Many manufacturers sell to retailers under a unilateral minimum price policy. You can buy from the manufacturer and stock your showroom, but you are not allowed to mark it below a certain price. You'll also see payments from the manufacturer to the retailer in the form of "advertising support" to drive certain models. So you'll end up with a retailer:
* Paying $500 per unit (A) which they cannot mark below $399, but buying a certain amount at a loss to receive a payment from the manufacturer for paper/web/TV advertisements contingent on including A in the advertisement and possibly even presenting it in a certain way on the sales floor (endcap, front display, etc.)
* Paying $450 per unit for unit (B) which they cannot mark below $599
The goal for the retailer is then obviously to buy as few of the first unit as possible to get the manufacturer payment and then push as many customers as possible to buy the second. The manufacturer is happy because unit A was last year's model rebadged and they could clear inventory and move towards retiring it.
The real top end items are sold under unilateral fixed pricing: you pay $X and must retail it for $Y. Manufacturers have people employed to mystery shop and look for violations. If a retailer marks up or marks down, they are blacklisted. Possibly for all lines, not just the marquee brand - depends on your sales.
Many manufacturers sell to retailers under a unilateral minimum price policy. You can buy from the manufacturer and stock your showroom, but you are not allowed to mark it below a certain price. You'll also see payments from the manufacturer to the retailer in the form of "advertising support" to drive certain models. So you'll end up with a retailer:
* Paying $500 per unit (A) which they cannot mark below $399, but buying a certain amount at a loss to receive a payment from the manufacturer for paper/web/TV advertisements contingent on including A in the advertisement and possibly even presenting it in a certain way on the sales floor (endcap, front display, etc.)
* Paying $450 per unit for unit (B) which they cannot mark below $599
The goal for the retailer is then obviously to buy as few of the first unit as possible to get the manufacturer payment and then push as many customers as possible to buy the second. The manufacturer is happy because unit A was last year's model rebadged and they could clear inventory and move towards retiring it.
The real top end items are sold under unilateral fixed pricing: you pay $X and must retail it for $Y. Manufacturers have people employed to mystery shop and look for violations. If a retailer marks up or marks down, they are blacklisted. Possibly for all lines, not just the marquee brand - depends on your sales.