Retail shop owners recently received a letter from Westminster Fabrics informing them of a new policy that will take effect February 1, 2009. This policy forbids shops from advertising prices for Westminster and Freespirit brand fabrics below the Manufacturer’s Suggested Retail Price (MSRP), which is 2x the wholesale price. They cannot advertise prices lower than that for the period of one year from the official release date of the fabric. If shops violate this policy, Westminster says they will not honor orders from that shop for the period of one year.
Additionally, there is a 25-cent increase in wholesale cost of their printed cottons (not the home decor weight sateens, though), effective January 1, 2009.
The new policy allows retailers to sell the fabric at whatever price they want — the key word here is advertising. (Shops will also be allowed to offer “standard volume discounts.”) Such a policy is nothing new. If you’ve ever seen prices advertised (or listed on online retailers such as Amazon) as “too low to publish,” you know the product’s manufacturer has a Minimum Advertised Pricing (MAP) policy. MAP has a long legal history, but most recently, in June 2007, the supreme court ruled that MAP is not “per se unlawful.” Here is a good overview of MAP from the Wall Street Journal.
In trying to learn about MAP, I’ve come to the conclusion that one needs far more education in economics, marketing, and law than I do to have a truly informed opinion on the matter. The retailers I spoke to have a number of questions about specifics that have yet to be answered. (I emailed Westminster for comment, but have not yet received a response. But it’s just after the holidays, and they’re likely dealing with a barrage of questions from their customers, so that’s understandable.) What is certain is that come February, fabric consumers will have a much harder time finding new collections for lower than $9.50/yard retail. It’s unclear whether the policy will be retroactive to earlier collections, so if you’ve had your eye on something, you might want to be safe and snatch it up before the end of this month!
The letter explained that the policy is being enacted to protect Westminster’s identity as a premium brand.
In the internet age, MAP policies effectively level the playing field between brick-and-mortar and online shops, the latter of which can afford a lower markup due to lower overhead costs. In the fabric world, there is also a third player — Etsy- and eBay-based shops, which have even lower overhead costs than stand-alone online shops and tend to offer the lowest prices on fabric. Typically with MAP policies, any online listed price equates “advertising,” and it’s difficult if not impossible for retailers to adopt something like Amazon’s “add to shopping cart to see price” workaround, a technique that usually appeases MAP-enforcing manufacturers.
I can see a number of pros and cons for fabric retailers. The biggest advantange, of course, will be getting higher profits, which makes for a more sustainable and happier business. And don’t we all want to support our favorite fabric shops? Online discounters will lose some competitive edge, but it does help protect brick-and-mortar shops at a time when they need all the help they can get. Of course, volume discounts (e.g. “10% off orders of $50+) are still OK, and retailers can still compete price-wise with other manufacturers’ fabric (not to mention other avenues that help one stand out in a crowded marketplace).
The biggest problem I foresee is that retailers will no longer be free to put fabrics on clearance that are not selling well for them. A year from the date of introduction seems like an eternity in the quilt fabric world. That might make retailers more conservative in what they order in the first place, and that’s not good for Westminster or the consumer. Or is this danger offset by the positive aspects discussed above?
What do you think? As a consumer, will the price increase hurt you? Is price your main concern when choosing a shop? If not, what is?
If you are a retailer, how will the MAP policy effect you? Is my assessment of the pros and cons accurate? (Feel free to comment anonymously.)
How does everyone feel about MAP policies in general — as applied any goods or service, not just fabric?