In the 1930’s, immediately post-Depression, small grocers believed it impossible to compete with the giant A&P chain, so they sued, and ultimately got The Robinson-Pittman Act Of 1936 passed by Congress – and it’s still in law today.
It says that volume discounts given by manufacturers cannot exceed the cost savings gained by the manufacturer by delivering the large volume order. And now a group of 160 tire store owners have filed an anti-trust complaint in federal court against Wal-Mart, Sam’s Club, AutoZone and thirteen manufacturers, based on this law, claiming the manufacturers are selling to these chains too cheaply.
See, and you thought if you owned your own business you could sell or not sell to anybody you darn well pleased at whatever prices you chose.
Ha! I hear business owners complaining about Wal-Mart specifically, big competitors and price cutters in general, all the time. Their woe-is-me whine that they can’t compete on price. And they’re right.
So, dunderheads, compete on some basis other than price. Sadly, we’ve nationally sanctioned the idea that losers who can’t compete should get to drag the winners into court and just steal the money. Hey, you: do NOT let yourself get sucked into this kind of Loser Thinking. It’s a dead-end.
So, an instructive story about Price. The hottest ticket in Cleveland this past holiday season was on the Cuyahoga Valley Scenic Railroad Ride. You can ride this train all year. But in the freezing cold winter, at night when you can’t see much of the scenery, they jacked their prices up higher – and wound up selling most of the tickets via lottery, months in advance, at $17.50 each, $70.00 for a family of four!!!
Resellers got as much as $520.00 for four on Ebay. How? They turned the ride into The Polar Express, capitalizing on the movie, and added a conductor dressed like the guy in the movie, a reading of the story, an appearance by Santa. And promoted. Making price irrelevant. What does this have to do with competing with some cheap price discounter? EVERYTHING!
The lesson is: in the face of tough price competition, change what you are selling. No, I don’t mean board up the windows on your place of business and walk away. I mean re-invent. Create an ‘experience.’
People don’t just want to go and do something ordinary, shop someplace ordinary, attend another ordinary seminar – they want new and different and exciting experiences.
‘Disneyfy’ your business. They get it. They tilted supply and demand in their favor. So many marketers stubbornly refuse to get this.
Look, you don’t compete with a price cutter by cutting prices. It’s a path to extinction. And if you cannot sell at the lowest price, having the next lowest price is no advantage, so you might as well have a juicy high price.