eHobbies, Search Marketing and Pricing Restrictions

10/16/2008

Many manufacturers are imposing minimum price policies on online retailers. This affects search engine marketing strategies for online e-tailers like eHobbies in that it prevents them from posting prices on their site that are below those set by manufacturers.

Many online retailers like eHobbies rely on pricing to help them stand out from the competition. In just the past year, the number of suppliers to eHobbies that have imposed minimum pricing policies has gone from just under 20% to almost 75%. Why the big jump? A June 2007 Supreme Court ruling allows manufacturers to have more say in setting minimum prices. Online marketers like eHobbies have felt the effects. Their marketing departments have had to work a lot harder on their search engine marketing tactics to get the site in the top tier of search results.

It’s caused the company to increase their search marketing spending by up to 60% in some cases says Brian Carlevato, a senior buyer at eHobbies. This increase in spending has brought in a 10-15% increase in sales, says Carlevato, which justifies the increase in spending in this area.

Instead of spending more, some online marketers have found other ways to compete in light of this new manufacturer pricing. For example, xtremez.com, an eCommerce site offers additional free items with a purchase in some cases. Or, they may offer a discount says Adam Stites, the president.

Some manufacturers object to xtremez.com’s online marketing strategies, but Stites points out, “They’re going to be left behind if they don’t give us any flexibility to market their product.”

This seems to be the message to all manufacturers from online retailers in light of the new power they enjoy with regard to pricing strategies.

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