Jan 8, 2007
This is from the Salt Lake Tribune:
How Provo Craft ended up on loyal customers' 'naughty' listThe unkindest (Cri)cut of all
Mike Dolan, a scrapbook-store owner in San Antonio, is urging a boycott of Provo Craft, maker of a contraption called the Cricut. And he's looking for a good slogan to put on T-shirts, buttons and armbands for the upcoming Craft and Hobby Association winter show in Anaheim - and, we can presume, the cover of a nifty mini-book about the revolution. I don't know if a boycott is in order, but I do like the idea of cranky scrapbookers staging a public protest. And so, in support of his cause, I offer the following catchphrase for use on bumper stickers or buttons or whathaveyou: "Provo. How low can you go?" It's been a favorite of Utes fans for years. But it also sums up the story of how one wholesaler, overwhelmed by the popularity of its product, double-crossed its most loyal customers and now is paying a price.
In June 2005, Orem-based Provo Craft introduced the Cricut, a portable machine that cuts letters and shapes that come on individual cartridges purchased separately for an additional charge. As is often the case, the product was unveiled at a craft show and at a discount to small retailers who placed orders on the spot. Instead of paying $150, retailers attending the Craft and Hobby Association show in Chicago got the machines for $135. The suggested retail price was $299. There were some caveats: The machines would not arrive in stores until January 2006 - after Christmas. They couldn't be sold on eBay or by other unauthorized dealers. And though stores could sell them for any price, they could not advertise them for less than $249. Violators, Provo Craft vowed, would be cut off from carrying Cricut products.
The small retailers saw the minimum advertised price (MAP) as a good thing, a tool to prevent "discounters" from undercutting local scrapbook-store owners and a way to protect the Cricut brand. (It's tough to argue a product is worth $250 if you can buy it for $150 at Wal-Mart.) Dolan, a banker by trade, says Provo Craft representatives assured him and other small retailers that the machines would not be available in big discount stores. So he ordered 50 and, at a subsequent trade show, requested several more, figuring he could sell them for $199 and still make a decent profit. The orders streamed in, and the double-dealing began. The machines didn't arrive in January as promised. In fact, many independent dealers didn't get their orders until October 2006 - a year after they placed them. Yet QVC had machines - in April - and they were bundled with a free cartridge worth $99. In May, just before National Scrapbooking Day, they appeared in Michaels craft stores, which permitted customers to use a 40 percent off coupon. By Thanksgiving, Wal-Mart and Target were selling them for $179. Customers were furious that they had to wait nine months for a product which, by the time it arrived, was available elsewhere for less than what it cost them and, in some cases, for less than what retailers paid. Dolan bought Cricuts from his competitors in an attempt to satisfy some customers. But he ended up giving a lot of refunds, he says.
To make matters worse, chains like Michaels got around the MAP policy by boasting of discounts "too low to advertise." Meanwhile, the Web retailer www.addictedto scrapbooking.com (ATS) was penalized for telling customers a discounted price would be revealed once the Cricut was moved to the "shopping cart." In its response letter, the owner of ATS called the company's tactics "disgusting" and "utterly un-American."
Provo Craft won't disclose which companies have been reprimanded, but says it treats all violators equally. "We must, at all times, unilaterally enforce this policy regardless of the size of the retailer or their placement in the marketplace," communications director Cathy Davis wrote in response to complaints. Davis also emphasized that the MAP is an advertising restriction, not a pricing policy. As for why Provo Craft didn't warn independents that the Cricut would be sold at large discounters, Davis said the "timing implementation" of entering the mass market took the company by surprise. But she offered no explanation of why discounters were given priority in shipping, saying only that demand was stronger than anticipated.
I'll admit, it's hard to feel sorry for small-store owners who claim to care about their customers but have no trouble charging what the market will bear - until, that is, the market gets more competitive. And, as someone who routinely uses those Michaels coupons and rags on local scrapbook stores for not offering more incentives, my sympathy is with the consumer.
But the issue isn't whether Wal-Mart should be able to buy in bulk and offer steep discounts, or whether Provo Craft should be able to sell its products in as many stores as possible. That is just capitalism. Small retailers accept this, and they are pretty savvy when it comes to competing with big-box stores. They realize that their primary customers - avid scrapbookers in this case - won't go to Wal-Mart or Michaels to save 50 cents on a pack of brads. But they will go there to save $50. Which is why the boutique stores like Dolan's Scrapbook 911 in San Antonio would not have loaded up on Cricuts if they hadn't been assured, or at least had been warned, about their availability in discount stores.
I doubt Provo Craft set out to deceive local scrapbook stores. But it wouldn't surprise me if some of the big stores placed one-time orders and advertised them for bargain prices because they had no intention of reordering and therefore didn't fear getting "cut off." By selling to discount stores in the first place, Provo Craft devalued its brand, exactly what it hoped to avoid with a minimum advertised price. By burning its best customers, the company also sullied its good name. If Provo Craft had any sense, it would find a way to right this wrong. A good start might be for company representatives to show up at the Anaheim trade show with their own buttons, saying simply, "We're sorry."