Trey Morrison

About The Author

Serial entrepreneur with an industrial psychology education and over 23 years of creating, consulting, and operating businesses. Loves mountain biking, snowboarding, and surfing.

Market saturation and your brand

When trying to grow a brand it is normal to think more distribution is better. Manufacturers are pumped when they get large enough to make it into the top-tier wholesale distributors. Sales are growing and everyone is happy. During this growth phase, it is hard to be aware of the problems that might lurk just around the corner. With growth in distribution comes growth in unauthorized sellers. There are many “underwear entrepreneurs” who get a data feed from a WD and list all your products at rock-bottom prices on Amazon and eBay. Who are these guys?! Some of them put a lot of effort into hiding their identities so it is very hard to figure it out. Pretty soon your die-hard brick-and-mortar dealers are complaining because they can’t compete with the online sellers and are threatening to stop making stocking orders. This is a real problem. In addition, new wholesale distributors are refusing to carry your brand until you clean up your pricing.

You might try to clean up violators by putting them on a do not sell list. This is a great idea and often works great, but what do you do when it doesn’t? Where are they getting the product from? Maybe your new wholesale distributor isn’t enforcing the Do Not Sell list you sent them? Or, maybe the seller has an account with multiple WDs? This happens all the time. It can take a lot of time to figure it all out.

Does any of this sound familiar? As you grow, managing your sales channels should be given careful consideration. You need a long-term plan when writing the terms and conditions for your price policy.

• Do you allow sales on third-party marketplace sites?
• MAP or MRP policy?
• Should you have a preferred dealer program?
• What are the penalties for violations
• How many WDs do you want?

There are many things to consider but above all, be prepared to monitor and enforce your policies regardless of the type. Professionally enforcing MAP is a “self-correcting” way to clean up over distribution and leaves a smaller subset of sellers to contend with.

A smaller subset of sellers does not mean no growth or fewer sales. There is a common illusion that more sellers mean more sales. This might be true with brick-and-mortar dealers, but the same thing does not carry over to online sales. When a customer looks to buy your product on Amazon it does not matter if there are 50 people selling the part or just a handful. They are just going to buy it from whoever has the lowest advertised price. And with hundreds of sellers, I can assure you it will be harder to have any control over who is advertising for the lowest price.

So, before your sales channels turn into a free for all and there is a race to the bottom, take the time to plan. Make sure the terms and conditions of your policy and your expectations as the manufacturer match. Future negotiating with warehouse distributors and stocking dealers will go a lot smoother when you’ve addressed these important points in advance

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