Westminster Fabrics Adopting Minimum Advertised Pricing Policy

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?

33 Comments

  1. Jen says:

    I think you’ve got a pretty good handle of the pros and cons. In my opinion, I appreciate MAP because I feel that the fabrics I sell are worth the additional price. Collectively, fabric boutiques (both online and brick-and-mortar) are already competing substantially on price with large fabric discounters who always have coupons available. Many fabric manufacturers sell only to us independent retailers and we are lucky that they have great designers and marketing to help promote their fabrics. If you think about it, listing big name designers is sometimes all a small fabric boutique has to do to advertise. That is a big advantage that we have over the large fabric discounters.

    It certainly does, however, make it more difficult to differentiate between the boutique stores, if you take pricing out of the equation. That leaves having the hottest designer and latest releases, and most importantly the customer service experience. As a business owner, I like the notion of competing on customer service in particular- especially over competing on price. It encourages my own creativity and delivering the best experience possible to each and every customer instead of number crunching.

  2. Michelle says:

    I think you’ve laid out the pros & cons nicely – but from my perspective, I’m not sure how the MAP benefits Westminster. This is where the economics comes in…not sure if the MAP just moves consumers up/down the demand curve, or if the MAP actually moves the demand curve. I guess time will tell – but I would guess that fabric retailers will be ordering less from Westminster, particularly if they get burned by trying to sell unpopular fabric @ full prices and not able to unload it quickly.

  3. Jenna says:

    I can see the pros and cons, but in my opinion it’s a bad move by Westminster. I’m a small business who normally buys about 80% of my fabric from etsy sellers. Price is the main factor for me. In a world where wholesale is out of my reach because of cost and I just don’t need that much of 1 print buying from etsy sellers was the perfect match for me. With the new rules I’m going to have to cut back my yardage big time…. which may be a downer for my business.

    On another note I talked to one of my suppliers and they are talking about shutting down shop because of the price hike. They are afraid they won’t be able to keep their customers and with costs going up it would be too big of a risk to invest in so many bolts.

    Who knows though. Only time will tell. I do see why this might be considered a good move for many, but to me it just stinks.

  4. Kathleen says:

    I used to work in the retail sector (not in fabric), at a B&M store, so I fully support MAP pricing. Having to compete with online sellers with lower overhead is difficult. It is especially infuriating when you spend a lot of time with a customer, answering questions, providing actual product for them to touch and see, and then they turn around and buy it at the lowest online price. My husband works for a manufacturer (also not in the fabric world) and constantly fields complaints from B&M stores because of the pricing issue. Their customers feel like the retail store must be overcharging if the online store can afford to sell more cheaply.

    From the standpoint of a consumer, of course I’d rather pay less. I think bulk pricing should cover many of a store’s sales. If they need to put something on clearance, they can use the method you explained, of the price not showing up until the item is placed in the cart.

  5. Vireya says:

    This practice is illegal in Australia:
    http://www.accc.gov.au/content/index.phtml/itemId/322982

    “A supplier may recommend an appropriate price for particular goods but may not stop retailers charging or advertising below that price.”

    I suppose Westminster’s policy will only apply to US retailers, but perhaps they should consider that the internet provides a global marketplace.

  6. sarah says:

    I wonder who actually received this letter. I am one of their online retailers, granted I only sell on Etsy and only buy 10-20 bolts a quarter or so, but I haven’t seen this yet from them. So I guess big thanks for the heads up- I was about to order from them, but if this will be policy for my shop, I won’t comply and therefore I won’t order from them.

    I love the ability to help support other Etsy sellers and home crafters by offering fabric with very little mark-up, since I buy a bolt with the intention of working with half myself and selling the rest. I have no incentive to double the price- I don’t need profits like that when I don’t have the expenses other b&m stores have. And in a free market system, I should be able to set my pricing, in my mind.

    I think this will hurt them in the end, and will surely cost them in goodwill and word of mouth as well. When buyers start asking why prices are increasing, sellers will surely reply they are forced to by the company. That will make many customers choose fabrics from alternate makers, or choose to buy less, or not buy at all.

