The retail marketplace has gotten more complicated with the rise of e-commerce. People have become very savvy at using apps and search engines to compare prices and brands in order to find online bargains. Competing sellers are also adding to the pressure by using technology to spy on competitors. These activities are bad for your profit margins and damage the ecosystem between resellers.
It takes more than simply monitoring the price activity on major retail sites to prevent your price from going too low in the market. You need to develop a plan with various strategies for minimum advertised price enforcement in order to keep your profits from plummeting.
The internet is a powerful way to scale up sales, but it comes with some risks as well. Major marketplaces like Amazon are not usually the first ones to drop below the minimum advertised price. It’s often a smaller reseller that does it first, and it could be one that you’ve never heard of. If this lowered price gets matched by major market platforms, your cash flow could be in a lot of trouble. Businesses often don’t realize how much e-commerce activity can impact their pricing structure until it’s too late.
On average, a brand has 77 or more sites that are selling its product. Because of this, 23 percent of these products end up plummeting below the minimum advertised price (MAP) point. This is common, especially with electronics which tend to fall up to 17 percent below the MAP. About 80 percent of the resellers for electronics are not even authorized. They tend to be individuals who sell through major marketplace platforms such as Walmart, eBay, and Amazon.
Another sector that is hit big online is housewares that see 20% of products going below MAP. Outdoor products have a very high average number of resellers at an average of about 210 per brand, so they’re also hit hard by online price busting. If the brand doesn’t create a solid stance about its pricing, authorized resellers can become belligerent on this issue.
This hurts the communication between the brand and the sellers, and it can distract sales teams from concentrating on moving the products and from taking on new products from the brand. To prevent this problem, brands are beginning to create MAP policies for minimum advertised price enforcement. By doing this, profit margins are protected, and unauthorized sales are curtailed.
Steps to take
First, you need to roll out your MAP policy to let sellers know what’s not allowed. Include price gaming tactics that involve coupons, in-cart discounts, and other gaming strategies. Point out that these tactics are not tolerated.
Use software tools to monitor the entire web. You have to check a lot of websites and sellers. Thoroughly scour the large online marketplaces.
Look for unauthorized sellers, and thin the herd. Build your brand with trusted sellers, and make sure they’re getting all the business. This also helps improve your brand image and keeps your pricing more stable.
Online selling has become the mainstream marketplace for many products, and this trend will continue to rise. The action you take to enforce your pricing is key to attracting the best quality sellers. Your prices only remain stable when you enforce them.