It’s that time of year. The wonderful holiday and post-holiday period when independent retailers get angry at some of their friends.
Why, might you ask, would those retailers choose this season as the moment to become angry with people that they hang out with multiple times each year? People with whom they share outdoor interests and cocktails, business partnerships, and big plans? People with whom those retailers take both financial risks and days off outdoors?
Freaking MAP policies.
Unexpected changes to MAP policies during the holidays make those friends – sales managers and sales reps, and vendors in general – seemingly into liars. It’s when their brands surprise everyone with huge discounts. And the modifications to MAPs threaten livelihoods, businesses, college funds, and retirement plans.
Let’s talk about what MAP policies are in theory, how they are being used currently, and what might be done so that people don’t have to spend the holidays next year angry about discounts on long underwear.
What Function Do MAPs Even Serve?
MAP (Minimum Advertised Price) policies are the backbone of the outdoor industry’s pricing models. The legal rationale for their existence is that they protect the brand equity that vendors build by investing in advertising, product development, and marketing.
MAPs are supposed to level playing fields, build brand value for vendors, and allow retailers to plan their business for long-term profitability with trusted partners. Sometimes, a couple of those things actually happen.
MAP policies are simply a written representation of a brand’s plan for what product can be advertised below a set retail price, and when. For example, a MAP might say that during any particular season an authorized retailer could advertise the entire brand at 25% off during the Black Friday shopping holiday.
Otherwise, the authorized retailer would be expected to only advertise merchandise from that brand at full price.
In return for acting as a dealer for a brand, retailers agree that when placing their orders, that they will abide by the MAP policy. And while federal law prohibits brands from requiring actual price controls from retailers, MAP policies generally allow the brands to end their relationship with retailers that violate them.
A retailer that advertises a sale price on a brand outside of the MAP (including having a discounted price on their website) can expect to no longer receive shipments from that brand. This should mean that retailers that plan their buys well and abide by the advertising agreements are the only ones receiving a vendor’s product.
In concept, these policies should be a good thing.
In recent years, though, many MAPs have instead been cudgels that both brands and huge retailers use in ways that give those entities unfair advantage in the market.
It’s worth noting that when MAP policies get weaponized in-season, those responsible for the changes very seldom are the sales leaders responsible for wholesale relationships. Those executives and sales reps are put in the position of having to announce the changes after having fought internal battles to avoid the modifications. But since they are the communication channel to retail, they get to be the villains.
And it creates a situation in which the sales directors take the heat for now-worthless promises.
How MAPs Lead to Bad Buys and Unfair Competition
MAP policies presented during the preseason are sometimes literally not worth the paper that they are printed on. Why? There are three main reasons.
The first is that these policies can be, and often are, changed during the selling season with absolutely no warning. That means that any assurances that were made about holding price when retailers committed to buying product are often false shortly after they receive their deliveries. The result is that the investment that the retailer made in that inventory loses most of its value almost immediately.
Why would a brand change its MAP in-season? It’s often simply because the brands themselves bought poorly for their own websites and decide that they need to advertise a discount to move product out of their warehouses.
Or they might get a call from someone at a huge corporate retailer that lets the brand know that they are overstocked on something that they bought, and expect to have the MAP changed so that they can move the excess at a discount – no matter what the previous arrangement was.
Either way, this means that – no matter what the situation is for other retailers – those policies get changed. The worst part is that those changes often happen on a Friday afternoon and get reflected immediately on the brand’s own website and that of those very large chains. Those are the only people who are given the chance to plan with the newly modified MAP policy.
The result is that those entities can often get the jump on their competition, and with their outsized advertising power, they can soak up market demand before anyone can react.
By comparison, most small retailers don’t have dedicated online staff or merchants. They are on the sales floor on a Friday afternoon and spend the weekend both overpriced and outgunned.
The second reason MAPs are generally worthless is that vendors can’t talk to anyone outside of their own team about MAP enforcement.
When a retailer breaks a MAP, that vendor can’t talk to anyone other than that specific dealer about what happened or the consequences because they risk accusations of price fixing.
In reality, it’s very rare that a brand shuts someone down for breaking MAP. There is absolutely no clarity in enforcement and I have found little evidence of consequences.
The third reason is simple. The only enforcement of MAP policies is theoretically carried out by the brands themselves.
What happens when, as has occurred in the outdoor market multiple times within the last year, the brand itself breaks its own MAP policies?
Absolutely nothing, except a spike in sales for that vendor.
