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I don’t understand why did Asus, Philips and others do that? Why do they care about retail prices? They’re not earning retail price, they offer their products t

I don’t understand why did Asus, Philips and others do that? Why do they care about retail prices? They’re not earning retail price, they offer their products to retailers for wholesale prices. They’re manufacturers, can’t they always adjust that wholesale price however they see fit?

toong 8y ago
My guess: perceived brand value ?
Aunche 8y ago
If retailers sell their devices as loss leaders, it may tarnish their brand image.
iammaxus 8y ago
The margin that a reseller/distributor/retailer has on a product goes mostly to sales and marketing of those products in one form or another (ads, placement in a store, training of staff on the product, etc). If an OEM lets that margin get squeezed by low cost resellers (like a crappy ecommerce only company), their other resellers will also get their margins squeezed and therefore can't spend much to sell that product. One common response to this is to charge different wholesale prices to different channels, but this can also be difficult to control or subject to price-fixing regulations. Keeping the margins high for resellers = spending more on sales and marketing for your product. I don't think non-commodity products in competitive markets should be subject to price-fixing rules in terms of setting the market price, but that's how it is in many jurisdictions today.
berberous 8y ago
To protect their customers (the distributors/retailers), who have different cost structures (e.g., BestBuy, with physical real estate and employees, has higher margin requirements than a no-name website dropshipper). A physical retailer will get annoyed with a manufacturer, and will not want to carry their products, if their products are easily available via other sales channel for much less. And many manufacturers will want to utilize multiple sales channels to maximize overall sales.
- cepth 8y ago
  Just to add to this, you also want to prevent one customer from becoming too large a slice of your sales. If we use the Amazon and Best Buy example, if I'm selling to both Amazon and Best Buy, and Amazon cuts its sale price to the end customer, in the short term this doesn't affect me. Amazon is still paying me wholesale. Long-term however, if Best Buy is unable to compete with Amazon's price to customers, it may stop being a customer altogether. Amazon may now be my biggest, or even only, customer. At that point, they WILL ask for further discounts on the wholesale price. Jeff Bezos has openly and repeatedly said that he read a lot of Sam Walton's writings to help shape the vision for Amazon. CNBC did a 2-part documentary on Walmart a few years back (a "CNBC Original"). The two parts were shot years apart. In part 1, they showed a couple of entrepreneurs who had triumphantly become Walmart vendors, and were delighted that they now had such a huge retail distribution channel. In part 2, many of those vendors had soured, since Walmart had put pressure on them to offer increasingly lower wholesale prices etc. For these vendors, Walmart was often their ONLY large customer, so they had little power in negotiations.
  - MisterBastahrd 8y ago
    Manufacturers usually see this as a boon. In the premium cigar industry, for example, there were three gigantic mail order companies that ate up most of the action in the 90s: Thompson, Mike's, and JR. JR would DEEPLY discount a lot of their merchandise, squeezing both local shops and other online retailers in the process. Some manufacturers proudly proclaimed that they were not in the business of discounting their product, and there were even entire lines created to sell solely to offline realtors aka the local shops. When the USSC ruled that manufacturers had a right to set the prices for their products, suddenly there was a lot more competition in the online market. The big discounters still got a lion's share of business, but it wasn't impenetrable like it used to be. The flip side is that some of the smaller guys came up with the idea of password protected member's only sites with discounted prices which were impossible for the bigger guys to duplicate because of their volume.
    - marnett 8y ago
stubish 8y ago
Its important that a large outlet who negotiated/forced a lower price point does not set their retail price lower than their competitor's wholesale price, or the competitors get upset and quite possibly sue. Even if the price discrepancy isn't quite that bad, if an outlet does not feel it is worth their while price matching they just drop the product to make room for more profitable brands. The brand then suffers due to the lower visibility.
jdietrich 8y ago
Retail price maintenance protects the manufacturer's margin. If your retailers get into a price war, their margin will get squeezed down to almost nothing. At that point, they'll either drop your product, nudge customers towards an alternative product that they can make a profit on, or demand bigger discounts from the manufacturer. If your retailers can't make a healthy profit from selling your product, they're not particularly inclined to sell it. Excessively tight retail margins also degrade the customer experience. As a manufacturer, you generally want retailers who can provide good pre- and post-sales support. If a retailer makes almost nothing from selling a product, they aren't particularly inclined to help customers. They'll spend more time upselling accessories or additional warranties than actually advising the customer and will just deflect all problems to the manufacturer. https://en.wikipedia.org/wiki/Resale_price_maintenance https://en.wikipedia.org/wiki/Resale_price_maintenance
- jmanderley 8y ago
  The incentive for retailers is to provide as little post-sales support as they can get away with, margin has nothing to do with it. Also, online stores don't tend to "advise" customers.
  - jdietrich 8y ago
    Hence RPM. If everyone is selling my product for the same price and making a healthy margin doing so, they have to compete on other factors, customer service being the most obvious. Online stores often indirectly benefit from brick & mortar retailers - customers browse in store, then buy online. Again, hence RPM.
- rhizome 8y ago
  How does competition between resellers change the wholesale price, from which (AIUI) the manufacturer's margins are derived?
  - coryfklein 8y ago
    The clear inference from OP's remarks is that if the resellers literally stop selling your product, then the manufacturer would be forced to lower the wholesale price to compete for "shelf" space.
deleted 8y ago
[deleted]

toong 8y ago

My guess: perceived brand value ?

