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on January 28, 2016 by Katie Ervin in Uncategorized

Are Resellers Trashing Your Brand and Killing Your Margins?

These days, many manufacturers use resellers. Working with resellers can be an excellent way to get your product to more customers. Unfortunately, with every reseller you add, there is further chance of a tarnished brand image and margin depletion.

 

If you’ve gotten to the point where managing your resellers feels like herding cats, you probably need to rethink your strategy. To put it another way: cats are fundamentally untrainable and enigmatic creatures; the same should NOT be true of your resellers.

 

Like most things in business, there are some ways to head off problems. And of course, prevention is much easier than damage control. This blog post will talk about some of the common pitfalls, and how to head them off. In the future, we will have a guest blogger who will talk more about reseller clean-up.

 

Drops in pricing can cause two things…

 

When a reseller drops a product’s price, a manufacturer will be negatively affected in two ways:

Brand image: This is most crucial when you’re selling a premium brand. Premium brands rely on a sense of quality that can be damaged when the price on a product keeps changing. When a reseller drops that price, customers may begin to see the item differently. Consider how differently you would see Apple products if their price was constantly fluctuating.

 

Margin depletion: Even for the less premium brand, price-dropping can be problematic. Chances are, you sell a product at a given price for well thought-out reasons, most of which hinge on profit. If a reseller drops the price too much, then you will be forced to drop the price of your items in order to maintain the Amazon Buy Box. Plus, customers may begin expecting, and waiting for, lower prices.

So, even if you aren’t a premium brand, make sure you develop an MAP agreement for your resellers.

 

In order to head off price fluctuations, we always suggest manufacturers use Minimum Advertised Price (MAP) agreements (see a sample MAP Agreement here). Since price fixing is often against the law, MAP agreements deal only with the advertised price of an item. In a nutshell, a MAP agreement is a contract that holds resellers accountable. According to the MAP agreement, if a reseller advertises an item below the agreed price, the manufacturer will cease business with that seller.

 

If you remember a time when you had to “add to cart” on Amazon in order to see a price, this was caused by the advertised price rule. These days, this is less common, since “add to cart” seems to lessen the chance at the Amazon Buy Box.

 

Of course, even with MAP agreements, there’s always a chance of leaks in the supply chain.

 

Sometimes, you may discover a reseller you’ve never heard of selling your product, damaging your brand in exactly the ways you tried to head off with the MAP agreement. What this often means is that a reseller has either created another brand to sell under, or is reselling your items to someone else who is, in turn, selling it below MAP. Unfortunately, the damages that can be done by these instances are just the same as discussed above.   

 

So, how do you find the leak? One way is with serial numbers. If you track which number goes to which reseller, it should be fairly easy to track the item back to the culprit. Unfortunately, this is an expensive solution that only some manufacturers can afford. MAP agreements can be structured so that downstream purchasers from your resellers are held to the same agreement, but this only works if your resellers are honest.  

 

This brings us to the second preventative strategy…

 

Trust.

It sounds simple, but trust of your resellers is critical. Like almost all relationships, the best resellers will be those that you’ve built trust with. Before you begin working with a reseller, it’s always a good plan to look into their history, and make certain they aren’t prone to spinning off new brands. Just like you probably shouldn’t move in after a second date, it’s a good idea to take your time as you look for trustworthy resellers.

 

Finally, there’s always the third option: managing sales yourself.

 

Another way to prevent reseller damage is simply to minimize the need for resellers. For many, the prospect of managing the many steps of online sales is overwhelming. In this case, it might be worth considering a move towards automation.

 

Whitebox offers comprehensive services – from product descriptions to packing and shipping – that can expand with your business. Even if you aren’t ready to work with Whitebox on automation, look back at some of our past blogs for strategies on how automation can help with the many facets of ecommerce.

 

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