Originally Posted by guyladouche
Sounds like crappy news to me.
I don't claim to fully understand the agreements between retailers and suppliers. For example, let's say a store agrees to sell a Sony TV--do they buy the TV up front for a set cost and then re-sell it at a different cost, or is the store merely a "showroom" for the Sony TV, and Sony still owns the product until it's sold to the consumer? Sounds like the latter is the case.
Sounds to me like all-around, the MAP scheme works out best for retailers and consumers, and this new UPP scheme only works out well for the supplier. Big surprise things are being changed...
The store buys the product for a certain price, they also get rebates afterwards based on the amount that they sold. For example lets say that a retailer buys a TV for $700. They then have to cover shipping from their central depot to the store and the wages of all the employees who handle that TV. So lets assume that the final cost of the TV is $800. They then set the price of the unit at $1000 (margin on TVs is quite high, on computers you'll get $40 of margin if you're lucky). Then the manufacturer sets a rebate setup for their models, something similar to:
<100 units sold = $50/unit
100-200 units sold = $75/unit
>200 units sold = $100/unit
The quantities and rebates will of course be different, but you should get the idea. Thats how stores decide on their sales, if a unit offers large rebates (with large quantities required) then the store will try to sell as many as possible.
I hope that answers your question.