To Stop On-Line Sales From Undercutting Dealers

Selling IP cameras on-line has become one of the hottest and most controversial industry practices. To protect their dealers, ACTi is taking steps to restrict on-line advertisement of their products for less than MSRP. This is a key element of their Authorized Distributor Partner program. It is likely to be well received by dealers but also presents some risk to ACTi's competitive positioning.

For almost all IP camera manufacturers, an increasing problem is end users finding lower prices on-line than provided by security dealers/integrators. Basically, an on-line seller buys volume from a distributor at a significant markup. The on-line seller than applies a minimal markup and adverises it on their website at prices significantly lower than MSRP and often nearly as low as the price dealers pay.

This creates problems for the integrator and the manufacturer; The integrator, obviously, because it risks losing the sale. For the manufacturer, the risk becomes increase support costs for installation and maintenance. As such, this program reserves the right to terminate warranties for unauthorized sales (like on-line sites selling below MSRP). By doing so, ACTi will support and protect its dealers against being undercut by on-line sales.

Requiring on-line sellers to advertise at MSRP is likely to cause ACTi to lose on-line business. For buyers who want to buy on-line only, competitors who allow on-line sellers to advertise at significant discounts to MSRP will gain a significant cost advantage. To the extent that product purchasing moves on-line, ACTi's risk increases.

On the other hand, ACTi is likely to strengthen its position with security dealers. Security dealers will value the protection and lower risk of losing a large deal to on-line sales. Given that ACTi's go-to-market strategy is firmly focused on dealers, this should help support that strategy.