Chasing IMAP

How brick-and-mortar showrooms and their champions are engaging new tactics to fight the IMAP (and UMRP) fight. 

Alison Martin
09/05/2018
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Most consistent marketgoers would describe the summer show scene as sleepy, but for lighting retailers who attended the first meeting of the Facebook group Lighting Showroom Coalition at the new SMART Center in Dallas, the summer market snapped out of its haze when the subject of Internet Minimum Advertising Pricing (IMAP) and Unilateral Minimum Retail Price (UMRP) policies came up.

“It was one of the first times that I’m aware of that a whole bunch of random showrooms and manufacturers — not preordained who’s going to be there — got together to talk openly about some things, so it was an interesting discussion that I learned a lot from,” recalls Lisa Dixon, CEO at Pace Lighting in Savannah, GA, and the founder of the Facebook group.

Everyone came ready with an opinion about IMAPs and UMRPs, and some retailers wore UMRP badges around their necks. The lively discussion brought comments from showrooms of all sizes and in all regions of the country, and for Dixon, it was comforting to know that businesses of all revenue sizes were facing the same problems with internet retailers.

Between March 2016 and 2017, online sales of lighting and ceiling fans totaled $2.5 billion as online sales of home improvement products hit almost $11 billion, according to NPD Group. In just one year alone, online home improvement sales grew by 34 percent, reaching $20 billion, says NPD’s latest research. 

Whether they compete online or not, lighting showrooms face an uphill fight against online players who go below IMAPs and UMRPs. They feel the effects when they have to price match their online competitors and see their margins drop, and when manufacturers don’t respond to messages about IMAP violators or inform them about IMAP holidays, retailers feel like no one is listening.

But the fight against IMAP and UMRP breakers involves far more than just finding a lower price on a website, and it’s not as easy to identify exactly who broke IMAP first. While both sides face significant struggles against IMAP breakers, a little understanding and better communication could go a long way in building successful partnerships going forward.

Internet detectives

Richard Spicer, Vice President of Marketing and Sales for Pacific Coast Lighting, hasn’t had a showroom at Dallas Market Center for years, but he heard about the conversations in the SMART Center. Over the years, Pacific Coast Lighting has earned a reputation for maintaining an aggressive IMAP policy, and though manufacturers cannot legally dictate pricing — especially after a retailer has bought the product — they can refuse to sell to certain retailers, which Pacific Coast has done.

Spicer says the company does very little business with pure-play online retailers and instead focuses on brick-and-mortar retailers who have an online presence. It can be hard to turn away potentially large accounts, but he says the company sees the future in brick-and-mortar retail, and that’s where it plans to keep the focus.

That doesn’t mean Pacific Coast relaxes its IMAP policy. 

“We put a lot of energy into our policy,” Spicer explains. “We send out crawlers on a regular basis. We spot check.”

Not long ago, Spicer and his team divided the customer service department and started a new e-commerce division with four employees. Part of their responsibility is to spot check customer websites and other marketplaces such as Amazon. Pacific Coast doesn’t sell directly to Amazon, but some of its customers sell products as a third-party retailer on the site. On the one hand, the company doesn’t have to police Amazon, but not every Pacific Coast product on Amazon comes from a reputable buyer, and that’s where policing IMAP starts to get difficult.

Justin Rychak, President at internet account management company mySamm, knows all about unreputable sellers on Amazon, and he says they can be difficult to catch and report. One of Amazon’s global marketplaces gets about 3,000 new sellers every day, a recent Bloomberg report says, and these sellers are not required to provide a phone number or direct contact information on their Amazon storefront. Many of these sellers fall into one of three categories. Some are existing accounts working under a different name so as to break IMAP and hide their identity from the manufacturer. Some are unauthorized sellers outside the distribution channel. Finally, there are the rogue sellers who create problems for customers (such as stealing their identity).

For retailers masquerading under a different name, the only way to catch them is to buy the product, trace the return address and match it to a retailer in the manufacturer’s database. Spicer has had to do this when Pacific Coast products ended up on Amazon below IMAP, and the company found it was a buyer. For unauthorized sellers, there’s not much that manufacturers can do to stop them without a name and address.

