By Barry BermaN
For years manufacturers of pet products ranging from cat treats to reptile heaters
have received an earful from
brick-and-mortar retailers about
how low the Internet prices are
on what they sell in-store. Many
websites advertise low prices on
prominent brand names and eas-
ily identifiable items, sometimes
as low as what retailers pay for
the same items.
Internet retailers employ oth-
er tactics in the attempt to dis-
rupt the traditional retail supply
chain. One is to track consum-
ers’ online lookups of brands
and serve them ads with deep
discounts. Another is to induce
consumers to sign up for the au-
to-ship option, allowing them to
automatically receive at home
what they regularly purchase,
such as dog food or small animal
bedding, at very low prices.
This is doubly insidious for
brick-and-mortar stores. Not
only do these customers switch
purchases on the staple items
themselves, but they no lon-
ger need to make regular visits
to stores where they often buy
high-margin extras in addition
to the essentials.
The magnitude of the prob-
lem is evidenced by what man-
ufacturers hear from their mar-
keting people and, if they have
private equity investors or are
owned by large corporations,
folks from those worlds. Many
hear that the Internet’s share of
all retail is 7 percent—higher
when cars are excluded—and
growing to 11 percent in a few
years, and that the Internet’s
share of pet product sales has
grown at a steady rate of about
10 percent a year—much higher
than the growth of the total.
This is why companies controlled by people who have relationships with independent
retailers are more likely to protect them, because they are not
under investor pressure to hit
profit growth goals. Is it fair to
ask “Why should a customer
be able to buy a product online
for less than they can buy it in a
store?” especially as stores make
the investment to stock, show
and inform customers in-person
about the category?
What maNuFacturers
caN Do
In discussing this, I hear manu-
facturers say, “There’s nothing
we can do; distributors sell to
whomever they want.”
Actually, manufacturers can
instruct their distributors to not
sell to a certain website. And
many of the most aggressive
websites buy direct, anyway. If
a website promotes a brand, a
manufacturer can press the on-
line company to stop showing
it at all, if necessary claiming
that continuing to do so is an in-
fringement of the brand’s trade-
mark. Manufacturers can do a
lot, and you can press your reps
to see which suppliers actively
take steps to protect you.
mINImum aDvertIseD PrIce
Ask whether a brand has minimum advertised prices (MAPs)
for every product. These generally leave a decent margin for the
retailer in case they must match
another store’s price.
Know that MAPs can be substantially lower, possibly 10 percent or more, than the suggested retail prices. This necessary
gap accommodates promotions
where the store owner receives
a comparable reduction in cost
during a temporary promotion
and can lower the price with
little or no reduction in margin.
The size of the gap between the
suggested retail price and the
MAP represents a big reason
why brands need, in addition to
MAPs, special minimum pricing for Internet advertising, or
IMAPs. A brand could make the
IMAPs equal to the suggested
retails, essentially denying the
websites the advantage of the
temporary promotions.
Other policies to look for include whether the brand allows
auto-ship and accompanying
discounts, free freight, Amazon
dash buttons or purchases with
no sales tax charged. Any brand
can ban any of these practices, if
they want to.
eNForcemeNt
It’s easy to publish policies, but
the true test of whether a prod-
uct line is protecting its brick-
and-mortar retailers is whether
they enforce them. Do they have
a system of written warnings for
policy violators? Do they pro-
vide success stories to prove it?
Have they managed to get unau-
thorized websites to stop show-
ing their products? Have they
actually cut off any websites? Do
the shipment suspensions apply
to the entire brand—a policy
with teeth—or only to the specif-
ic item on which the violation oc-
curred—not a very strong policy,
and perhaps an insincere one.
Independent retailers can
make the argument that specialty stores are where consumers
first see new products, and they
provide recommendations and
product information more thoroughly than other channels and
deserve protection. But indies
will recommend and educate
consumers with or without protection. A retailer’s only leverage
is to reduce the space devoted to
offending brands and to push
brands that have our backs. Already, a handful of brands protect brick-and-mortars with the
policies recommended here. If
enough of us make enough noise
about it, more might follow.
Fight the Power
When it comes to Internet pricing, independents’ only leverage is to
reduce shelf space for offending brands and push supportive brands.
COUNTER POINTS
Barry BermaN is president and co-founder of
NeXPet co-op for independent retailers and
GraNDma mae’s couNtry Naturals pet food
company. contact him at barry@nexpet.com.
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