MAP and Embargos
Understanding what MAP is and how it impacts you and your preferred shop is useful. So is understanding the reality of the embargo process, so that’s what we are going to talk about this time.
MAP is an acronym for Minimum Advertised Price. While many of us find that it smells a lot like price fixing, it really isn’t. I’ve invested the time to speak to leaders of independent guitar shops to better understand where MAP works, how it works and when it hurts.
MAP exists in most product industries. It was created when online selling became really prevalent although the concept existed in dealer agreements prior to that. The concept is as follows. No authorized dealer can ADVERTISE a product below the manufacturer defined MAP price, without an exception called a MAP holiday. Even a store having a Black Friday event for example, will only make wide statements about special discounts and rarely on a specific product. To see the price after discount, you either calculate it yourself or head into the physical store to check. The penalties to a seller for violating MAP policy can be very harsh, up to and including loss of authorized dealer status.
Thus if you see a common product advertised below the price seen in most other sellers, there is either a MAP holiday that has been granted, which are rareties, or the seller is not an authorized dealer and the product may be grey market, or a fake. If you see an Ampeg SVT head for $300 new in box, it’s going to be a scam, and won’t actually be an Ampeg SVT head if you ordered one and something actually ever arrived, which is highly improbable.
MAP does not mean that the seller cannot offer a discount. You always have the option to ask for a discount, and the seller always has the option to say yes or no. That is a private conversation between you and the seller.
You will see from time to time “brand” months. These are scenarios where a maker or distributor has authorized a discount for a specific territory and for a specific time. These exist so the seller does not take the loss in the butt as they do whenever they discount directly.
Musical instruments do not have massive margins in them. Asking for 5-10% off may get you a positive result, asking for 50% off will not. Musical instruments are not like branded clothing that is marked up 500% to 2000% or jewellery that is marked up as much as 10000%. This is why you can see massive discounts from the MAP prices from time to time, or there may be no MAP at all for that particular product only a Manufacturer Suggested Retail Price. MSRP is a guide number and is actually meaningless in practice because it is so artificially inflated only a fool or ego maniac would ever pay that price.
The good side of MAP is that it helps protects authorized sellers against unauthorized sellers who advertise a low price for stock that they do not actually own and may never get. If you’ve ever heard the term bait and switch, this is a good example. It also helps prevent an advertising driven race to zero. No business can survive on zero profit, so if a deal looks too good to be true, it is. Quality sellers want to be around and earn your business for the next purchase. They have built infrastructure, hired and trained staff and otherwise made efforts to make your shopping experience as successful as possible.
A downside of MAP is one that only the seller sees. This happens when the maker or distributor reduces MAP but does not reduce the seller’s purchase price, which takes margin away from the seller. MAP pricing for accessories like strings, and instrument stands and the like where there should be decent margin for the seller can hurt as much as it helps.
Another downside of MAP, that you and I see is when a maker or distributor raises the MAP price. Since sellers must pay for goods on delivery, anything in inventory is already paid out. If MAP goes up, older inventory cannot be advertised at its original MAP, only the current MAP. This means more margin on older inventory, but no way to clear it at a special price point. A MAP increase usually comes when a new version or colour happens. The increase may or may not cover older inventory. What you and I don’t know is how long the piece has been in inventory and whether the seller bought it at the old cost or the new cost. Building a relationship with a good seller is important and so it keeping track of a particular instrument that you are interested in. The seller is under no obligation to sell it at a lower price to match their original cost, but it is a conversation that you can and should have.
Philip McKnight of Know Your Gear advocates always asking for a discount and proposing a number that is mutually beneficial. Your seller can say yes, offer an alternative or say no. You are then able to decide what you want to do. You may choose to pay the asking price because the product is exactly what you want, or because you received exemplary service. Or you may choose that the asking price is more than the product has value to you. However if you are going to negotiate, you have to be prepared to be gracious if it does not work out the way that you want and walk away. It is tough for sellers to make money, but it’s also tough to do so for us as well.
MAP is all about advertised price. It’s not price fixing, but it is for the dealer benefit more than anything. If a price looks too good to be true, it likely is so buyer beware.
Embargoes are a means for a maker to advise a seller that a product is coming, what it entails, when the seller can talk about it or advertise it publicly and should also be indicative of availability.
Except that the embargo model is badly broken. Let’s say that a guitar maker has an embargo on a new product, which is probably just different lipstick on an existing product, but I am admittedly somewhat suspicious of some specific makers. Let’s say that this new product has some specific features and capabilities not presently in the marketplace, or comes in a unique colour, or as a decal for a current popular person who will fade into obscurity in short order. That product has a release date, a MAP assignment and typically involves a minimum stocking order so the dealer can be sure of having the product to sell. Thus if the dealer chooses to leverage the opportunity and places an order, the dealer will have stock to sell and an advertisement could drive new business. Embargo models fail when a maker defines an announcement date and even a price, but does not have the product available or has minimal counts available followed by a long wait. This is more common than not. Scarcity has an impact on demand. People want what they cannot get more than what they can. It’s a fact proven by decades of data. So maker A preannounces to the dealer a new product with a date that the dealer can talk about it. On that date, the maker is hoping that the dealer makes a lot of noise about the product. The maker may or may not actually have any product to ship to sellers, and in some cases, they only had enough product to make available to reviewers and paid influencers. So you placed an order and prepaid for the product on the announcement because your seller does not have it in stock. Eventually it turns up, usually after the bloom has fallen off the rose. The maker has received a lot of advertising in the form of reviews and noise but no end user actually has the product yet. The maker sees this as success, the seller sees it as another failure because they cannot get the product that there is demand for, while the demand exists.
The principle behind an embargo was to let the sellers know what was coming, and offer them an option to have the product in stock on the day of release, however it no longer works that way because embargo dates rarely align with product availability any more. Don’t be annoyed when you ask your seller what is coming that is exciting. If they know, they cannot talk about it, and further don’t even know if they will have the product anywhere near announcement. Sellers have to sell what they have today, not depend on a future promise date. The more like an existing product a “new” product is, the greater the probability that availability will align with announcement. Signature products are like this. They are the same as the standard product with some minor change if any, and have a different decal to go with the higher price. They are easy, and that’s why there are so many, plus makers understand that buyers are increasingly lazy and think that a signature product will make the buyer more successful for no more effort. This is, to use a common phrase, bullshit, an old and effective practice used on the gullible and stupid.
Release dates are now mostly works of fiction. A company may announce a new set of pedals, and have minimal availability on release date followed by a months long wait for general availability. A company may announce a new guitar model with delivery taking up to two years before the product delivers in which time four other guitar models have been announced and are also not available.
This is further complicating life for actual guitar stores as makers start going direct. In this case, the buyer pays for the instrument online and the maker either pulls from inventory that may have been allocated to a retail store order, sells it at MAP and earns a higher profit by taking the retailer out of the loop. Makers know how to make instruments as cheaply as possible while making the highest possible margin. They don’t have the level of customer service or customer relationship management as the retailer that they just put under the bus and good luck to the direct buyer who has an issue. Speak to any competent retailer and they will tell you that pretty much every instrument that they receive requires an inspection by a tech before it its the wall. Proper inspections by the makers themselves are not comprehensive and even vaunted 12 point or 30 point or however many point inspections have to be completed in a fixed amount of time. If a retailer receives an “inspected” product, they are smart enough to know how much time is going to be required to make the thing play well before it goes on the floor. Some need very little work, some need more work than the margin actually pays.
Thank you for reading. I appreciate your support. Feel free to post a comment or a question. Until next time, peace.
