The BRA/IASC Roundtable at ASR

The first issue on the table was Manufacturers’ Suggested Retail Pricing (MSRP) and Minimum Advertised Pricing (MAP). I’ll assume you know what those things are. People in the room were generally in favor of both and I’d have to admit that I’m not necessarily against them. Though as I mentioned in the meeting, managing distribution well is perhaps more important in keeping prices up.

What concerns me about both MAP and MSRP is that they feel like potential excuses not to manage your business well. I was impressed with the retailer in the meeting who said, more or less, “We got some belts with price tags on them but we ripped them off and priced those belts $5.00 higher because we knew that’s what we could sell them for. MAP? MSRP? How about knowing your customer, your market, and your inventory? Don’t let these kinds of tools, which may have their uses, have too much influence on your thinking.

Honestly, I’m not quite sure what the second issue was, but it ended up with the usual hand ringing about margins on skate hard goods needing to be higher.

I worked up some righteous anger, but then Don Brown ended the meeting before I could get a word in. Probably just as well.

But after the meeting I reminded everybody who would listen that the previous ASR, IASC had sponsored a seminar where a major topic of discussion was Gross Margin Return on Inventory Investment (GMROII). Cary Allington from Action Watch had presented some very interesting numbers showing that if you took inventory turns into account, the margins on skate decks were not nearly as bad as people thought.

I had been arguing for a while that our new economic circumstances required a focus on gross margin dollars- not just gross margin percentages. Actually, I first suggested that years ago.   Cary brought GMROII to me attention and I wrote an article about it. I knew that inventory turns and inventory dollars were important, but GMROII gave me an elegant and effective way to put them together and compare how profitable it to sell a skate deck compared to, say, a pair of skate shoes.

So the source of my pissedoffness was that here we were again lobbying for higher margins, while ignoring turns and margin dollars and data suggesting that on a GMROII basis, margins on skate decks weren’t half bad. And I’m sure we’ll have the same discussion at the next ASR.

The article is on my web site and has a date of August 15, 2009 on it.  Cary’s numbers are in there and I think they will surprise some of you.