Steve Jobs: T.J. Maxx Not an Authorized iPad Retailer

[Cartaphilus]

In the UK, under its purely municipal law, there is a presumption that retail price management agreements are against the public interest, and therefore unenforceable. The law does, however, provide for the presumption to be overcome by evidence to the contrary, and in the case of publishers and booksellers, vertical retail price management has been held enforceable. The UK is, of course, a member of the European Union which takes a stronger stand against retail price management, and pursuant to the articles of the European Commission, it is their standards that apply to covered cross-border transactions.

In the U.S., there have been swings back and forth through much of the 20th century, but current Federal law (since 2007) applies the "Rule of Reason" to retail price management arrangements, and a retail pricing scheme will be enforced if it is not anti-competitive. The Supreme Court recognized that competition often is enhanced by matters other than price (after-sale support, strong warranty, etc.), and it may well be reasonable to require a minimum price to support an overall more competitive position.

Those who find the public policy aspects of this question interesting may wish to read the now definitive opinion of the U.S. Supreme Court, http://www.supremecourt.gov/opinions/06pdf/06-480.pdf

 

[jafan pit]

Lets face it, Mail on iphone blows when compared to blackberry. There is no security like blackberry has on top of the entirely inadequate mail program.

You can't search well beyond the most recent emails. on a blackberry you can search thousands of recent emails and it just works.

 

[doctor-don]

TJ Maxx isn't selling them at a loss. TJ Maxx however is diluting the perceived value of the iPad. That's something all manufacturers -- not just Apple -- look to protect.

It's exactly why Amazon forces you to put some things in your cart to see the price. Amazon can't advertise a product below Price X, according to their agreement with the manufacturer. If they did, Amazon would be diluting the perceived market value of the product, which would force other resellers to follow suit. This forces the market price lower, and then resellers start putting pressure on the manufacturer to lower THEIR price (to resellers) so the retailers/resellers can maintain healthier margins.

It turns into a race towards the bottom, where a product gets commoditized. Manufacturers try to avoid that at all costs, because they only have a few products where they can sell at a high-margin or premium, for so long, before competition creates a pressure to drive the price down.

Yes, it's a loss leader item.


From tech.fortune.cnn.com-
Piper Jaffray's (PJC) Andrew Murphy has heard that T.J. Maxx's total supply of iPads is about 80 units, which could have been purchased as a loss leader anywhere -- including Apple's own stores -- for $40,000, and then re-sold for $32,000.

"It's obviously irritating to Apple that they're getting used this way," says PJC's Gene Munster. "But for $8,000, it's a brilliant marketing strategy."

And they may have bought them from Target where they seemed to be in good supply yesterday (as well as other days I have visited different Target stores) since most of the 64GB iPads are gone. The economy is doing well when the most expensive (non-3g) iPad is selling out; but it could be they didn't have that many at the start (due to the perceived poor economy).

 

[snberk103]

Yes, it's a loss leader item.
...
"It's obviously irritating to Apple that they're getting used this way," says PJC's Gene Munster. ...

Actually, it probably helps Apple in the big picture. Eighty people get a fantastic deal - and they know it's a special deal, so the real value of the iPad is reinforced. And a whole lot of people, who missed out on the deal, have reinforced the perception that the iPad is not a commodity, and that Apple's msrp is 'true' price. And further, those people who missed out have now 'decided' that they want an iPad, and a fair number will go and buy one at full price. Apple wins in this case. Sold 80 units to TJ's at full price, and TJ's pays to fuel iPad frenzy in their customers. Laughing to the bank.

 

[ericinboston]

I'm certain TJ MAXX ran this by their legal team...

If they are willing to sell the product at a $100 loss, that's their choice.

But it's not a $100 loss because tjmaxx is buying them for LESS than $499 to begin with from their distributor. So maybe they only lose $65 or $75 per iPad. As most have mentioned here the goal is to get people into the stores. I'm sure tjmax only bought a few per store so there will always be the "sorry we sold out" line and the customer will just hang around and buy something.

Even if tjmax did buy them at full price and lost $100 so what? Do the math if they lost $100 per iPad and bought 300 ipads....that's $30k for a killer ad campaign. And if you've ever been to their stores you will notice they never stock more than like 5 quantity of 90% of their items. Do you really think they are going to have hundreds of ipads per store? No way....more like 10-20 at best.

 

[CFreymarc]

I'm sure TJMax is rethinking how brilliant their idea is. But is it really illegal? What can Apple do?

Not much. If T.J. Maxx or other outfits or private individuals buy any product at retail price, they own it. Under Federal Trade Law, there are very little resale restrictions. Also, you can sell it for any price your want, that is as a profit or a loss. T. J. Maxx did a classic loss lead to get traffic into their stores from the iPad "sale." I say it is legal IMO.