  7. j. caroline says:

    Excellent post. I was just researching the Supreme Court case in 2007 that opened the doors for MAP. I understand the premise and understand the B&M stores frustration with on-line retailers. (If I were on the other side, I’d be irritated.)

    But, the sentences you wrote that ring in my ears: “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.”

    If it’s a hot seller, I would not need to discount it. But if it’s a dog (economically, not aesthetically), I can’t wait a year to clear that off the shelves. Especially these huge collections (often 40+ pieces). Slow moving inventory just continues to increase in cost as interest accrues, property taxes are assessed, etc. Dead inventory also impedes your ability to bring in new fabrics. If it isn’t moving, it needs to go!

    My take is that Westminster clearly has the legal right to pursue the policy they have taken. I, as a business owner, have the right to make decisions that are best for my business. How those decisions affect my Westminster purchases, I haven’t yet decided. But, I do have that ringing in my ears…

    Also, the letter gave no indication that the policy was retroactive to older collections. I am going on the assumption that it only applies to purchases after February 1.

  8. Rosaline says:

    First of, my answer is “no” to your statement “And don’t we all want to support our favorite fabric shops?” I think Canadian quilt shops grossly overprice their goods. Re the MAP issue, I don’t know what Westminister is hoping to gain from this. If their designers see a decline in their sales, they’ll just move to another manufacturer. At the end of the day, I think fabric consumers have less manufacturer loyality and more price sensitivity.

  9. pam says:

    Most retail shops around here are marking up more than just double the wholesale cost so a wholesale price increase at this time will probably hurt a lot, making fabric about $10.75 a yard. In some areas more. The shops that I have worked for never specifically said which fabric brands were on sale when sending out newsletters/advertisement so I don’t know how this would effect them. Westminster/FReespirit has often tried new things and been the first to re-evaluate policies that weren’t working, so if this seriously effected their ability to make sales I’m sure they’d be dealing with it appropriately. In this economy though, where shop owners are probably being even more careful than normal, a notice like this might be offputting. Consumers are also very aware of policies like this. I remember back when Amy Butler said you could’t sell items made with her fabric. Consumers in our area did not buy her fabric and I remember a buzz about it online as well.

    I wonder how this will effect people who order Westminster fabric through distributors like Checkers?

    Thanks for the information, I’ll be anxious to see how this plays out.

  10. Jane says:

    I see this as a huge risk by Westminster. They are banking on B&M shops increase in purchases to outweigh internet shops decrease in purchases. This might happen, but there will be a lag time. Will designers be patient and stick with Westminster or will they jump ship? (Do designers sign contracts for a specific length in time?)

    I’m an online shop that does charge below MSRP. This new policy will affect my future purchases. I no longer have the flexibility to take a risk on prints that might sell. As others have commented, waiting a year to discount the prices is an eternity; even three months would be a long time.

  11. Sandy says:

    As someone who lives in an area where I can’t get a lot (or any) of the prints I love any other way but online, this is a little concerning for me.

    But, the one question I have is whether or not it will work just like Best Buy or any of the big box stores do. Can they just list prices as an “add to cart to see” kind of thing? If so, then I don’t think that it will hurt too much.

    What I am actually more concerned about is that some stores will stop carrying, or be more choosy about which fabric lines they order from Westminster, because of these rules. And, that could hurt both the stores and Westminster overall. Maybe more online stores should consider more coupons for full price items like some of the brick and mortar stores do.

  12. Jacqui says:

    Very few of the Westminster lines make it down to the B&M shops here in New Zealand, and if they do there will only be a few fabrics, not the whole lot. If we want access to the entire range we are essentially forced to buy it online so it will be interesting to see what this does to the available selection. Often the American Ebay/Etsy sellers are by far the cheapest, and have much more reasonable shipping charges than B&M shops or sites like Fabric.com – if they stop carrying Westminster then I can see it becoming far too expensive and I would have to go for other manufacturers instead. It could be a bit of a boon for Australian online sellers though, if MAP is illegal (wonder what the deal is here in NZ, often it’s the same as Oz).

