One of the biggest mistakes manufacturers make in their attempts to grow their brand is to not pay close attention to what sellers are doing on ecommerce marketplaces.
You might have great third-party (3P) partners distributing your product, but without a vigilant eye and rigorous policies in place, any third-party distributor can hurt your brand right under your nose.
The best way to stay in control and ensure your brand is protected on ecommerce marketplaces like Amazon is through MAP compliance.
As a global ecommerce accelerator and brand-obsessed 3P seller, Pattern knows the importance of maintaining MAP compliance on ecommerce marketplaces, and we always uphold our brand partners’ MAP policies. For brand control issues, we recommend brands work with specialized econtrol experts and control their product distribution with sellers that are willing to stick to MAP.
What is MAP Compliance?
MAP stands for “minimum advertised price” (not to be confused with MSRP). It’s the lowest recommended price a distributor can advertise a product for without facing penalties from the manufacturer (“recommended” is the key word here—manufacturers can only recommend a minimum advertising price, not fix their prices). Distributors can sell a product at a price below MAP, but when a MAP policy is in place, they cannot advertise that product at a below-MAP price.
MAP compliance is a de facto method for manufacturers to enforce their MAP policy and ensure their third-party sellers are playing by the rules. When a distributor or seller is MAP compliant, it means they’re following your MAP recommendations and not dropping their prices too low.
Why MAP Compliance Matters
Making sure your sellers are MAP compliant is one of the best ways to ensure your brand is protected online and safe from the Profitability Death Spiral—it prevents bad players from seizing control and mucking up your brand’s growth and reputation.
Let’s say you have a seller, authorized or unauthorized, who chooses to list your product on Amazon far below your standard pricing. Without MAP compliance, that seller has no incentive to play by your rules, and you have no control or protection from the consequences.
They’ll more than likely gain control of the Buy Box and sell a lot of product with that lower pricing. Other sellers will notice the price drop and be motivated to drop their prices as well to try to get some of that Buy Box share.
And, once a seller drops the price of a product, it impacts the sale of that product across your entire omni-channel strategy. Because ecommerce marketplaces know customers will purchase your product at the lowest price they can find, other channels like Walmart.com or Target+ will lower their prices to match the new Amazon pricing.
Lowered pricing affects your brick and mortar performance too—customers often engage in “showrooming”—looking at a product in-store while checking online prices. This leads to either fewer sales in brick and mortar stores or price-matching disasters that force your brick and mortar retailers to ask you to lower your price with them to stay competitive.
Without MAP compliance, this cycle continues until the value of your product and the way your brand is perceived by customers is significantly diminished.
In short, lack of MAP compliance is like giving sellers the green light to harm your ecommerce brand, your authorized sellers’ business, and your retail relationships.
How MAP Compliance Affects the Relationship Between Buyers and Sellers
When your sellers are forced to lower their prices to compete online, it can dig into their margins and really hurt them. Some of your sellers won’t be able to compete, and they may not want to distribute your products as a result. After all, if you allow price erosion to happen and don’t step in to stop it, they lose their safety net and control, too.
Maintaining MAP compliance keeps trust between you and your buyers/resellers. It keeps your ecommerce ecosystem healthy. Your sellers know you’re looking out for them by ensuring other sellers don’t erode pricing, and you know there are protections and incentives in place to prevent price erosion from harming your brand.
How Can You Help Enforce MAP Compliance?
The sooner you get your MAP compliance strategy in place, the easier it will be to maintain it long term. But how do you start?
The first step is to assess your distribution. Are you selling your product through a few vendors? Or is your distribution so wide that it makes it difficult to keep track of everyone?
When it comes to maintaining control online, wide distribution is not your friend. The most effective strategy is to narrow your distribution—even if it means kicking out a few long-time vendors who shirk the rules—and choose quality partners who are as protective of your brand as you are.
Even with limited distribution, unauthorized sellers can get their hands on your product and sell it for cheap online. Monitoring platforms with technology that allows you to see where leaks in your distribution are happening is another way to maintain MAP compliance. If you can see it happening, you can stop it from happening.
Most important to the MAP compliance equation is actually having an effective MAP policy. Get the help of an antitrust legal council that can help your brand build a careful, clear, and effective MAP policy that tells brands exactly what you expect from them and that can be enforced across all channels.
How Pattern Can Help
At Pattern, we help you protect your brand by identifying leaky spots in your distribution and bad sellers. Our specialized Predict software allows us to track authorized and unauthorized sellers as well as pricing across the marketplace so you can maintain control of your brand. We also scrape critical data you can use to capitalize on the right keywords and ad strategies so your brand isn’t just protected, it’s continuing to grow online.
Need a reliable 3P partner in the marketplace? We can help you with that, too.
To learn more, contact us today.