Retail Tales: What Retailers Want Brands To Know About Their MAP Policy
Podcast Episode #1 - Eddie Lichstein from Autoplicity.com
Trade Vitality has jumped aboard the podcast train and we’re thrilled to launch our first episode! We will be sharing “Retail Tales,” which is a collection of conversations with retailers about their perspective on MAP policies, their interactions with brands during the MAP monitoring and enforcement process, and topics brands might not hear about from retailers regarding the impact of MAP policies at the ground level.
In the first “Retail Tales” episode, Eddie Lichstein joins Aram Stepanian of Trade Vitality to give his thoughts on MAP policies from the perspective of the automotive industry. Eddie is the founder of Autoplicity.com and THMotorsports.com, two e-commerce platforms for the car enthusiast, as well as Rejoiner.com, a lifecycle email management software that helps give retailers an edge in their marketing.
Our conversation with Eddie covers:
The impact of how the digital era has changed the way consumers view pricing online
The misconception that brands have about getting customers into the door with low prices
The difficulties delivering high customer service levels in today’s online world, but why it’s necessary
Costs involved in selling retail products
What happens when brands don’t properly enforce their MAP policies
The importance of creating partnerships between brands and retailers
The benefits of Trade Vitality’s approach versus other options
Below is the modified transcript of the podcast.
Aram Stepanian: [0:02] The following is brought you to you by Trade Vitality. You can find us at www.tradevitality.com. We have a free guide and lots of great information on there, so make sure to check us out.
Aram Stepanian: [00:13] Alright, this is Aram Stepanian. I am one of the co-founders and brand evangelist for Trade Vitality. We’ve got Eddie Lichstein on the line to share some perspective on why MAP monitoring is important from a retailer’s perspective. Eddie, how are you doing today?
Eddie Lichstein: [00: 35] Thanks for having me. I appreciate being able to speak about MAP from a retailer’s perspective. Usually, we are just asked to follow it or ask ourselves by the manufacturers to, we never get the chance to actually give feedback.
Aram Stepanian: [00:53] These days, It seems like there might be some kind of a disconnect because everything’s become so specialized as far as the supply chain. You have distributors that are involved that are in-between the retailers and the brand, and often, many other custom situations I am sure you’ve come across.
Eddie Lichstein: [1:14] Many. A lot of situations obviously start with the topic of MAP.
We are in an era where digital has taken over how pricing is viewed online. We have vendors and people going to Amazon looking at what things cost and coming back to the retailers. More than ever, it’s important for manufacturers to be on the cusp of leading digital technology to make sure that they know where their products are being sold and for how much.
Being a low price leader is a very easy thing. Once you find someone who is a low price leader; it starts to cut business away. To those who are trying to achieve the highest version of service retail, if you want to service the client properly, you are going to need a lot of tools to do it -- and tools aren’t cheap.
So it’s kind of a mixed bag. To some extent, retailers feel that it’s the job of the manufacturer. The manufacturers feel that the retailers should always be taking care of MAP and pricing themselves. Retailers are under the viewpoint of the actual customer who oftentimes say: “hey, I’d like to buy it for less because I saw it at blank place”. The other fear is that no one wants to buy it from you because they are already shopping at store XYZ where the price is lower.
Aram Stepanian: [2:52] Absolutely, absolutely. So from the consumer’s point of view, it’s all about price when you’re shopping online. There’s all types of engines that will allow you to compare by price. As an online retailer, I’d imagine that that is the way to get people in the door, initially. Can you go into a little detail on why that can be damaging to not only the brand, but the retailers as well?
Eddie Lichstein: [3:18] Everyone knows that if you’re going to be the low price leader, it’s a race to the bottom continuously.
That’s what a lot of manufacturers see behind Amazon, that everyone just tries to go as low as possible. There’s a ‘buy’ box and that ‘buy’ box is what’s going to get you business.
A lot of people think that they can acquire a customer based on price, and afterwards, they’ll be able to turn that customer into a loyal one who’s not price sensitive. There’s a misconception about that: the architect of the person that you got in the door actually came to you because of your price. Since you offer nothing but price, it’s very hard to change the mindset of that person to start looking at your service level, your offering, and how you merchandise. This is mainly relevant to commoditized products. If this was your own product, you can set the price to whatever you want. If you’re trying to compete against some form of table, for example, and your table is cheaper than others in the market. That’ll last for so long, but again, you’re getting people to buy your product because of price. It’s very difficult to scale afterwards. In the commoditized area, it’s very hard to keep finding that customer who’s going choose you because of service. Once you get them through the door, you have to go above and beyond. It’s doable, but a challenge.
