If you are already an e-commerce entrepreneur or are currently looking into giving it a go, you’ve probably heard the term MAP – or Minimum Advertised Price – a lot by now. What you may not know is how absolutely crucial MAP policies are to your dropshipping business. So, what exactly is this powerful price policy and why is it so important? Read on and we’ll explain everything you need to know!
What is Minimum Advertised Price (MAP) and how is it different from MSRP?
Most people are pretty familiar with MSRP, or Manufacturer’s Suggested Retail Price. This is exactly what it sounds like – what the manufacturer recommends you sell their product for. It’s not so much a strict policy as it is a guideline, giving retailers an idea of how to price a brand’s products.
MAP, or Minimum Advertised Price, is a much stricter policy. A manufacturer’s MAP policy states the minimum price a reseller may advertise their product for. As the retailer, you are legally required to adhere to the MAP agreement. While you may advertise above the minimum retail price stated in your supplier’s MAP policy guidelines, you may not advertise below it. Further, if you are found to be in violation of this MAP policy, you may lose your ability to sell that supplier’s products.
For some industries, it is considered a best practice to have MAP policies in place and for other industries, it is very uncommon. This is an important consideration when you are researching prospective niches for your business. We’ll get into that topic a bit more later.
Is this legal?
Absolutely! Well, in some countries. In the United States, it is very common for manufacturers to have MAP policies and they are legal under federal antitrust laws. In Europe and the UK, though, they are illegal as they are considered to hinder competition. In this article, we will be providing our recommendations for people doing dropshipping within the United States, where these MAP policies are present.
Are MAP policies beneficial to consumers?
While it depends on the specific MAP policy and the industry in question, there are certain cases where MAP policies are definitely beneficial to consumers.
For example, MAP policies may actually protect consumers from false advertising in certain cases. In doing your supplier research, you will sometimes notice certain online retailers advertising a product for a far lower price than most other retailers. Upon investigation, you will see that once you add the product to your cart there are substantial shipping costs added to the order or that the pricing is somehow not aligned with what was advertised. Customers are brought to the site expecting a lower price only to find they were misled once the total cost is revealed. By having MAP policies in place, suppliers can actually prevent these attempts by unauthorized sellers to undercut other retailers with extremely low product prices, thereby ensuring a safer shopping experience for customers.
Additionally, MAP policies can protect consumers from price discrimination by ensuring equal access to products at fair prices across a multitude of retailers/locations, thus allowing customers to shop where they are most comfortable without being penalized on price.
Why do suppliers use MAP?
The main reasons suppliers use MAP are to:
Maintain their brand image
Pricing is an important piece of establishing brand value. Having a MAP policy helps retailers ensure their brand does not get devalued by underpricing.
Prevent price wars and price erosion
When there are no guidelines in place, unfortunately, online marketplaces often become a race to the bottom when it comes to pricing. See the previous point for why this is a bad thing for the supplier!
Ensure a healthy relationship with third-party sellers
With MAP pricing guidelines in place, good retailers won’t be flushed out of the market by fly-by-night companies looking to get a few sales at a huge discount. Further, they also have the opportunity to compete with large retailers, including brick-and-mortar stores, on price. Suppliers are helping to ensure a level playing field for all their channel partners, no matter how big or small they are. And they are effectively protecting the profitability of their products for those partners, too. As a current or future e-commerce entrepreneur, this includes you!
Why is MAP so important to dropshippers?
Here at The Bean Online, we’ve gained a lot of valuable experience in the e-commerce field and we cannot state enough how important it is for dropshippers to work with MAP suppliers. Here are a few of the main reasons:
Avoid price wars
Wait, didn’t you just read this in the section above? Yes, you did, because price wars suck for absolutely everybody involved! The last thing you want for your business is to end up in a price war with large retailers like Home Depot and Walmart. That is a war you will never win. These companies have a massive amount of products and therefore employ software that is constantly scanning prices and uses automatic price display to adjust pricing and undercut competitors once a lower price is discovered on the market.
While they can absorb lower margins on some products because of their size, you generally won’t have the same ability to do that. And why would you even want to? You got into the dropshipping business to make money after all, right? This brings us to our next point…
Protect your profit margin
When a supplier has a MAP policy, it usually allocates a pretty healthy profit margin for its retailers, which sets up a win-win situation for everyone. It protects you as a retailer from having to battle it out with other retailers on price and, in effect, protects the profitability of your business. Sounds good, right? And it is! Plus, it enables you to budget ad spending and other costs much more easily since you have accurate profit margins to work with.
Customer confidence = more sales
Customers really appreciate not having to hunt around for better prices. They like the certainty of knowing that when they shop with you, they don’t have to worry about finding their product advertised for a lower price elsewhere after they have made their purchase. When you work with MAP suppliers, it enables you to provide your customers with a Price Guarantee, enabling them to shop with peace of mind. And you, as the retailer, are able to offer this because you know no one can beat your price due to the manufacturer’s MAP policy. When customers feel confident they are getting the best price they will not have to leave your site to comparison shop, which will lead to increased conversions (i.e. sales) for you!
