Before the proliferation of online marketplaces, brands could be confident in knowing exactly who was selling their products, on what platforms and at what prices. Now, with unauthorized sellers trying to hawk items at reduced — and unapproved — rates, brands are risking damage to their corporate reputations. What’s more, retailers are seeing reduced margins as they’re forced to stay competitive.
Fortunately, there’s a solution: a rigorous and updated distribution agreement, coupled with a thoughtful MAP (minimum advertised price) policy.
“Most brands have a distribution agreement in place,” said Ryan Erickson, VP of sales at Trackstreet, an SaaS platform that helps companies reduce brand and pricing policy violations. “But do they have enough data to be able to specifically call out whether a store dealer can sell their items anywhere on the internet, only on their website or only in-store? Or do they just have a policy that says that they’re an authorized dealer of their product?”
An open policy leaves a brand vulnerable to integrity damage, as consumers question why the brand is pushing for higher prices than the ones displayed on Amazon and other online marketplaces. Brands also might see their valued retail partners choosing not to sell their products if they can’t make enough profit at the lower pricing. Introducing a comprehensive agreement protects the brand, retailers and customer by ensuring a universal price.
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But overhauling distribution strategy is a large task that requires looking at dozens of data points. That’s where companies like Trackstreet and ORIS Intelligence come in, using their software platforms to collate the data into an actionable format. By assessing which products are being undermined by reduced price points — and which have just decreased in market value over time — a company can find out where to target their price protection efforts.
“When you go to a MAP policy, you don’t have to cover your entire line,” said Erickson. “Anything new, anything that’s been heritage to the brand since its inception, anything you’re going to put a huge marketing effort against for that season, those are the things you protect. It’s about protecting the castle, not the kingdom.”
These pricing violations mutually impact retailers and brands, but Erickson believes that it’s the brands that need to be taking the initiative to overhaul their distribution processes. There is a risk of a short-term revenue drop as they eliminate some of their less reputable sellers and crack down on MAP violators, but the longer-term reward is being able to add assortment back to their trusted retail partners at higher protected prices.
Another concern that brands might have is that retail partners won’t agree to more controlled terms, which is why industrywide discussion of these issues is important. The footwear industry is already better positioned than many other consumer goods, as the arrival of Zappos in 1999 encouraged brands to address internet issues much earlier than other industries. However, these policies still need to be updated to address the new generation of online marketplaces.
“If people don’t make the hard decisions now, the decisions aren’t going to get any easier,” warned Erickson. “Take some kind of action — that’s the recommendation I would make to a brand. If you don’t have a policy right now, start small, and then down the road, you can continue to add to this process.”
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