When it comes to brand-seller relationships, Nike, the footwear and apparel giant, has been the brand to watch.
In June, the company announced that it would finally begin selling its products on Amazon. For anyone who has ever typed "Nike" into Amazon's search bar, this news may have been met with some confusion. As of June, a product query pulled up about 73,000 returns on Amazon. To clear things up, all of these products were being hocked by unauthorized sellers. Nike finally warmed up to Amazon because it needed the retailer's help to deal with this problem.
Just a few months earlier, Nike announced the implementation of a new minimum-advertised pricing (MAP) policy. Retailers can now advertise 25 percent discounts on Nike merchandise year-round as opposed to on a select number of weekends. It's not clear if this decision was made with the Amazon deal in mind. At the time it was announced, the move was met with varying outlooks. Some thought it risky to be so liberal with discounts. Others said it will help drive sales, and simplify relationships with authorized sellers.
Granted, the outcome remains to be the seen. However, one thing that is very clear, and ultimately bodes well for the footwear maker, is its dedication to addressing the problem of unauthorized sellers, and wrangling back control of its pricing policies.
Are brands doing enough to stop unauthorized sellers?
"Policing for unauthorized sellers is now a function that can be almost entirely automated."
The sad truth is, probably not. Unauthorized sellers have been the bane of e-commerce, especially for brands, who have the most to lose from illicit third-party vendors. The actual retailer (Amazon, eBay, etc.) does not necessarily gain from unauthorized sellers, especially when bootleg products and bad service result in customer dissatisfaction. However, a sale is still a sale for a retailer, which means that they have significantly less incentive to deal with unauthorized sellers on behalf of brands.
This isn't to say that retailers have done nothing at all. For instance, Amazon's "Brand Gating," which was established August 2016, attempts to create a barrier to entry for sellers by demanding a $1,500 startup fee, and by requesting invoices for brand-name products. However, that startup fee doesn't apply to already existing sellers, and the full extent enforcement of the invoice rule, which is completely in Amazon's hands, is somewhat obscured to the brand.
In actuality, there is really only one way that brands can make sure they're guarded against unauthorized sellers, and that's to actively look for them. Historically, this was a time-consuming, complex task that required hours of tedious work.
However, policing for unauthorized sellers is now a function that can be almost entirely automated. For example, PriceSpider's MAP Guard has a feature called Retailer Discovery Report, which lets brands see "which unauthorized sellers are selling their product, the price they are selling their product for, and through which online channels they're selling from."
Form here, brands can take action against against these sellers, using legal claims including, but not limited to:
- The First Sale Doctrine.
- Copyright Infringement.
- Unfair Competition.
Don't let unauthorized sellers leech off your brand's success.
Then there's the issue of MAP violations
"15% of authorized resellers are guilty of MAP violations."
MAP violations are another big problem brands face. However, MAP infractions are a slightly more sensitive issue than trying to stamp out unauthorized sellers.
Because, while it's true that unauthorized sellers are most likely to perpetrate a MAP violation (more than half are guilty of this), authorized sellers have also been known to post prices that dip well below a brand manufacturer's suggested retail price. According to KellogInsight, 15 percent of authorized resellers are guilty of MAP violations.
Statistically, 15 percent looks more like the exception, but when one seller violates the policy, another almost always follows suit. This series of copycats essentially leads to a type of domino effect, where it becomes difficult to figure out who the first offenders were.
To address this problem, brand managers need to take the same data-driven approach that they would to identify and deal with unauthorized sellers. Specifically, they need to automate MAP monitoring so that pricing infractions can be detected in real time. This will help ensure that violators are caught early, which can deter copycat offenders.
Just as importantly, MAP monitoring software tracks MAP violations over time so that repeat offenders can be penalized differently than a first-time violator. If MAP violations continue to occur over time, then brands may have to have a separate conversation about whether that seller is a worthwhile channel partner.
At the end of the day, brands need to maintain a certain image, which is difficult to do when unauthorized sellers are peddling products that may have been tampered with, or when vendors are wresting a brand's grip on pricing.
For brands, it's really all about controlling what is rightfully theirs.