MAP / Discounters
There is nothing harmless about your retailers competing with each other on price and smart brand owners pay a lot of attention to what discounting is occurring with their products.
Here is the most important thing you need to understand about this topic: rogue discounting will never grow your market share; it simply shifts around the way that the market share is distributed between retailers. Unfortunately, it often shifts revenue from retailers who are working the hardest for your brand to retailers who do not care about your brand at all. Those discounters are just looking for easy sales that come from offering the lowest price. As long as they have that opportunity with your brand, they will hang around, but once the opportunity disappears, they will go missing too, leaving you to try to salvage the damaged relationships with your loyal retailers.
In other words, discounting is a very serious problem that if not addressed can destroy your brand. If you don’t protect your good retailers and brand ambassadors from discounters, they will eventually leave you to find a company that will.
Of course, discounting existed a long time, but the internet’s impact on discounting has been like throwing gasoline on a fire. While in the past, your retailers may have only competed with a few competitors in neighboring towns, they are now forced to compete with potentially thousands of online competitors. And while most of us at some point have walked into a store, noticed a product, and then purchased it later on Amazon at a lower price, the reality is that this kind of shopping behavior is really putting pressure especially on brick and mortar stores.
Practically every well-known brand focuses on this problem, usually with MAP (minimum advertised pricing) policies. MAP policies require distributors to advertise at minimum products. (According to US law, brand owners cannot regulate the price products are sold at but they can regulate advertising.)
Writing a MAP policy is relatively simple but enforcing it can be tedious, especially considering that your retailers may be diverting it to other businesses that have never signed the MAP policy. That is why distributor agreements should address product diversion as well as MAP. If offending retailers refuse to abide by MAP policies after warnings, they should be terminated. Regardless of their revenue, they are not helping grow the brand and in fact are probably doing incalculable harm.
At Cobblestone Trade, we specialize in MAP enforcement. In fact, if we do an exclusive deal with you, we not only agree to abide by your MAP policy but we take on responsibility for enforcing it if other retailers manage to get their hands on your products.