Resale Price Maintenance Strategies for Hugo Boss: A Detailed Report

This report examines Hugo Boss's resale price maintenance (RPM) strategies, focusing on the agreements between the manufacturer and retailers regarding minimum prices. It discusses how Hugo Boss utilizes RPM to control pricing, protect brand image, and manage competition. The analysis covers minimum advertised prices, resale price agreements, and the consequences of non-compliance for retailers. The report highlights the benefits of RPM for both Hugo Boss and its retailers, including reduced price wars, brand protection, and enhanced promotional strategies. It also addresses the importance of monitoring retailer performance and the impact of online sales on RPM. The report draws upon various sources to provide a comprehensive overview of Hugo Boss's approach to maintaining price integrity and managing its distribution network. The agreement between Hugo Boss and the retailers when entered becomes binding and the retailers will have to follow the agreement strictly because they would face the consequences if they fail.

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Resale price maintenance refers to an agreement between manufacturer and retailer on the
minimum price the retailer should not charge below. This means the prices for products are
determined by the manufacturer, and the retailers do not have permission to sell manufacturers
product below the set price (Brinson, 2012). Minimum advertised price is the lowest price
which the retailer can advertise manufacturers product. Retailers who enter an agreement on
the minimum advertised and selling price with the manufacturer should be able to maintain the
agreement throughout their business operations.

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Hugo boss has the right to specify the price below which the retailers should not sell the
clothes. The agreement between Hugo boss and the retailers when entered becomes
binding .the retailers will have to follow the agreement strictly because they would face the
consequences if they fail (Brinson, 2012). Since Hugo boss has the market power, he can decide
on minimum advertised and resale prices while giving the retailers incentive in order to
maintain the agreement as well as prevent new entrants from the market. The manufacturer
and the retailers can come to an agreement on resale price (Dailey, Franzen and Schaefer, 2002).
This will prevent stiff competition from the producers and distributors and minimize price wars
among retailers. When the retailers do sale the clothes below the resale prices set by the
manufacturer, it can lead to termination of contracts. Therefore, the manufacturer may end up
not supplying the retailers with the suits.
The agreement on prices reduces problems that can arise between manufacturers and
retailers. Conflict of interest that may lead to retailers reducing the prices for the suits in the
event of increasing sales and attracting more customers is avoided. This can be in the form of
reducing prices for the suits in order to counteract other retailer’s prices and take customers
from the retailers with higher prices for the suits. The brand image of the suits is maintained
when retailers do not sell them cheaper. The cost incurred on display of the products in the
shops should be a burden of the retailer and not the manufacturer or the buyer. Also, the cost
of advertising should not be below the agreed cost with the manufacturer. The customers
should get to know that the particular brand of suits cannot be acquired at any lower prices
(The Hugo Boss Prize 2000, 2000). All the retailers should maintain the advertisements at an
agreed range of prices. In this case, to survive as well as thrive in the industry, Hugo boss needs

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to ensure that the retailers are respecting the agreement by constantly monitoring the retailers’
performance. This eventually reduces brand and price competition among competing
manufacturers. There will be few competing products with the suits since minimum price
required will make the product expensive and of a high quality. The specific retailers will have
exclusive right to sell the suits. The price agreement is beneficial to the manufacturer since it
leads to better contracts and expands territory to carry out their businesses. More retailers will
want to work with the manufacturer as there will be an increased demand for the product. The
agreement can be protective of the brand of the manufacturer and provides the retailers with
exceptional promotion strategies such as advertising (The Hugo Boss Prize 2006, 2006). The
agreement will enable the distributor to recover the cost incurred in promotional activities. The
promotional costs are recovered from the sales, meaning the customer bears the cost of
advertising. By setting the minimum prices for advertising, Hugo boss will protect the value of
the suits as well as protect retailers from fierce competition amongst themselves. Retailers will
not lower or raise the prices as they wish in case they want to increase sales of the suits.
Retailers can compete well at the same time increasing sales of the suits.
If the retailers enter the agreement with Hugo manufacturer, they should abide by the
rules. The agreement can be written or verbal hence binding. It can be a form of policy by the
manufacturer. All the retailers have the responsibility to agree or disagree on the manufacturers
demand. In the event that the retailers violate the conditions, the manufacturer can stop
working with the retailers or take legal action on the retailers.
Whereas retailers need to make more profits, they should find ways that they can attract
more customers without going against the agreement. The retailers can provide shipping

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services to the customers as a way of creating customer loyalty so that they do not affect the
prices of the products.
Online retailers should display the suits with prices in line with the minimum required
prices by the manufacturer. This will allow customers to compare prices for different retailers
and same products before making purchase (The Hugo Boss Prize 2006, 2006) s. This gives
businesses that are small and new to the market fair competition with those that are big and
established.
Hugo manufacturers should be able to deal with retailers who will not follow the
agreement on minimum price and advertising prices. This is because when retailers do not
follow the minimum requirements, they end up damaging the value of the product. Those who
will sell and advertise below the minimum required price will portray the suits as cheaper and
of low quality.
Reduced sales of suits will be as result of retailers selling below the minimum price. This
is because customers will not buy the suits from those retailers who are conforming to the set
minimum price since they can get the same suits in the unauthorized retailers with less money.
Those retailers who will not follow the minimum requirement for prices may sale the suits
below the prices set and attract customers than other retailers. Sales will be reduced in the end.
Hence the retailers who adhere to the agreement get low profits.
The minimum price agreement is beneficial to the retailers. It leads to more profits for
the retailers. This is because it reduces price wars between retailers (The Hugo Boss Prize 2006,
2006). Those retailers who buy in small quantity are supported from being crushed by big

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retailers that order in large quantity. It leads to a good relationship between manufacturers’ and
retailers. Retailers who advertise manufacturers’ products and also those who have good
customer relations product get rewarded (The Hugo Boss Prize 2008, 2008). The agreement
saves on customers’ time in that they will not move around comparing prices since they are
aware that it is the same everywhere for the same products.

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References
Brinson, K. (2012). The Hugo Boss Prize, 2012. New York: Guggenheim Museum Publ.
Brinson, K. (2012). The Hugo Boss Prize, 2012. New York: Guggenheim Museum Publ.
Dailey, M., Franzen, E., and Schaefer, C. (2002). The Hugo Boss prize 2002 : Francis Alÿs, Olafur
Eliasson, Hachiya Kazuhiko, Pierre Huyghe, Koo Jeong-a, Anri Sala. New York, NY:
Guggenheim Museum Publications.
The Hugo Boss Prize 2000. (2000). New York: Guggenheim Museum Publications.
The Hugo Boss Prize 2006. (2006). Ostfildern/Ruit: Hatje Cantz.
The Hugo Boss Prize 2006. (2006). Ostfildern/Ruit: Hatje Cantz.
The Hugo Boss Prize 2008. (2008). New York: Guggenheim Museum Pub.