Aram Stepanian: [5:09] Right, so to the layman what’s happening is that maybe a viewer or less experienced retailer will get online, they will throw a bunch of their products up that they’re getting from a supplier on to Amazon, let’s say. They get a bunch of sales because they have the lowest price, their supplier sends them the products, and they start doing a bunch of volume.
A couple of months go by and their margins are so narrow that they’re unable to advertise, they’re unable to grow, they’re unable to hire a customer service person to get on the phone and service their clients. So there is no growth potential for that entry level retailer at that size.
However, we’re all watching Amazon who actually go and manufacture their own products, and take them straight to market at ridiculous prices. We see the end result as consumers. People don’t realize that without a MAP policy (minimum advertised price) set by the person or the company that makes the product, there’s no guarantee that at the end of the supply chain, the retailer is going to have enough margin or profit to invest in their business and deliver more quality to the customer. Have you seen that for yourself in the automotive industry?
Eddie Lichstein: [6:35] Absolutely. If you look at the automotive industry, people talk about the golden days, about 15 or 16 years ago. Maybe a bit more. This is when everyone was in a thicker margin area and the internet wasn’t as prevalent. People weren’t doing as much comparison shopping. At that time, you really found that it was easier to deliver service level, do promotions, and do special things for repeat customers (as opposed to one-time and/or occasional customers).
Now, we’re in a time where things are narrow. There’s no problem with being narrow because you can advertise more strategically. However, you don’t have that breadth of tools at your disposal to deliver a high level of service because tools are expensive. So if you want to scale and have great tools, you need to have a bit more in the piggy bank to give that customer the service level they need.
We’re also moving into an era focused on the speed of shipping, or rather we’ve moved into it. These days, you’re not going to wow people unless it’s faster than two days. So unless it’s coming the next day to the customer, they’re not really wowed. It’s a standard that the Amazons of the world have set.
We’re running away from the idea of being the butcher shop and knowing your client, the 1950s approach. People just want to do a quick sale because they feel that they have nowhere to turn. They also can’t afford to turn anywhere with service that high. If they did have funding, that would be a different story. Again, this comes back to your business where it’s important to monitor MAP and understand that there’s partners that you work with.
From here, I want to get into the next topic. From what I’ve seen, manufacturers believe that if retailers set prices low, they basically have no cost to sell - it’s FREE. Essentially, you are eroding the market because you want a free methodology of obtaining customers. That actually isn’t true.
Today, everything is pay-to-play to some degree. Whether you’re advertising somewhere with low prices, on social media, using a shopping engine, or doing cost per click, retailers are constantly investing into marketing, regardless if they’re following MAP or not. There’s no other way for them to be prevalent. That’s a disconnect that manufacturers don’t see.
Aram Stepanian: [9:45] This is what I am getting from what you’re saying. Give me a large manufacturer from the automotive industry, for example.
Eddie Lichstein: [9:54] I’ll give you one of the biggest, WeatherTech.
Aram Stepanian: [9:57] OK. So there they are. They have their site, they have their brand and they probably get an insane amount of organic traffic. People are coming to them for customer support by going straight to the brand. They might have the perception that that’s how it is for a retailer or vendor selling their product: “Oh well, our brand is now on that website, so of course that company is going be overloaded, even as a retailer.”
Yet, when you get down to the retail level, you have so many fish that are right next to you competing in this giant ocean. If there isn’t some type of bar to say that: “alright, this is where the price is”, you don’t have the luxury to focus on the other elements that you were mentioning earlier that are part of creating the sale. The cost of the ad to click, promoting the item, educating the staff about the item, and actually getting that to market, as well as the shipping involved – all of that comes into potential for the retailer to want to cut down on price and make that the way to sell the product when that’s not going to be beneficial to the retailer. So, go right ahead
Eddie Lichstein: [11:07] I 100% agree with you. Everyone who I’ve ever done consulting for or have spoken to in the ecommerce world are listening for that silver arrow, they’re looking for just the gold. They want to do one thing, and it needs to be a game changer. They want to do it over and over because it’s simple to gain revenue.
Unfortunately, that’s not the case. With how hyper competitive it is, online retailers need to do a lot more. Again, this mainly has to do with if you’re selling a commoditized product. So now, a lot of retailers are coming back and saying “I have the best service level”. I think that’s phenomenal, people and other retailers should continuously work on service level. Not only from the perspective of what the customer demands, but also on the flip side, try to do what the customer wants ahead of time. That’s the ability to have a set price amongst all retailers. That’s where you can start to become a differentiator.
