Mar 7, 2012

Vendors and Dealers Debate Online Pricing of Carry-Over Merchandise

A significant jump in retail prices this spring is prompting discussions between some vendors and dealers about how to label and price carry-over inventory on e-commerce sites.

Vendors, who have had to raise wholesale prices by as much as 12 percent on some spring/summer apparel and footwear items due to rising input costs, worry that consumers may be buying lower-priced carry-over products online without knowing it. Some brands have responded by requiring dealers to explicitly label carry-over product as “discontinued” on e-commerce sites.

“We are talking to everyone who is off-price if they are not marking it as discontinued,” said the CEO of one hard goods company that addresses the issue through a minimum advertised pricing, or MAP, policy it implemented in 2010.

Some say that selecting the right language to identify carry-over product is important to avoid confusing the consumer. Unfortunately, said one CEO, some dealers have advertised carry-over product as a “special model” on their own websites in violation of its policy. To avoid confusion, the vendor timed the launch of its MAP policy to coincide with the release of a new product line so there would be a clearer distinction between new and carry-over product.

Independent retailers generally welcome MAP policies since they are designed in part to ensure specialty dealers get the margins they need to provide high levels of customer service. However, two retailers told WebNews that they have been cited for violating MAP policies in recent weeks for marking down carry-over product online. One said that three different hard goods vendors contacted him last week regarding the pricing of carry-over goods on his store’s e-commerce site.

While he gladly follows MAP pricing on in-line products, the retailer argued that vendors need to distinguish between “serial discounters” and legitimate dealers who are marking down product that fails to sell through at full price after several months. 

“Ultimately, that inventory prevents take up of newer product,” he said. “At some point you do need to have a clearance window.”

Both the CEO and one of the retailers noted that pricing of carry-over product is less of an issue on, which strictly adheres to UPC matching that prevents carry-over product from appearing alongside in-line product in product search results on its site. (For an examination of the pros and cons of selling on Amazon, see this month’s CEO Brief.)

What’s clear is that pricing discussions will only increase alongside online sales of outdoor products, which grew 18.7 percent in the fiscal year ended Jan. 31 from a year earlier, and now account for 11.3 percent of outdoor product sales, according to OIA VantagePoint™, the first and only full market point-of-sale data view, built specifically for Outdoor Industry Association members. Indeed, the issue may heat up this fall as retailers seek to sell unsold outerwear, skis and other snow sports gear left over from what has been a very disappointing winter season.

Regardless, vendors and retailers can agree that the rise of the online marketplace has created new pricing and product transparency challenges. Going forward, vendors, reps and retailers will need to collaborate on how to give retailers the pricing flexibility they need to move product while preserving brand integrity and ensuring consumers know what they are getting.