Aunche 8y ago

If retailers sell their devices as loss leaders, it may tarnish their brand image.

iammaxus 8y ago

The margin that a reseller/distributor/retailer has on a product goes mostly to sales and marketing of those products in one form or another (ads, placement in a store, training of staff on the product, etc). If an OEM lets that margin get squeezed by low cost resellers (like a crappy ecommerce only company), their other resellers will also get their margins squeezed and therefore can't spend much to sell that product. One common response to this is to charge different wholesale prices to different channels, but this can also be difficult to control or subject to price-fixing regulations. Keeping the margins high for resellers = spending more on sales and marketing for your product. I don't think non-commodity products in competitive markets should be subject to price-fixing rules in terms of setting the market price, but that's how it is in many jurisdictions today.

berberous 8y ago

To protect their customers (the distributors/retailers), who have different cost structures (e.g., BestBuy, with physical real estate and employees, has higher margin requirements than a no-name website dropshipper). A physical retailer will get annoyed with a manufacturer, and will not want to carry their products, if their products are easily available via other sales channel for much less. And many manufacturers will want to utilize multiple sales channels to maximize overall sales.

cepth 8y ago
Just to add to this, you also want to prevent one customer from becoming too large a slice of your sales. If we use the Amazon and Best Buy example, if I'm selling to both Amazon and Best Buy, and Amazon cuts its sale price to the end customer, in the short term this doesn't affect me. Amazon is still paying me wholesale. Long-term however, if Best Buy is unable to compete with Amazon's price to customers, it may stop being a customer altogether. Amazon may now be my biggest, or even only, customer. At that point, they WILL ask for further discounts on the wholesale price. Jeff Bezos has openly and repeatedly said that he read a lot of Sam Walton's writings to help shape the vision for Amazon. CNBC did a 2-part documentary on Walmart a few years back (a "CNBC Original"). The two parts were shot years apart. In part 1, they showed a couple of entrepreneurs who had triumphantly become Walmart vendors, and were delighted that they now had such a huge retail distribution channel. In part 2, many of those vendors had soured, since Walmart had put pressure on them to offer increasingly lower wholesale prices etc. For these vendors, Walmart was often their ONLY large customer, so they had little power in negotiations.
- MisterBastahrd 8y ago
  Manufacturers usually see this as a boon. In the premium cigar industry, for example, there were three gigantic mail order companies that ate up most of the action in the 90s: Thompson, Mike's, and JR. JR would DEEPLY discount a lot of their merchandise, squeezing both local shops and other online retailers in the process. Some manufacturers proudly proclaimed that they were not in the business of discounting their product, and there were even entire lines created to sell solely to offline realtors aka the local shops. When the USSC ruled that manufacturers had a right to set the prices for their products, suddenly there was a lot more competition in the online market. The big discounters still got a lion's share of business, but it wasn't impenetrable like it used to be. The flip side is that some of the smaller guys came up with the idea of password protected member's only sites with discounted prices which were impossible for the bigger guys to duplicate because of their volume.
  - marnett 8y ago

stubish 8y ago

Its important that a large outlet who negotiated/forced a lower price point does not set their retail price lower than their competitor's wholesale price, or the competitors get upset and quite possibly sue. Even if the price discrepancy isn't quite that bad, if an outlet does not feel it is worth their while price matching they just drop the product to make room for more profitable brands. The brand then suffers due to the lower visibility.

jdietrich 8y ago

Retail price maintenance protects the manufacturer's margin. If your retailers get into a price war, their margin will get squeezed down to almost nothing. At that point, they'll either drop your product, nudge customers towards an alternative product that they can make a profit on, or demand bigger discounts from the manufacturer. If your retailers can't make a healthy profit from selling your product, they're not particularly inclined to sell it. Excessively tight retail margins also degrade the customer experience. As a manufacturer, you generally want retailers who can provide good pre- and post-sales support. If a retailer makes almost nothing from selling a product, they aren't particularly inclined to help customers. They'll spend more time upselling accessories or additional warranties than actually advising the customer and will just deflect all problems to the manufacturer. https://en.wikipedia.org/wiki/Resale_price_maintenance https://en.wikipedia.org/wiki/Resale_price_maintenance

jmanderley 8y ago
The incentive for retailers is to provide as little post-sales support as they can get away with, margin has nothing to do with it. Also, online stores don't tend to "advise" customers.
- jdietrich 8y ago
  Hence RPM. If everyone is selling my product for the same price and making a healthy margin doing so, they have to compete on other factors, customer service being the most obvious. Online stores often indirectly benefit from brick & mortar retailers - customers browse in store, then buy online. Again, hence RPM.
rhizome 8y ago
How does competition between resellers change the wholesale price, from which (AIUI) the manufacturer's margins are derived?
- coryfklein 8y ago
  The clear inference from OP's remarks is that if the resellers literally stop selling your product, then the manufacturer would be forced to lower the wholesale price to compete for "shelf" space.

deleted 8y ago

[deleted]