Aram Stepanian: [12:13] Right. So what happens when a product maker, brand, or manufacturer have established a minimum advertised price policy, but they’re not necessarily enforcing it? What happens at that point?
Eddie Lichstein: [12:29] So, let me give you my background.
Our business model has always been to work with manufacturers is to create friends. In any world, I think that creating allies is significantly better than making enemies. For manufacturers, when they set up a MAP policy, they think it’s pretty simple: “I’m just going to set price to XYZ and then everyone’s gonna adhere to it.”
They instantly find is that there are a lot of people who are diverting the market - they are trying to continue to win based on price. Let’s say: manufacturers come out, only contact their top retailers, they say: ‘from now on you need to sell at this price”, and the retailers agree.
That leaves a lot of room for those who are lurking in the shadows. There are people who start to take advantage of that. They are happy that the big players are gone, and start to beat up the price of the product. That’s where you get into the issue that manufacturers don’t see: MAP in itself is an excellent thing, however, if MAP isn’t unilaterally followed by all retailers, you’re always going to get diversion. You’re always going to get someone who starts taking the business away.
We’re in America, we pride ourselves on getting something cheaper. You may offer all the service in the world, but if a first-time customer doesn’t know about your service level and sees the lifting at a lower price as opposed to an excellent top service level retailer at a higher price, that customer could be taking a chance. He/she will likely purchase from the former.
In response to this situation, manufacturers say: “well, don’t focus on those customers. Those aren’t the customers that you want.” I don’t disagree with them. However if MAP’s not done well, MAP monitoring isn’t done well, and MAP enforcement isn’t done well, you’ll quickly start to see erosion in revenue right until the company does it right.
It takes a good amount of time: you need to contact every single retailer, go through the diligence process of creating a partnership, and getting things to actual MAP pricing. When manufacturers do it right, that’s when you start to see sales coming back to those products, improving margins, and everyone’s happy.
Most times, manufacturers don’t do that. They just setup a quick policy and pick out the retailers or sellers who are doing the best with their product to fix MAP - that leaves them exposed.
Aram Stepanian: [15:30] This is true. Unfortunately, there are a number of online channels today where retailers are allowed to hide behind the skirt of maybe a larger portal. You know, there could be another club.
So what is it about Trade Vitality in particular that you found to be helpful or unique? Does anything stand out in particular that you want to share with the audience as far as our process or how we go about actually helping you to have some visibility out there?
Eddie Lichstein: [16:05] For me, the biggest game changer when we had interactions with Trade Vitality is that same service level that we’ve been discussing.
It’s the understanding. I felt that there was a retailer or somebody who sat in my shoes who gets what we’re going through, is working with us until we get to the manufacturers, and trying to create a symbiotic union between the two of us as an intermediary. That’s what I like most.
Many times right now with MAP policies, you’ll see that the retailer is very different than the manufacturer. For example, the manufacturer could be a little more antiquated. As a company, their job is to manufacture an excellent product(s) and distribute the product(s). Sometimes, they don’t even distribute, they just want to be a manufacturer.
For the retailer, they have to adhere to the standards and policies of today’s modern world. There are a lot of things that are constantly changing. For instance, our business has changed from a year or two years ago. The model stays the same, but the speed of which things are moving - like shipping time, service level, etc. - have changed quickly.
What I liked about Trade Vitality, when you reached out to us on said product, it felt like you were asking us to be part of a team. As opposed to most times, we’ll receive a threatening letter. I didn’t feel like you were attorneys throwing out a cease and desist order. Instead, you said “hey, we noticed that there’s something off. This company is really trying hard to adhere to their MAP policy. Let’s try to help them grow together.” I love that.
I think that approach itself is a 100% winner. You bridge the gap between what the manufacturer doesn’t know and what the retailer doesn’t know about the manufacturer. As the mediator, Trade Vitality ties in the pains of both parties. As a result, both sides feel good about moving forward together.
Traditionally, which is really only five or six years of heavy MAP enforcement, most retailers get a threat letter which tells retailers that “you’re my enemy”. In reality, even if the price is set low, there’s still a cost to do sales, there’s marketing dollars behind it. In the retailer’s eyes, it makes them not want to support the brand anymore - why would you?
