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Dan Minor

Four Very Important Letters: IMAP

November 20, 2012

In the furniture industry, we use a variety of important initials to guide our business. There's SMRP (Suggested Manufacturer's Retail Price), or MRP (Minimum Retail Price), or maybe GMROI (Gross Margin Return On Inventory). However, the acronym that is becoming more and more important as we get further into this new day of doing business is IMAP (Internet Minimum Advertised Price).

Why is IMAP so important? First a little history; way back in the day, we had very free market principles in place. Manufacturers would produce products and retailers would sell them. There was price competition to hold prices in check and give the end consumer a fair value, while the retailer would receive a healthy margin. A few people knew about "North Carolina" pricing and would fly in to take advantage of the typically lower price they would receive. Then the 1-800 numbers started popping up and distribution expanded, so people from anywhere in the country could call these numbers and typically get lower pricing on the exact same goods available in their local trading area. This did not sit well with local retailers, and some in the manufacturing community instilled an MRP. The Minimum Retail Price was an attempt to level the playing field. Distribution cleaned up with the promise that if you floor a certain square footage with a manufacturer's product, you would be protected from price shopping and typically be guaranteed a 44% margin. This had good and bad results. It helped retailers all over the country maintain a margin that SHOULD be consistent with their bottom line needs. However, tension was created when manufacturers did not police this policy and consequently, quite a few retailers spent time checking on others, instead of building their own brand.

Internet Minimum Advertised Price (IMAP) has risen to extreme importance due to the simple fact that the overwhelming majority of consumers begin their buying process online. It's no longer a question about whether a manufacturer should be online. You MUST be online, and if you are not, you are throwing away volume.
How do you have an effective online strategy without harming brick-and mortar-retail? By establishing online pricing that is typically higher than what would be found in a brick-and-mortar store (to account for the physical store's higher overhead costs). But don't go overboard - if your IMAP is higher than a keystone, you are in a good place. If it too much higher, you will hinder sales. A solid IMAP policy can also help combat showrooming, because if pricing for products is similar on all retail channels, customers have no way to acquire a lower price.

Transparency in pricing will only grow clearer with the easy access to information on the web, and now is the time for all parties - both retail and manufacturing - to agree that they are in this together. I am in full support of the goals of a group called the Home Décor Industry Accord (www.hdiaccord.org). This trade group is fully behind the integration of retailers and manufacturers in home décor, all under a strong standard toward our industry's future. The HDIA website also has some examples of IMAP policies and articles written about this topic that are very helpful.

Unauthorized sites and price gouging helps no one, and it can all be avoided!