you just said my pricing was gonna save you thousands of rands and money was not the issue.....so why go and hussel your lfs for a better deal than mine if you were already saving so much.
and then still buy from them???
so i negotiated the deal with the wholesaler, bought the volumes to get the deal, spent the money opening a online store to negotiate deals.....and you bought the product elsewhere at the same price.
you get my point and the point of the wholesaler?
i see your point very clear....and take it into consideration....but i also would like to see great suppliers grow, not dissapear.
hope you get it.....and hope to hear from you soon.........i mean...sorry, hope to be swiping your card soon
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Apologies then. It seems like you were implying that the "moulding" of the thread had something to do with the deleted posts. As you know the contents of those posts weren't really anything to do with the topic of the thread anyway. The threads moulded by the participants, and just the sharp corners trimmed by the mods
you rock dude!!!1:yeahdude:
thanks for being on the ball.....
The structuring of pricing policies can be a very delicate subject and a lot of thought is necessary before wholesale prices and MAP or recommended selling prices are concerned. In most cases the Wholesaler wants to protect his client base and make it fair for all his retailers. This is especially the case when bigger retailers are spending larger amounts on product and stock, compared to small retailers that only purchase on demand. This is where the wholesaler tries to enforce minimum prices to stop the small retailer or online shop from undercutting the retailer that has spent a large sum of money on holding and displaying stock.
Let me explain some scenarios.
a) A wholesaler has a brand of product and sells (product Y) to his retailers with a MAP or recommended retail price of R1400.00 and at a cost price of R1000.00. A retailer then does a deal with the wholesaler and purchases 50 of these items at a 10% cash or volume discount. Along with a whole bunch of other items. This retailer then sells and advertises this fast moving item at R999.00 because he only paid R900.00 for it and complies to the recommended retail price for the rest of the range. The wholesaler then tries to sell the same item to smaller and other retailers
, and guess what. He how only has one retailer who has him in his pocket for future orders because nobody wants to purchase from him anymore.
b) A loyal retailer that is marketing you product around the recommended retail price and is spending, paying and holds a large quantity of you stock. A on line store operator gets wind of a pending sale and cuts the price to cost + 10 or 15%. I can assure you the wholesaler will get a earful from the loyal retailer and the account will in most cases be closed by the retailer.
In a way i cannot blame the wholesalers for trying to keep the playing field fair for all of his product retailers. But whether MAP is the way to go, i am not sure, as it is a form of price fixing if the wholesaler takes any action against a non complying retailer. But on the other hand if the complaining retailer stops purchasing or threatens to stop purchasing if the non complying retailer does not raise his price it is also considered attempting to price fix.
Hope this give some insight into the dilemmas Wholesalers are in when trying to market their products. But i agree that the wholesaler should not have an influence over a retailers selling price and merely provide a guide line.
WOW a lot has been said whilst i have been typing this.
you type too slow
But hang on, the electricians in your area also buy from the electrical wholesaler/s in the area who have also invested big money in their businesses, now according to your business model, this gives the electrical wholesaler the right to dictate prices and profit margins to stop unfair compitition amongst the electricians that support him.....sorry but how does this work? It still stinks which ever way i look at it.
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@marco I did not buy the product as it did not fit in my sump. All I told the lfs was that I could get it cheaper. Anyway, I feel bad as you had you felt the brunt of all this and for that I apologise again and you will be getting my next purchase. Will pm you for some stuff I need.
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Alan you can come up with 100 scenarios. From past threads it seems to me that you have an issue with this specific wholesaler and maybe you are just using this thread and MASA to grind your axe.... again.
He is running a business and neither of us have any right to comment on his pricing structure as neither of us know for a fact what he is charging % wise. There are many in the marine hobby making far more % wise and I have not seen you comment negatively on it. Perhaps this is a personal issue?
We are always saying "good for the hobby" what good are we doing running down his business?
You of all people know how business works so I find it strange that you even comment on this...unless you have other motives.
You brought up the electrician scenario, not me, so please explain how it works. Please show me the other thread where i have the proverbial axe to grind. But hang on, no names have been mentioned here. Do i have an axe to grind with certain suppliers that think they can dictate terms and conditions to MASA yeah maybe.
Sims you really got the Bull by the Udders on this one, its not the % profit, he can make what he likes, but to dictate what others should sell at IMO is wrong. As it is my right to buy the stuff or not. retailers have the right to sell at what they consider a fair profit. Please explain how this MAP benefits the hobbyiest in anyway. Nobody in this thread has shown that yet. How does the stopping compitition benefit the consumer in anyway?
Yes, i do understand how business works and strongly believe in free enterprise, now you keep insinuating Ulteria Motives, now please explain.
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Well here is the law.
appear next to the stated price.
Page 7 of the act.
http://www.info.gov.za/view/DownloadFileAction?id=70747
Restrictive vertical practices prohibited
5,( 1 ) An agreement between parties in a vertical relationship is prohibited if it has the
effect of substantially preventing or lessening competition in a market, unless a party to 45
the agreement can prove that any technological, efficiency or other pro-competitive,
gain resulting from that agreement outweighs that effect.
(2) The practice of minimum resale price maintenance is prohibited.
(3) Despite subsection (2), a supplier or producer may recommend a minimum resale
price to the reseller of a good or service provided— 50
(a) the supplier or producer makes it clear to the reseller that the recommendation
is not binding; and
(b) if the product has its price stated on it, the words “recommended price”
5,( 1 ) An agreement between parties in a vertical relationship is prohibited if it has the
effect of substantially preventing or lessening competition in a market, unless a party to 45
the agreement can prove that any technological, efficiency or other pro-competitive,
gain resulting from that agreement outweighs that effect.
(2) The practice of minimum resale price maintenance is prohibited.
(3) Despite subsection (2), a supplier or producer may recommend a minimum resale
price to the reseller of a good or service provided— 50
(a) the supplier or producer makes it clear to the reseller that the recommendation
is not binding; and
(b) if the product has its price stated on it, the words “recommended price”
appear next to the stated price.
Page 7 of the act.
http://www.info.gov.za/view/DownloadFileAction?id=70747
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Well there you have it then..........the wholesaler is well within his rights
Case closed before we start talking about pricing plumbers charge in certain areas etc etc.
At zayd......cool buddy........no worries.....you did not cause me any hassles
Buddy, just a few laughs at other people's expense.....
Maybe tell that lfs the same cause he seems to think I sealed the deal....lol
Maybe tell him to contact me direct to find out the scenario and conditions before whaling on.........and tell him I said he was quick to moan but had no problems taking a quote I did and undercutting my prices last month.......did I complain.....no, I took it like a man.......Like people said 100 times in this thread......competition is good
Case closed before we start talking about pricing plumbers charge in certain areas etc etc.
At zayd......cool buddy........no worries.....you did not cause me any hassles
Buddy, just a few laughs at other people's expense.....
Maybe tell that lfs the same cause he seems to think I sealed the deal....lol
Maybe tell him to contact me direct to find out the scenario and conditions before whaling on.........and tell him I said he was quick to moan but had no problems taking a quote I did and undercutting my prices last month.......did I complain.....no, I took it like a man.......
Like people said 100 times in this thread......competition is good- Status