  13. LeAnn says:

    Personally, I think it’s nice of them to state such a policy. It gives the retailer the choice to end their relationship or not. When I ran a small internet shop, I carried a line of purses. After I started selling those purses for 20% lower than the ‘big guys,’ I was told by the President of the purse company that I had to sell the items for the MSRP or they would no longer take my orders. I would have been much happier if they had created a policy that they gave to me up front. As it was, I felt like I was being blackmailed into raising my prices.

  14. Linda says:

    This is the first I have heard of this Westminster policy. I don’t know how this will apply to European shops, online or otherwise because we have to not only take the wholesale price from Westminster, but the price of the international wholesaler that we have to buy from, into consideration. Westminster/Free Spirit has not only raised it’s prices but for European buyers at least, they have increased the size of the bolts from 10 yards to 15 yards, so the whole buying process has become more expensive. One problem with this is that you are less inclined to take risks which generally will have an effect on how interesting the fabric landscape is here and that’s a pity. As a small retailer if you have invested in fabric that isn’t selling and you can’t mark it down to move it, you are in a difficult situation.
    As far as an ethical question goes, I think the whole pricing issue is important. It is very expensive to set up and run your own shop, much more so than by being part of ebay, etsy or dawanda, and you want to offer your customers the best possible range you can so although I would like to, I can’t compete with people selling who have a lower overhead. I do think that a certain price range for all retailers, no matter where they sell, should be respected.

  15. Ava says:

    I don’t live in an area that has readily available fabric of any kind. We have one shop locally that sells fabric, but most of it is appeals to my mother, not me. The closest B&M that stocks a good supply of Freespirit fabrics is a little over an hour away. Given the drive, constricting hours, and difficulties with directions, the Internet is a better alternative for me. While I understand that B&M stores must make up for their increased overhead cost, the manufacturer runs a huge risk trying to “level the playing field.” For me, I really don’t have a choice but to shop via an on-line retailer . . . it just makes more sense for me.

  16. georgia says:

    I am quite confused by this policy, to be totally honest. Can shops sell it at whatever price they want, but just not advertise it? What constitutes advertising, especially online? Can my local fabric joint no longer advertise “15% off all quilter prints” now since that would include Westminster and Free Spirit, or would that be a so-called “volume discount”?

    So many questions. It seems like an awful time to enforce this.

  17. Shannon says:

    I don’t know very much about the workings of running an Etsy shop, but I’d think this sort of thing would drive up the use of custom orders. If Etsy fabric sellers encourage buyers to email about “pricing for custom orders,” casual buyers like myself could develop relationships with certain sellers who are looking to provide low-cost fabric to other small crafters *(psst! hi sarah!),* determine inventory based on “advertised” prices, and email to set up custom orders based on the unadvertised prices.

    The B&M retailers near me with good fabric already sell their fabric at a higher price than online retailers. I tend to only visit that store when I need something quickly. If I have a large project I can plan for, I order online. I’d imagine this only hurts the B&M retailers.

  18. sarah says:

    Shannon, thanks for the idea- I hadn’t thought about just stating “convo for pricing” in my listings on Etsy. That would be how I would work around it for sure, set up a MAP price for a half yard, and then convo for pricing over that and custom listings that don’t disclose amounts. ALthough, as I mentioned, I haven’t received this letter, so maybe I am not big enough that they are concerned by this.

  19. Kristin says:

    I think your summary of the policy and the pros and cons is excellent. I received several copies of the letter (it shows up in every order I receive), and every time I have to sit down and try to figure it out. The word “advertised” is confusing, because it is not what we would typically think of as advertising. It basically means the list price. I sent Jeff an email to which he responded. Basically, you got it all right and they will be sending out another letter clarifying several issues by the beginning of February.

    Before I comment on the policy itself, I’d like to try to dispel the myth that online businesses have much lower overhead than brick and mortar stores. If you are running a legal, sustainable long-term business and paying employees a living wage, the overhead of online stores is comparable to that of b/m. We have rent, employee wages, insurance (business, inventory, hacker, worker’s comp!), licenses, taxes, utilities, site hosting, site design, site software, advertising and marketing, packaging, etc., etc., etc. According to advisors I’ve worked with, margins are very comparable with brick and mortar. I think it is important to keep in mind.

