Managing how your products are sold on the Marketplaces.
Managing how your products are sold on marketplaces is a complex dilemma. The dynamics of marketplace sales channels like Amazon, eBay, and others, constantly put pressure on the value of products and ultimately the value of Brands. The Brands original wholesale partners set up to service specific local markets are no longer competing with the account across town, they are now competing with accounts on a global scale. This increased competition and Seller anonymity is driving price pressure on these products, especially when service levels between sellers is consistent and the main differentiator is price.
Ask yourself, since the introduction of online marketplaces, has your organization created or altered its’ sales policies to regulate how products are sold online? If Brand Value or Brand Equity is important in the buying decision of the products you make, the answer to that question is most likely, yes. If that is the case, ask yourself four more question.
What are you doing to enforce your e-Commerce policies?
What is your ideal scenario regarding marketplace distribution.
Where do you fall in your level of commitment and expertise to solve this problem?
a. You do not know where to start to manage your distribution channel to eliminate disruptive sales.
b. You know you needed to do something; your customers expect you do something. You are resigned that marketplaces will inherently disrupt your product offers and there is only so much you can do to control them.
c. You will do anything in your power to control distribution and not allow unauthorized 3P sellers to hijack your Brand Value.
4. How are your efforts working?
If Brand Equity is important to your organization, you are likely using a marketplace tracking service, but what are you doing with that information? How are you using it to remove unwanted sellers and protect product values? Often, Brands are in a position where they can enforce their policies against their known accounts, but in many cases that is the tip of the iceberg for what is being offered.
Factors for success
Understand what the tracking company can and cannot do for you. There are a lot of good tracking companies and each approach the situation differently. They provide some fantastic tools and often, tremendous resources to help you use the information that they provide to manage grey market issues. It is important that you understand that their primary job is to track marketplace activity and provide you with that data. In many cases they provide seller information and tools to communicate with the seller. But even the best one will not give you the final piece of the puzzle to solve the problem.
Understanding the differences between how you can hold sellers and your wholesale accounts responsible to your policies. When confronted with a Cease and Desist, many sellers will stand behind the First-Sale Doctrine, in this situation, “it is generally legal for an individual to resell a trademarked item after it has been sold by the trademark owner in an authorized sale, even if the resale is without the trademark owner's consent.” 1 While a wholesale partner, would have consent, a company’s sales policies or terms and conditions usually specify where the resell of the products purchased from the company are allowed to take place. If a wholesale partner is authorized to sell on a marketplace, many brands have a Minimum Advertised Price (MAP) policy to adhere to and consider marketplace listings as advertised prices. The differences between these two relationships make it very important to identify how sellers are obtaining product.
Digging into all the data, not just the tracked data, but the data your company has. It is likely 10-15% of your distribution channel is responsible for more than 90% of your disruptive marketplace sales. Use all the data available to you and make the process of managing 3P sellers a significant piece of the job description for someone in your organization. Whether it is part of the responsibilities of a coordinator to work with Consultants and Agencies who specialize in this work or ramping up a team to tackle this internally, protecting Brand Equity should be a high priority.
Addressing the problem at the product source. The longer a product has been away from your distribution center and the more times a product changes hands, the less control Brands have over how it is sold on marketplaces. The Counter Diversion approach focuses on where the product originated, looking at economic factors to analyze the listing itself, proximity, and assortment probabilities. It will inform you of what accounts immediately turn to marketplaces to sell their inventory, which accounts are liquidating product through unauthorized 3P Sellers and paint the complete picture of each tracked seller as early as possible to empower you to address distribution issues.
Tackling distribution issues at scale. Cleaning up marketplace distribution can be a monumental effort. Often, authorized or known accounts are put at a competitive disadvantage against unknown sellers, who think that they are free from policy enforcement. Having a process to organize and quickly address seller behavior, whether they are known to your brand or unknown is vital. Visit www.counterdiversion.com or email email@example.com, if you need help in this area or simply a consultation that you are taking the necessary steps to address your marketplace distribution goals.
Take Action. Whichever way your Brand decides to connect the dots from shipping product the first time into the market and how unauthorized 3P sellers are getting that product, come up with a plan and a level of comfort you need to have to either confront or stop shipping wholesale partners suspected of consistently supplying unauthorized 3P sellers with product. If you can protect your product values, your better wholesale partners will thank you with more shelf space.
1 https://www.lexology.com/library/detail.aspx?g=8dabcfa9-596c-43c4-a2b5- 3122cfbd8b2e#:~:text=Pursuant%20to%20the%20first%20sale,without%20the%20trademark%20owner's%20cons ent