As a matter of fact, those brands that have violated their own policies in the last 12 months seem to have done it in a very calculated manner. They change their prices, activate their social media teams, and blast out emails to generate sales over weekends, taking advantage of the price controls that they exert on their own wholesale customers to get the bump in sales.
Then, they revert to their normal pricing in a few days, without giving their dealers the opportunity to react.
In my experience, if a dealer sees this behavior and calls the brand, the consistent answer is that someone on the direct-to-consumer side made an unauthorized change, and the brand addressed it as soon as possible. Sometimes there is an apology. But there is always both a) the business that flowed because of the MAP violation and b) the subsequent movement of customers from specialty retail to brands’ direct to consumer channels.
Don’t Retailers Bear Some Responsibility?
Well, some do. Is it your local mom-and-pop retailer? Not likely.
The most significant influence that most retailers have on a brand’s strategy is what they order in the preseason process (months before the product is on the market) and how much they take during the actual season.
Brands can sometimes point to order cancellations as the reason for their own overstock and make the argument that had retailers lived up to their commitments, MAP changes wouldn’t be necessary.
However, in our current market, brands have put themselves in the position of having to demand orders from retailers when no one has enough data to make a good decision.
Supply chains are so long that line showings and preseason deadlines for next winter happen before retailers have the chance to sell anything this winter.
And while we get why that happens, it seems ridiculous for the brands to both make MAP promises and place enthusiastic orders with their factories with so little data.
In addition, there are few retailers who place orders large enough that should they cancel said orders, it would change the brand inventory calculus.
That puts a lot of pressure on brands to manage those specific orders from huge accounts. The MAP policies are already written to comply with those large retailers’ sale periods – it only seems fair that the orders that those retailers place are considered when setting MAPs.
Do independent retailers order enough so that their cancellations might force an in-season change? Cumulatively, maybe. Individually, no.
I would argue that if a brand is seeing so many cancellations from small retailers that it will change the market landscape, they have every opportunity to communicate the changes to MAP in a constructive manner.
What’s The Solution?
In my opinion, the obvious answer is for retailers to only work with brands that don’t change their MAP policies in-season with little to no warning. It’s what we should all do.
The problem arises from the fact that smaller retailers often fail to change their orders to reflect how they have been treated, allowing their vendors to continue to take advantage of them.
Sometimes, that is because the deadline for turning in orders to a brand happens so far in advance that the MAP policy changes during the current season after the orders for next year are turned in.
But small retailers have allowed themselves to be continually disadvantaged without taking meaningful action. Retailers should actually back up their talk and cut orders with brands that abuse the MAP system.
If you are a retailer, find vendors that you can believe. Stop buying from companies that seem to disadvantage you in the market and cost you money. Keep track of who has taken consistent actions to earn your trust.
The second answer is for the brands to build to actual demand. MAP policies are inherently an attempt to avoid some basic economic principles, but they aren’t powerful enough to change how markets work. Oftentimes, they seem to just make retailers believe that they should order more since the brand promises to keep advertised prices at a certain level.
Brands and retailers don’t change or break MAP when supply matches demand – they often break the policies because they order product to meet a growth goal rather than to match what the market can bear. We saw that happen this holiday season more than ever.
If a brand can’t be sure that they have the right amount of product to sell, maybe they shouldn’t put that product on a MAP policy to begin with.
But the simplest answer? Maybe – just maybe – those brands that change their policies every year should look in the mirror before they publish their next MAP and decide that they are going to only make promises that they can keep.
That would mean that fewer products would be on MAP policies, and those products would be ordered on a scarcity model.
The leadership of those brands should decide, if it’s absolutely necessary to change their MAP, that they are going to make those changes known at least several days beforehand to even out the competitive landscape and to commit to helping their affected customers financially.
That solution is asking a lot of brands. But those brands ask a lot of their wholesale customers – the biggest ask being that small retailers trust the brand enough to invest their own money in inventory from the vendor because of the promises those sales managers and sales reps make.
Brands that keep those promises would help a lot of small businesses have a much happier holiday season next year and make hanging out with our friends who work at outdoor brands much more comfortable in the new year.
Wes Allen, principal at Sunlight Sports, started working the floor in a small outdoor shop in the ‘90s. Since then, he has worked for the world’s largest outdoor retailer, managed a brand, led the industry’s leading specialty retailer organization, and owned an independent retailer in Wyoming with his wife, Melissa.
