Internet dealers are under attack by wig manufacturers. They are receiving complaints from wig salons that potential customers are entering salons, trying on various wigs and then making the final purchase from Internet dealers. This act is harmful to all wig dealers and also affects consumers that do not engage in this behavior.

Salons are paying a stylist/employee to assist potential customers by providing a hands-on personal consultation with that customer, in full expectation of being able to pay for that employee’s time. Additionally, the salon owner needs that customer's purchase to pay for their retail facilities and overhead so they can stay in business.

Internet dealers are being harmed because manufacturers are under pressure by the wig salons to force the Internet dealers to maintain certain minimum price levels. This is supposed to result in fewer customers lost to Internet dealers. Well anyway, that's the theory. We believe that salon sales have not picked up as a result of imposing minimum price levels. If that is true, then imposing minimum pricing on Internet dealers is not the solution to salon's complaints. Salons need to figure out what the real problem with their sales and stop blaming Internet dealers.

We feel that imposing minimum price levels are unfair to Internet retailers because the prices the manufacturers are forcing us to post are higher prices than salons ultimately charge. The services a salon can offer are different in many ways that we can provide. A hands-on consultation is a service only a salon can provide.

The services we can provide do meet many customer's desires much better than a salon ever could. Some of those being up-to-date product offerings not shown in the catalogs. Customers can shop 24 hours a day. Our online catalog changes often, and salons can't keep up with the pace of the changes, nor can a salon stock all the choices we have on our website. We can respond to rapid demands for trendy styles because of popular movie releases etc. There may be only a few weeks to meet the demand surge for many trendy styles & colors, after that the demand will not be there.

Another complaint being made against Internet dealers is that by posting competitive prices, they are devaluing the "Good Name" of the brand and giving potential customers the idea that their products are of lesser quality than other brands that have higher prices. Some manufacturers have even instructed their wig salons to lie to potential customers that the wigs being sold by Internet dealers are inferior in quality to the wigs being offered by the salons. The claim is that wig salons are being given hand-picked premium-quality wigs from the factory while Internet dealers are being given seconds, defective and even used wigs. This lie was deemed necessary by manufacturers to give salons an edge in the wig business.

Some wig manufacturers have even gone to the extreme and imposed fines against Internet dealers that sell wigs below the manufacturer forced minimum price. Here is one formula being used: If an Internet dealer offers a wig for $50 below the minimum price, then 3 times that will be added to the cost of the next wig purchase by the Internet dealer or $150 increase in price! Other manufacturers simply say they won't sell wigs to the Internet dealer if they don't abide by the minimum price requirements.

THE FTC POSITION:
After receiving letters from several manufacturers demanding we raise our prices to their "suggested minimums" -- some from legal departments, some informal from the home office -- we contacted the FTC (Federal Trades Commission). We were told the following...

(paraphrased)

"The FTC takes seriously matters that harm consumers. Basically, a supplier or manufacturer cannot impose a minimum price structure or fine on a retail business unless the supplier or manufacturer is paying in whole or part for advertising of that product in a written agreement by both parties. A minimum price may also be imposed if the retailer is a franchise. (It is more involved but that is the basis behind their laws.)

"It should also be noted that minimum retail pricing requirements are generally seen as harmful to the entire supply chain from manufacturer to consumer. The FTC is only concerned about the consumer. It would seem the suppliers are not allowing natural market forces to dictate pricing levels in the supply chain. Higher prices to consumers mean fewer sales for retail businesses. Fewer retail sales can ultimately only hurt the suppliers and manufacturers. It is a wonder why they would try to impose policies that would prevent sales of their products between retail stores and consumers.

"Although there seems to be serious issues with the legality of what the wig manufacturers are doing by requiring minimum price levels (although those concerns appear to be easily remedied) we [the FTC] have neither the manpower nor resources to pursue anything but the largest cases at this time [i.e, Enron, Martha Stewart, Global Crossing, etc.]. We advise that you seek legal counsel on your own to remedy this issue."

THE PROBLEM:

Regardless of the fact that wig manufacturers have hired lawyers to create demand letters to intimidate Internet dealers, every legal case that has gone to court has had lawyers on both sides. Half of the lawyers are always wrong. They may interpret the law incorrectly, attempt to apply a law that doesn't apply to the case, or twist the intent of the law to apply where it does not.

One of claims is that Internet dealers have lower overhead costs in their businesses compared to salons. This might be true in some cases, but is clearly not in others. The image that salons have is that ALL Internet dealers are running their businesses from their garage. By eliminating the cost of the retail building rent, utilities, and employees, the Internet dealers are able to charge less for the same product. It is true that many (even some large) Internet businesses are run this way. They take orders over the Internet or by phone, and have manufacturers drop-ship directly to the customer. This is standard practice for those types of Internet businesses. However, not all Internet businesses are run this way. Internet businesses that choose to have more control and maintain an inventory need to operate differently. Simply put, they do not have items drop-shipped to their customers. They order from the manufacturer and have it shipped to their place of business, where it is then boxed and shipped to the customer. This way, items from several manufacturers can be combined into a single order to be shipped in one box, saving the customer on shipping costs and ordering hass les. This is not possible with drop-shipping as the customer pays for each wig ordered from separate manufacturers individually.

