Re: Fender Eliminates MSRP
I was specifically only talking about the same products and giving retailers the freedom to price them any way they want, after they freely negotiate a price from the factory.
How freely do you think most dealers negotiate those prices? You've already pointed out that smaller dealers don't have the buying power of the bigger ones. Do you think that's unfair? "Gee, I do a lot of business with you guys. What are you going to do for
me?" It's fine to do that when you have some leverage, but what what if your volume is so small that the people taking your orders wouldn't notice if you disappeared? So pay more, try to cover more overhead with each gross margin dollar, and have less breathing room on cash flow. It's not a strong position from which to cut prices.
Nobody except you brought in other products or changing the products to be cheaper to make. I don't see how you think any unusual pressure to do the latter comes in that isn't there already.
When retail prices go down, the value of what manufacturers make will be less. They will be able to get less money out of the same product. In order to maintain the same profitability, they will have to cut their costs. This is part of what drives down the manufacturing costs of next-generation products; it's not just because they
can build it cheaper, it's because they
have to.
On the contrary, instead of "forcing" GC to have a high margin between what they pay and what they get, and hence leaving them no choice but to invest it in expensive locations and marketing (the latter being of no benefit to the consumer) you now leave the consumer with more money in their pockets. That as such doesn't create pressure at the manufacturing end.
Oh, it does. It creates pressure to go back and get more of that money. From a consumer base growing more and more accustomed every month and every year to getting more for less. So you branch out and offer more products; you create product categories that didn't exist; you offer new flavors, variations, special editions. You try to get the guy who hasn't bought something in a while but
would, if he saw the right thing. Maybe he doesn't peruse all the manufacturers' websites regularly. He sees an ad, in some form. Lets him know about a product he decides he likes and ends up buying and enjoying. That's pressure on the manufacturing being turned around into something positive for the consumer, and that's marketing doing something positive for the consumer.
What does the dealer do with that? He made the sale, has a happy customer, but with a lower margin than the same product used to. He's selling a lot of these things, though, but he can't afford to hire any more staff to deal with the increased floor traffic. It's more people in and out the door, more turns, more boxes, shipping keeps going up, and his wholesale cost per unit certainly hasn't gone down. Just like the customer, he'd like to find a way to pay less for the same product. With so many different lines available, the manufacturer may well feel pressure to give in on pricing negotiations. You know, get less money for the same product. I wonder if the manufacturer's parts, labor, utilities, R&D, and other costs will go down, or if he'll have to exert price pressure on down the line. We often hear about companies changing out a tiny part to save a pitifully small amount of production costs per unit. I wonder where they get ideas like that.
