Only Tilli changes his mind

(Sorry for the inaccurate gender — is there a Tilli? But that’s the way the pun works.)

The online retailer who broke the keystone pricing non-secret secret posted last week (September 20; I only saw it today) that she had received a reply from Tilli Tomas: the company is apparently suspending its keystone pricing policy. Whether this means that we’ll see more variation in TT retail prices, and whether that means that this particular retailer will continue to be supplied by TT, however, are yet to be determined.

Check out the comments: some anonymous poster claimed it was “a bit immoral” to consciously sell at a “much lower” price than one’s competitors. Said anonymous poster also said it was “wrong” to publicize the Tilli Tomas issue, because it may cause other suppliers to think twice about selling her yarn. In that respect, well, it’s certainly not the wisest thing, because there are lots of competing retailers out there; on the other hand, if it’s evident that such a retailer is also successful because her customers trust her to sell at a fair, unfixed price below the MSRP, maybe the suppliers don’t care.

I can understand why a supplier may elect not to supply a certain class of retailer (online vs. bricks-and-mortar or catering-to-fools-with-lots-of-discretionary-income vs. jobbers-catering-to-bargain-hunters): that’s not the same as supplying only those who agree to sell only at a fixed retail price. You only have so much stock to go around; you may choose to have it sold in places that give you the most prestige for your brand, or the stores that you feel are more likely to survive in the long haul (when the big crash hits the knitting market) and invest in supporting their product lines (for example, by teaching classes to ensure a surviving customer base).

In the meantime, Ana mentioned in the comments to the first TT post that she started a blog to track keystone pricing policies to keep the consumer informed: it’s here.

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9 Responses to Only Tilli changes his mind

  1. j. says:

    Well, that’s a shame. My first impression from that article (not having read the decision yet) is that I’m not certain I agree with the theory expressed in the report: that the minimum price promotes competition by allowing small businesses with niche products to compete against larger competitors and their discount products, by offering enhanced customer service. Logically, if good customer service costs more (and it does), then that cost would be built into the price the consumer pays, anyway. Why guarantee a minimum price? I wonder what kind of evidence the appellant had to support this: what value did customers attribute to these services? Were they comparing cheap, mass-produced handbags against high-end products?

    … in fact, I’m almost reading this as a tax on the consumer just to protect smaller stores selling *different* wares than larger discounters. I’d better read this decision before I read too much into the article’s summary.

  2. Kate says:

    The Supreme Court just made a decision today that seems relevant to this topic:

    http://www.washingtonpost.com/wp-dyn/content/article/2007/06/28/AR2007062800858.html?hpid=topnews

    Sadly, probably not what we want to hear.

  3. j. says:

    Because one company does not a cartel make. ;)

  4. Jen says:

    Yarn cartels! Thanks, Violet! That makes total sense. :)

  5. miss violet says:

    Keystoning is a term for the practice whereby a retailer marks up the price to double wholesale. (i.e. Buying a skein of yarn for $5.00 and pricing it in the store at $10.00). It’s pretty standard, and covers the costs of the retailer — rent, utilities, profit, advertising, etc.

    The problem comes in when it becomes manufacturer-mandated keystoning, which implies (and in some cases implicitly states) that they HAVE to keystone. They don’t have the choice of having sales or pricing it at less if they choose. (Usually, charging MORE than keystone isn’t a problem to the manufacturers, oddly enough.)

    If the retailer is required to sign an agreement to keystone, it’s price-fixing, which, strictly defined, is where goods providers decide in advance to keep prices artificially high. (Since the price isn’t dictated by customer demand, but by some kind of mandate, the price isn’t reflective of the actual demand for the product, which is supposedly how the free market economy works.)

    We talked to the justice department’s antitrust division in NYC in episode #12, and the guy there was pretty clear that it probably violates the law in a criminal way. (We gave him the documents we had, and explained the situation. I think he thought we were kind of silly asking about the Yarn Cartels, but he was respectful in his answers, which I appreciated.)

  6. Jen says:

    So, this is probably a really dumb question, but what is the difference between keystone and price-fixing? I would guess price-fixing is when the retailers get together to determine how much something should cost…but, I thought I’d ask the expert.

  7. j. says:

    Sure, the manufacturer does get that choice, but depends on how the choice is exercised.

    On another point: re-reading what was posted on the shopowner’s blog, she said “after charging our accounts and tying up our money for major shipments that we were waiting for, and without even having the courtesy of informing us of their decision until after having received many of our e-mails and phone calls” that TT refused to ship.

    What it doesn’t quite say is what “charging our accounts” means: was it just an invoice, or was money taken from the shopowner? In either case, the fact that the shopowner was invoiced for an order before TT refused to ship raises the question of whether there was a contract in place with that order: if the shopowner made an offer by placing an order, did TT accept the offer by issuing an invoice, and if that’s the case, did TT have the right to unilaterally cancel the order for no stated reason? Should TT have filled any outstanding orders and simply advised that it would not accept any further orders from that shop?

  8. Steph says:

    There is no Tilli Thomas, or at least that’s not the name of the person who makes this yarn.

    I’m ambivalent about this. I think retailers should be able to do what they want with their stock, including discounts, bargain bins (some stuff just doesn’t sell) or even give it away. But manufacturers also get to decide who they sell to. Isn’t that how this whole free market thing is supposed to work?

  9. lorinda says:

    Thanks, TGFA, for discussing this issue. So pertinent with all the buzz from the Simple Knitted Bodice.