Imagine if you’ve been constantly advocating that brand, not necessarily in the most effective way, but at least putting in the money, energy, and resources into selling the product. If the manufacturer of that product comes to you and says “hey, I really hate you”, it obviously comes off poorly. From there you have two options, you can fix everything or never sell the product again. You see each other as enemies.
That’s why I think Trade Vitality is great for retailers. It’s a very nice approach for manufacturers. They should see that the current organizations and technology that they use for MAP enforcement don’t do a good job in regards to communications (I don’t want to name any others, but there are some prevalent ones that are three letters long). It is a bot or a scraper that runs and sends a lot of false positives, but there’s no interaction on a connected level.
Retailers often feel like they’re not cared about for the actual business that they do. Over time, those retailers will start to turn off the marketing. So, it depends on what the manufacturer wants. If the manufacturer wants them out the door, they need to understand that that retailer will not come back to selling their products, or if they do, they’re only going to care about making money out of it. They don’t feel like they have an ally.
Aram Stepanian: [20:20] I totally agree. You make a great point there, Eddie. The manufacturer themselves may be a bit antiquated and not have the sophistication to be up to snuff with where we are today as far as just having the tools to be aware of what’s happening with their pricing online.
When you hand that control over to a third party, be it Trade Vitality or anyone else for that matter, I think it’s very important - I’d go so far to say that it’s critical – to the brand’s success to have a relationship there. It needs to be people to people with individuals that understand the environment, are capable of communicating, and can represent the brand in a fashion that’s beneficial to the brand that offers the opportunity to communicate with the people who are selling their products to retailers.
These days, I think there’s a big disconnect by nature of all the increased specialization that’s occurred. Let’s say you have a rotor manufacturer and they make the greatest race routers out there. They might not have the rest of their company built out to have a sophisticated in-house MAP monitoring system. I don’t think they should. I think you can do what you do and do what you love. Maybe make some friends out there, we’re optimistic. I think it’s possible to still have relationships with people and lean on one another, while doing a good job and benefitting as a result.
Eddie Lichstein: [21:56] I completely agree.
Aram Stepanian: [21:59] That’s great! One other thing I would like to ask you about is have you seen MAP policies themselves evolve over time, over these last 5 or 6 years?
Eddie Lichstein: [22:10] Absolutely. There’s been a change in regards to understanding at what level you can enforce and how there are scalable solutions to make that work. In the past, manufacturers were just given a very rigid “you-must-follow-MAP-to-price-and-if-something-happens-again-we’re-kicking-you-out.” Often, there’s a lot of data inefficiencies.
There are sites that handle large amounts of data. Things happen. They could happen for an hour or two, something really short, and the price changes. Or there’s a break-in, an upload, or something of that nature or even at the same time, manufacturers are constantly changing prices. Usually it seems every six months.
Due to the pressures from the supply side, they may raise prices. At the time, their retailer might not know about making the changes. I’ve seen first-hand that big alteration in how manufacturers work with clients. Some of them similar to the evolutionary process that you mentioned. Those manufacturers take it one step at a time and won’t harden issues. As long as there’s communication and they know that this company deals with lots of data, the little things are fully understood because they’re starting to understand the business.
Before manufacturers didn’t understand the business, so they’d say “you must have this price and if you ever break this, we’re no longer speaking to you again”. I wouldn’t say there’s leniency, but an understanding of business practices on both sides.
Aram Stepanian: [24:04] Absolutely, absolutely. Very well put. So thank you very much. Eddie Lichtenstein of Autoplicity Inc. Any other projects going on that you wanna plug?
Eddie Lichstein: [24:18] Sure. So we also have our niche-based site, THMotorsport, now in in its fourteenth year. Similar to Autoplicity. I originally started from a social perspective and we specialize in a couple of platforms. We’re all gearheads, so we love that business and we love what it brings to the end customer.
From the software side, I’m a co-founder of a company called Rejoiner. It’s a lifecycle email marketing solution that I’ve fallen in love with. It helps out those who are looking for the differentiation point in retail. It’s a way of being a little bit different than everyone else and having different marketing where you try to remarket to those customers who’ve already visited your site and then have left for any reason or they’ve purchased from you and you want to give them a touchback email on their purchase.
There’s a lot going on in regards to customer retention that I love, at the same time as understanding that MAP itself is going to be more prevalent over the years. I don’t think it’s going away and we need more guys, more companies like yours, to come in and create partnerships and allies. As opposed to this non-said three letter company who’ve created a lot of angst and enemies in the market.
Aram Stepanian: [25:47] Yeah, it’s not doing an