The problem then becomes much bigger when other websites pick up on an IMAP break, and suddenly a few hundred IMAP breakers become a few thousand. Rychak’s company monitors over 20 million URLs on a daily basis looking for IMAP breaks, but each company has its own policy for when it sends out crawlers. Spicer says it costs money each time Pacific Coast sends out a crawler. On the weekends, Pacific Coast didn’t send out crawlers, but IMAP breakers got wise to the game and would lower prices over the weekend and then bring them back up on Monday morning. Now crawlers go out on the weekends, and those breakers have moved on.

“If people know that you’re watching,” he says, “they’re going to go do it with other lines that they think are not watching as much.”

The weekend crawlers fixed one problem, but Spicer says some breakers have gotten even more creative — and high-tech. Not long ago, a Pacific Coast brick-and-mortar buyer in a small trading area called Spicer and angrily asserted his local brick-and-mortar competitor was breaking IMAP on every single item. Pacific Coast had regularly scrubbed the competitor’s site, and thus far, nothing had popped. As he was speaking with the irate customer, Spicer pulled up the competitor’s website, but every single price appeared to be meeting IMAP.

The buyer then sent Spicer a screenshot of what he was seeing, and none of the prices matched what Spicer was seeing on his screen.

Turned out, the competitor’s website monitored the incoming IP address and would show different versions of its website depending on where the IP address was coming from. If the IP came from inside the trading area, the user saw a price below IMAP. Anywhere else, the site would show an IMAP price.

Spicer called the competitor, and the competitor never tried to deny it and insisted the below-IMAP price was necessary in order to compete. In the end, the competitor took all Pacific Coast products off its site, but it still remained a customer of the brand. Had the neighboring buyer never contacted Spicer, it’s unlikely he would have ever found out about it.

“The games are just getting more sophisticated,” Spicer says.

Come to the table

Dixon had no idea websites could redirect an IP address in such a way in order to hide an IMAP break, but as she sees it, the way business has been done between manufacturers and buyers needs to change.

It may be that manufacturers become more flexible in selling products, recognizing that one size no longer fits all showrooms. Dixon would like to see manufacturers provide a “menu of options” that would allow her to pick buying options that would work for her showroom, forming more of a partnership rather than a take-it-or-leave-it transaction. 

“It always has this feeling of the terms of sale haven’t changed since 1975, but the world has moved on,” she says.

Rychak sees the best practice that manufacturers can follow is to have an authorized dealer agreement, an IMAP policy and a warranty that applies only to products purchased by authorized dealers. The authorized dealer agreement requires dealers to maintain specific online standards and disclose their websites and web names. They also need to hold IMAP breakers accountable by having and enforcing consequences. Additionally, he says all manufacturers should consult an attorney when putting together their policies so the documents clearly explain expectations and work together to maintain a healthy online channel.

“Manufacturers who are using technology platforms like ours are proactively working to manage pricing violations and crack down on rogue sellers,” Rychak says. “It is not easy in the internet marketplace where sellers have a dizzying array of identities and cunning strategies, but we work with manufacturers every day who are deeply committed to their accounts and a healthy internet ecosystem.”

To Spicer, policing IMAP is just a cost of doing business now, and companies that aren’t policing or holding breakers accountable will likely lose business. Dixon has already dropped lines because of poor IMAP policies, and she’s not the only one.

As internet sales continue to grow, more and more showrooms may drop brands with poor policing practices, policies and communications. Dixon herself would like to see more manufacturers talk about their policies and explain what they’re doing to go after IMAP breakers. She’d also like to be informed about IMAP holidays and have knowledgeable lighting representatives that can keep her updated on holidays and help when she reports IMAP violations.

“Sometimes you don’t hear back,” she shrugs.

Breaking IMAP represents far more to Dixon than just a loss of revenue. It also causes a poor customer perception of her showroom. Most customers know nothing about IMAP policies. They just see one price lower and one higher, and even if the showroom matches the price (as Dixon’s does), the customer often walks away thinking the showroom is just trying to squeeze out some extra money from unwitting customers.

“It’s probably the most difficult thing to combat, even if it’s just a few dollars,” Dixon explains. “Once that idea is in somebody’s head, it’s really hard to counteract it, which is why there is all this talk of selling your service and your experience and all your qualifications and making people understand why there’s so much more value in buying from you than online. But honestly — very frustratingly — when it comes down to dollars and cents, those seem to rule over any talk about what experts we are.”

Next January, Lightovation may be buzzing once again, and buyers and manufacturers will likely be sitting down in showrooms for a tough conversation.

“None of this stuff is easy, and a lot of it is uncomfortable,” Spicer admits, “but you have to stand by your word. You have to stand for something.”

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