If you are a brand owner, here is a cold, hard truth: if you do not pay attention to the topic I am about to discuss, your business may very well be doomed.
Am I overstating it? I don’t think so. After two decades in the world of ecommerce, I have seen the enormous damage that rampant online price competition can cause. If you are a brand owner, you probably do not need me to tell you that online discounting destroys your valuable offline retail channels where the real branding and education is happening.
Do you need ecommerce? Of course you do. However, your online distributors need to be working with you to help your brand rather than just siphoning off sales from those that are doing the real work to build your brand.
So how do you get online retail under control? Here are some recommendations:
- Understand that more distributors does not necessarily translate to more revenue. Do not accept just anyone as a distributor that wants to sell your products online. A key thing you have to realize is that you don’t need a ton of online distributors; you likely just need ONE that knows how to hit all the important channels. We are big believers in exclusive online distributor deals and you can learn why here.
- Qualify distributors by asking them how they are going to help you. Ask them how they are going to increase your revenue. What they need to tell you is how they are going to sell a lot of products to customers that have never heard of you.
The way prospective distributors answer that question is critical and should eliminate almost all of them. If they are just going to sell products to people that learn of your brand in a local retail store and then go to the internet to save money, that is not helping you at all. Frankly, it is hurting you.
- Design and enforce MAP (minimum advertised price) pricing. Pricing is a big can of worms from a legal perspective but you should be able to enforce advertised pricing. Make sure that online retailers cannot discount below what is feasible for your offline retailers.
Having a MAP policy is worthless unless you enforce it, and if you have many online retailers, you will have to enforce it. Contact us for help with enforcement strategies.
- Beware of gray market/product diversion. Even if you have official online MAP policies, you will likely see your products on sale online by distributors whom you don’t even recognize. What this probably means is that you have distributors who are selling the product to other entities that are not official distributors. Tracking down these entities and shutting them down is complicated but very doable if you have legal help. This is a specialty here at Cobblestone Trade.
- Work with major shopping channels. We would not generally discourage you from keeping your products off important channels like Amazon and Ebay but in some cases, you should. Most of those channels have programs in place where you can either keep your products off entirely or restrict selling to authorized distributors only.
While controlling online pricing is sometimes time intensive and painful, you can see success if you stay on top of it. Almost all major brands take this problem very seriously and you should too. Let us know if we can help.