    That said, Etsy is another ballgame altogether. Over the past year we’ve watched the regular retail price of Westminster fabrics drop lower and lower. From Westminster’s point of view, I think they might be worried that the brand could become almost exclusive to Etsy and Ebay, as other retailers start to drop the lines because they can’t compete. That is my interpretation, but I’m not sure.

    As for us, we started with Amy Butler’s Charm as our very first collection. We love the Free Spirit designers and will continue to offer them in our line-up. As J.Caroline mentions, however, it is distressing to think of the duds sitting around the shop for a whole year. This will definitely influence our buying decisions. Whereas I would typically order a complete collection of the main Westminster designers, I’ll probably be more selective. Coordinates might become harder to come by.

    Also, I don’t know if Westminster can simultaneously try to sell a designer’s new group every season, but still expect us to sell the older groups at full price. For example, Amy Butler did three quilt-weight groups and one home dec collection last year. We’ll be less likely to reorder an older (gasp! that is sooo 4 months ago!) collection if we know we’ll be stuck with it at full price when the new, hipper group comes in.

    Anyway, thanks for bringing it up. It will be interesting to see what happens in the coming months!

  20. Mary says:

    How unfair to hear this…with practically no notice before my new shipments were just about to arrive! I had ordered several new releases (the full lines) well in advance and was not notified regarding this change in policy whatsoever. Needless to say ALL of those orders I just canceled! I’ll simply look elsewhere for my fabric for my fabric store. Good Bye Westminster!!

  21. Rosaline says:

    Kim – I found this topic very interesting and checked back a few times to read the most recent comments. Now I have a question. I know what a B&M store is, but what is the difference between an internet shop, an Etsy shop and an EBay shop. Also, someone commented above that internet shops have similar expenses to B&M shop. If this is the case, why are B&Ms fabrics so much more expensive? Perhaps my questions are not in line with your topics, so feel free to ignore this query, however, my email address is samadhi91@yahoo.com if any of your readers would like to send an answer. Thanks again for such an interesting topic for discussion.

  22. Mary says:

    The thing is though Rosaline….I think internet shops are a bit cheaper because honestly the customer not only has to wait a bit longer for the material because of shipping but also has to Pay Shipping!…which as we all know continues to rise and rise. The internet also is jut more competitive. You as a B&M store don’t have 10 other fabric shops literally next door..you might be the only shop in town…so why have such low prices..supply and demand of course. I hope that made a bit of sense..that’s what I face at least on the net.

  23. [...] scary and have you seen her new video? Not even I will link to that. 2. Westminster’s new Minimum Advertised Pricing policy. Lame. Some people seem to love it, but I do not. 3. FRAM. For those of you unfamiliar to [...]

  24. Lisa says:

    Frankly, I think it’s crazy of West. to do this. The economy is in the toilet, we are in a depression heading towards a depression – people are losing their jobs left and right and they want to protect themselves as a premium brand?

    Whoa.

    They will be lucky if they are here in a year.

    I’ve been in advertising and marketing for over 30 years and this is one of the stupidest things I have ever heard. They are not only gutting their outlets (quilt stores, online or not), they are messing with their consumers. Consumers do not forget things like this.

    There are plenty of other fabric manufacturers out there with gorgeous fabric. Watch where the consumer goes.

  25. Kristin says:

    I just have to add that it is my understanding that both volume discounts and coupons are OK. An online retailer can send out a coupon for 25% off the new Amy Butler collection if they want, as long as the list price on the website remains the keystone price. So I don’t think consumers should panic. They just need to look for these things before they buy. Trueup is a great place for them to start their search ;-)

  26. Jona says:

    Thank you Kristin (great point)! I’m finding all this a little painful. What a bad time to have to raise prices (I’m already scrambling to open accounts with other manufacturers so I won’t be as dependent on Westminster). But, I have been very concerned about the sellers on etsy listing this fabric at crazy low prices and I had a feeling there would be a response coming. Frankly, I can work around having to raise my prices but this whole “waiting a year” thing bugs me. Some fabrics just don’t move (even at rock bottom prices). I suppose I can just throw them in as “freebies” (with an apology? Ha!).