 

[bri1212]

it's legal

Not much. If T.J. Maxx or other outfits or private individuals buy any product at retail price, they own it. Under Federal Trade Law, there are very little resale restrictions. Also, you can sell it for any price your want, that is as a profit or a loss. T. J. Maxx did a classic loss lead to get traffic into their stores from the iPad "sale." I say it is legal IMO.

There is nothing illegal in what TJ Maxx did. They paid a price for the item and sold it. There is nothing that stops them from selling things at a loss, and it gets people in their stores. The rumor is they bought 2 ipads for each store, sold them at a loss of 100.00 each, but created a huge advertising buzz and got people in their stores. It is actually pretty brilliant and not very costly. Now if they would only do it with generation 2...

 

[bri1212]

What does this have to do with anything?

Lets face it, Mail on iphone blows when compared to blackberry. There is no security like blackberry has on top of the entirely inadequate mail program.

You can't search well beyond the most recent emails. on a blackberry you can search thousands of recent emails and it just works.

What does this have to do with the price of tea in China? This has nothing to do with TJ Maxx buying ipads. OH, and if you do not like the mail app on the iphone, or ipad, don't buy it, or don't use it. For me it works

 

[snugharbor]

Not true.. I am the Art Director for a Art department that makes grocery store ads.

Soda is not a common loss leader since it's DSD Pepsi/Coke keep close price controls.

I usually see produce and meat used as loss leaders..

--------------------------------------------

Another point... I expect that TJ MAXX just bought up a bunch of the Refurbished iPads and is taking a $50 loss on each to get people in the stores.

That's true: soda/chips not loss leaders but maintained by rack jobbers.

 

[laurim]

That's true: soda/chips not loss leaders but maintained by rack jobbers.

You could be right. I had heard from a guy who worked for a Coke distributor that there wasn't much margin on pop so when it's on sale, it's at a loss for the grocer. I drink a lot of Diet Coke so I thought he could get me a deal on a pallet, lol.

BTW- My grocery store has had Diet Coke 12 packs on sale for $1.79 with a $25 purchase so the price controls for grocers can't be THAT strict

 

[tigress666]

Doubtful since their warranty does not transfer to a second hand buyer. If I were to buy an iPod and then sell it on ebay a few weeks later the new owner would not be covered.

Uh, what?

I had them replace a third gen nano one time that broke and was at the end of its warranty that I bought off of ebay (and I freely admitted it to them too).

 

[mikerr]

Do we all like price fixing ?

Apple products are too often kept at RRP - not sure if its always by agreements with apple - "don't discount more than 10% or lose authorised reseller status"

Obviously good for apple products, but not for the consumer.

 

[bri1212]

price fixing?

Do we all like price fixing ?

Apple products are too often kept at RRP - not sure if its always by agreements with apple - "don't discount more than 10% or lose authorised reseller status"

Obviously good for apple products, but not for the consumer.

My understanding of price fixing, is when two competing manufacturers sell the same type of product and agree to only sell at a certain price, usually to keep the product at an unnaturally higher price then necessary. An example of this would be if Apple, contacted Samsung, and discussed making their tablet computer for sale at a certain price, to keep the price igher so that both companies would make more profit.

However, this is not the case with the Ipad. Most electronic products are given a manufacturers retail price, and you as the retail store, do not have the right to sell at a larger than agreed upon discount. The way some companies get around this is by packaging products and accessories together. This is done by every major manufacturer, from Apple, Sony, Samsung, Sharp, Nintendo, Microsoft, etc... Go check the Tv's in Best Buy, and then check Fry's, and then some other retailers, they will all be the same price essentially. Look at the PSP's or PS3 or the Wii. All are price controlled by the manufacturer. there is nothing illegal about this. By using the term price fixing, your intimating that they are illegally controlling the price, but this is not the case.

 

[iStudentUK]

In the UK, you are contracted to the retailer you bought it from. They are responsible for the product for six years. We have good laws in place to protect the consumer. I find it hard to understand why people never use their rights under laws such as the Sales of Goods Act.

A warranty is an insurance policy. Apple Care in the UK is not a policy from Apple, but a third party insurance company that they are contracted with. Can't remember the name of the company.

Apple are pretty good at repairing out of guarantee/Apple Care products, even when these times have lapsed. Had a power supply and logic board in my 4 year old iMac replaced for free. Sales of Goods Act is your best friend.

Whilst I always love to see people using the Sale of Goods Act to get what they deserve, can I make one small correction to avoid confusion?

The SOGA can offer protection for up to 6 years, but not automatically. The goods should be of "satisfactory quality" and this does not mean everything should last 6 years. The question the judge asks is- how long would the 'reasonable man' expect this item to last? For an iPad easily 2 years (Apple offer Applecare that long) maybe 3 if you are lucky. I don't think an iPad should be expected to last 6 years though.

Remember almost everything you buy is subject to SOGA, and I can't ask my local stationers to replace my black biro after 5 years if it stops working!