SOLUTIONS:

What is the easily remedied solution that the FTC was referring to above? First, wig manufacturers should immediately stop drop-shipping. This will force (garage run) Internet dealers to have product shipped to them first before shipping it on to the customer. This will have the effect of requiring a more substantial order-processing facility for those Internet dealers. Therefore, they will incur similar costs to many retail salons.

There are many possible solutions that would resolve problems.

1. Salons could institute a consultation fee for customers who wish to try on a variety of wigs during that visit to the salon. This fee would be paid up front, say $35. Then if a wig is actually purchased at that time, the $35 would be credited toward the price of the purchase. This would help pay expenses and prevent wasted time if the customer decides not to purchase, and if they do purchase there the customer is not out the cost of the consultation fee. For the ACTUAL customers there is no real fee to pay because their final purchase price is unchanged. The cost is only incurred by NON-CUSTOMERS that have chosen to use the services of the salon and not make a purchase.

2. Manufacturers and Suppliers could offer wigs in the same collection under 2 different brand and product names. Salons would only be able to sell Brand A and Internet Dealers would only sell Brand B. Salons customers would be unable to find Brand A wigs on the Internet and would be only able to purchase them at the salon. Internet dealers would be restricted from any reference to Brand A on their websites. Salons would be discouraged from mentioning Brand B so customers would not be able to make the connection between the brands.

Salons have different needs than do Internet dealers. Salons must have catalogs available for customers to look through. Traditional catalogs would be available for the salons for Brand A only. Internet dealers rarely need catalogs but do require digital images, and style and color information, to put on their websites. So, Brand B would have no printed catalogs available, but would have the product photos made available for download from a manufacturer's website, or on a CD etc.

Internet dealers also have the the need of JPG files for the master color list swatches as well. To quickly add collections or update websites, Internet dealers need style information in Excel file format. For each wig it would contain the wig name (Joan), product# (235), brief description, fiber type (human hair), cap size (petite), cap construction (monotop, hand-tied), shipping weight, available color codes, lengths of the crown, nape, sides and bangs, etc.

A manufacturer would, for inventory purposes, have wig styles numbered instead of named. When a salon orders Brand A, Jane in color 4, it would be item 235, color 4. The Internet dealer would order Brand B, Kimmy, color 4 and would get the same item 235 in color 4. Additionally, Internet dealers don't really need the fancy packaging that many manufacturer's use. It just adds to the cost. The fancy box is never shown on a website and doesn't affect the actual purchase. Inexpensive plain white boxes or plastic bags with a printed label are fine for Internet sales. After all, the customer is just going to throw it away in 5 minutes.

For Internet dealers, the price list could be just a spreadsheet. There is also the need for a master color list containing color codes and descriptions in Excel format. Internet dealers would then have the tools to put new collections on their websites with much less effort than is currently done and be able to respond to rapidly to short lived trends.

Internet dealers also have the need for live or semi-live manufacturer inventory information available for download on a regular basis in XML, Excel or CSV file format. This allows Internet dealers to display for each item in a description, things like "This item usually ships within 2 to 4 weeks" or "This item is temporarily back-ordered until 11/15/07". Currently, no wig manufacturers have this information available online. It is causing countless calls back and forth between Internet shoppers and Internet dealers, and between Internet dealers and manufacturers. Consumers are expecting this information to be available in real time on websites NOW, not in 5 or 10 years.

Prices vary according to the demographic market being served. For those wig salons in big cities in high-traffic, high-overhead locations, they must be mindful that their location commands higher pricing, after all, that is one of the reasons they opened in that location in the first place. Wig salons in smaller towns and poorer or rural areas cannot command such high prices and must locate in less expensive facilities and offer wigs at lower prices. Internet dealers with order-processing facilities are going to follow more rural ways of doing business except without the retail store front and with a much larger order processing area.

OUR POSITION:

We simply cannot put our business on hold and pursue a lawsuit against each and every supplier that is imposing these unfair minimum prices to Internet dealers. It would be very costly and time-consuming.

Some prices posted on our website reflect mandatory minimum pricing requirements set by that manufacturer for Internet dealers.

We have identified those brands in the description of that brand. Click on a brand name in the left menu of our main website. The last paragraph of the description at the top of that collection will state if there are minimum price levels in effect on that brand.

If you wish to pay the lower price we would normally be posting on a certain item, please contact us and we'll see what we can do for you.

We are allowed to sell products at any price we wish. We simply can't advertise these prices on the Internet for those brands who are requiring us to post their "suggested minimums".

The manufacturers we are aware of, who are currently requiring Internet dealers to post the excessive minimum pricing are as follows:
Rene of Paris
Noriko
Amore
Louis Ferre
Wig Pro
Tony of Beverly
Jon Renau
Henry Margu
Raquel Welch

The good news is that we have many other brands on our website for which we can post competitive prices, and there are still many other wig companies whom we have contacted, and have informed us that they are not planning on implementing these unreasonable minimum pricing policies now or ever. We are working to bring you these brands in the future, so we can continue to offer our customers the best value for their dollar.