    Hopefully Westminster will make a few adjustments to their new policy but in the end I can’t help but think the reason we all love fabric is WE ARE CREATIVE PEOPLE! So it’s time to use our creativity in a different way (coupons, sales, rewards, free shipping, etc). Fine.

  27. Mary says:

    I spoke with Westminster the day I canceled my orders and from what I hear they want all of us “little” guys out of the business to protect their “big buyers”…what a joke. I just hope the fantastic group of fellow crafters on Etsy support their little Etsy fabric shops and ban their use of Westminster fabric once the Etsy Fabric Shops are out! I do not respect anyone trying to hurt any upcoming businesses at this point and particularly at this time in our economy…when we need our entrepreneurs. Most of us are doing this along with our jobs to help support our families during these hard times. Go Working Moms!

  28. Sarah says:

    Buying designer fabric is a big treat for me. I just can’t afford it on a regular basis, so for me I’ll buy it even less than I do now so that’s nothing new, but the thing I find most disturbing, if Mary’s gut feeling is right, about Westminster’s new policy and the new law testing children’s goods is it puts the little guy out of business at a time when this country needs money to move hands between the people. It almost feels like the old coal mining towns where everything was bought through the “company” at astronomical rates, and there were no alternative choices given. If you needed something your only choice was to buy from the company.

    No choices, I guess this is where we are heading in America, we will have NO CHOICE but buy from the “big guy” when all the “little guys” are gone.

    (Hope this made sense. I have 4 children running around me asking for lunch. I have so much more I’d like to say, but it’s tough for me to keep my thoughts straight. Probably shouldn’t post, but I will anyway.)

  29. Judy says:

    I can understand the pros and cons, but I believe it should not be allowed to price fix.

    In alot of other industries this is not allowed. I, too, buy from Etsy and Ebay sellers because I do not always need a full bolt on wholesale and I just believe this is going to create a stigma on Westminster fabrics.They are always trying to corner some market share or control what others do with their products. You would think they would be happy with the shear volume of sales and not try to GO HOME WITH THE CUSTOMER and spy on what they do with it. I believe it should not be allowed.

    I’m wondering what benefit they hope to achieve by telling the store owner what they can sell something for. If you buy something, it should be your right to do with it as you wish. If you want to sell at a loss, what’s the big deal? It’s none of their business as long as they got what they wanted for it.

    I will certainly rethink buying those fabrics just because….it should be illegal. That’s only my opinion. Only time will tell what the outcome will be on them. I believe it will hurt their sales because most businesses are conservative, they have to be in today’s economy to survive, and they surely don’t need to get stuck with inventory. A big “shaking out” is coming and it’s unfortunate for the small businesses of America.

    We should write to President Obama. This is the type of thing he would deplore!

  30. Judy says:

    My thoughts exactly!!

  31. Lisa says:

    This is sad to hear. I’m sure that this will trickle down to those of us who use these fabrics as well. I’m always swayed by a discounted price on a beautiful fabric. I need to make a profit on my wares as well. If I’m paying $9.50 a yard, my prices will need to go up in my shop. I’m afraid that this will become the industry standard. I can’t bring myself to sacrafice quality, but can’t lose money, either. I spend way too much time and have too much heart in the quilts and bags that I create to use a lesser quality fabric.

  32. Diane says:

    Thank you Kim for posting this article. I haven’t read through all your comments yet, so I appologize if this has been mentioned. I have heard back from Jeff Prescott who plans to send out a follow up letter to clarify the many questions he has been getting.

    He did confirm, however, that all online shops are considered as having advertised prices since everyone has access to the information.

    I will share more information with you as I get it.

  33. Diane says:

    I have just read through all of the comments here and wanted to thank Kristen for her post. Very nice points all around, very well said.