Bottom line? MAP suppliers are a cornerstone to your success and we recommend you ensure your niche has a lot of them before moving forward.
Okay, great, but how do I figure out if my niche is MAP-friendly?
A ton of research goes into selecting the proper niche and it can start to feel tedious, for sure. But this is a super important step you do not want to skip, as it can truly make or break your business.
The main thing you need to do is come up with a list of suppliers in your niche and then search for each brand’s products. Look at how your competitors are pricing their products. If you are seeing the same price across multiple retailers for specific products, you can probably assume that the supplier has a MAP policy. If the prices are all over the place, they likely do not have a MAP policy or, if they do, they do not enforce it.
Another way to research if a supplier has a MAP policy is to check their website and see if you can find any documentation about it. You can also just give them a call (gasp!) or send them an email and ask them for more information about their partner program. Putting in the time upfront to figure this out will save you a LOT of headaches down the road.
You may find yourself leaning towards a niche that has some MAP and some non-MAP suppliers. That’s fine too, just be aware of what the pricing looks like for the non-MAP suppliers and mostly focus your time and advertising dollars on the specific products where you can be competitive.
What happens if a retailer violates MAP?
While some suppliers have MAP monitoring software that tells them if a retailer is violating MAP, many do not. Therefore, it is up to you to call out MAP violators when you see them and let your supplier know right away so they can take action to correct the situation. After all, you are business partners, so it is up to both of you to ensure the relationship continues to run smoothly and that both parties are fulfilling their end of the deal. Not only that, but you, as a retailer, have entered into a contract with the supplier and it is your legal right to enforce that contract if it is violated.
Unfortunately, MAP violations happen more frequently than we would like, but it is just the nature of the e-commerce beast.
Generally, your supplier will notify the offending retailer that they are in violation of the MAP policy and need to update their pricing. Sometimes the retailer will change the pricing immediately but sometimes, particularly with larger retailers, part of their agreement with the supplier will allow them a 30 or 60-day window to make the changes. Finally, sometimes it is up to the supplier themselves to resubmit all their products with the updated pricing. This, too, will take a bit of time to complete, depending on how many products are affected.
If a retailer repeatedly violates MAP the supplier may terminate their agreement, meaning that the retailer can no longer sell that supplier’s products. Frustratingly, sometimes suppliers do nothing at all to bring the retailer into compliance and it is up to their sole discretion to do so. In these cases, you will likely need to consider this supplier as non-MAP for all intents and purposes and refocus your attention on your other brands.
Whoa, that sounds serious. How can I make sure I never violate MAP?
Generally, as long as you are staying on top of things with your supplier this should not turn into an issue for you. However, sometimes there will be price changes you need to deal with in a timely fashion. Ideally, your supplier will send you a notification about this and you can just go ahead and make the changes manually to your site.
If we are all charging the same price, how will I stand out?
There are tons of ways to make your store stand out from the crowd without competing on price! In fact, it’s actually pretty freeing to NOT have to worry about the pricing part. You can make many enhancements to your product offering and website features to provide your customers with an easier and more satisfying shopping experience. Here are a few ways you can do that:
- Check out your competitors’ websites. They probably have similar features to yours, but what can you do to make yours stand out? Look at what they are doing and aim to do it better!
- Include product variations and options that your customers can’t get anywhere else!
- Make sure you have electronic media such as pictures and videos embedded on your product pages so customers can get a better idea of the look and feel of the product and how it works. Try to find more than what has been provided by your supplier so you can show your customers something different than everyone else’s website is showing them.
- Make your product descriptions detailed and interesting and include lots of keywords! They make it easier for Google to find you in a search and also give customers better information about the product.
- Add expiring coupons or other special offers on your site (make sure your supplier’s MAP policy allows this) to increase the urgency for your customer to buy.
- Offer amazing customer support! You are not a faceless corporation and that is an advantage here. Take good care of your customers and give them the personal attention they deserve.
- And, of course, make sure your site looks awesome and is well organized so customers can easily find what they are looking for.
All of these suggestions create material differences between you and your competitors that set you apart and result in a more compelling offer for your customer.
Want some help getting your dropshipping business going? We’ve got your back!
Whatever level of help you are looking for, here at The Bean Online we can help get you moving forward with your e-commerce business.
- Make sure you check out the Dropship section of our website for tons of helpful articles about dropshipping.
- Book a Power Coffee Session with us to discuss your goals and figure out how to get you to the next level. Whether you are new to all this and looking to get started or you have an existing store you need a hand with, we’re here to help!
- Head on over to our partners at Dropship Breakthru for a system that will help you start your business in the next 30 days!
Was this article helpful to you? Is there anything else you would like to know about MAP? Make sure to leave us a comment below with your thoughts – we’d love to hear what you think!