How Unauthorized Sellers Take Away Brand Control on Ecommerce Marketplaces

A top issue we see with brands struggling on ecommerce marketplaces is a loss of brand control due to a disjointed seller strategy leading to a plethora of unauthorized sellers—those that aren't following your brand policies and guidelines when selling your products online. A disjointed seller strategy creates a gray market of unauthorized, and rogue sellers, as well as 3P and other sellers who are noncompliant with your branding, pricing, and other forms of representation online.

It can be very easy for brands to lose control of their ecommerce strategy when they can’t get a handle on unauthorized sellers. Typically, these brands are either stuck in a game of whack-a-mole or just ignoring the warning signs of bigger issues and hoping for the best. But, when a disjointed selling strategy isn't handled right, the consequences can be devastating to profitability. A loss of brand control doesn’t happen overnight, and the factors that contribute to it are long-standing.

Erode Consumer Trust

Before the advent of ecommerce, brands favored a wide distribution. It was the easiest way to get products to as many distributors as possible. But wide distribution, when left unchecked, leads to leaky distribution—allowing your excess products to end up in the hands of unwanted sellers.

So brands that continue to operate with a wide distribution strategy are losing brand control and are damaging their brand equity and product performance. Why? You’re unable to monitor your products’ pricing, performance, or quality. You can’t dictate how you’re represented by each seller, creating an inconsistent and false representation of your brand to your new and existing consumers. These issues often lead to poor reviews and erode opportunities to build trust with future customers.

Wear Away Brand Equity

In today’s ecommerce landscape, marketplaces and digital platforms connect people and sellers to make online shopping simple and seamless. They also provide customers complete price transparency. Google, for instance, allows consumers to access any of your products on virtually every ecommerce channel and retail location and posts them side-by-side for you to comparison shop.

Now, everyone from your D2C distributors to large marketplace sellers, legitimate 3P sellers, and rogue and unauthorized sellers are on a level playing field—they’re all presented to the searching consumer, and that consumer has the purchase power.

Disjointed sellers have just as much power and authority to represent your brand as you do, without the same quality, pricing strategy, and customer focus as you.

Cause Competition and Price Matching Issues

In most shopping scenarios, consumers will choose to purchase a product from whichever seller offers the lowest price. Marketplaces like Amazon and Walmart know this, and optimize their product selection based on all retail offers to serve consumers the lowest price for the same item.

This means that as one seller drops the price of your product, the next will follow, and then the next, etc. Everyone gains access to the product at or below MSRP. This opens the door for unauthorized sellers to purchase inventory during promotions or at discounted prices and then turn around and sell the same product slightly below competing sellers’ prices—for profit.

As customers search for your product, they notice the cheaper price and purchase from the unauthorized seller, rather than paying the price you’ve established with your retail teams. Simultaneously, as Amazon monitors their product listing against other available channels, they notice they don’t have the lowest price. So Amazon, and other marketplaces, in service of the consumer, drop their price to match the lower price offered by an unauthorized seller. To stay competitive, your other channels follow suit. The cycle, also know as the Profitability Death Spiral, continues to drive down the price of your product, grinding away your margins and profitability.

This doesn’t sound like much of a problem if your brand isn’t actively selling on ecommerce marketplaces, right? Unfortunately, it causes big issues for your brick-and-mortar sales, too. Large retail chains like Best Buy and Macy’s noticed this potential loss of sales from ecommerce and needed to defend and protect their profit. Retailers started telling brands that, in order to keep their products in-store (which accounts for 80% of most brands’ sales) they would need to lower their prices to match online prices. Which led to the concept of price matching. If a customer could prove the price of a product was lower somewhere else, Best Buy would match the lower price and charge the brand for the difference.

As other brick-and-mortar retailers jumped on the trend, brands started to see large losses in their margins.

Gain Ecommerce Control with Pattern

The danger that disjointed sellers pose to brands is enormous—without a way to control all of a brand’s distribution points on ecommerce, your brand spins farther and farther down the profitability death spiral. Using custom technology and data-driven insights, Pattern can identify disjointed and unauthorized sellers for your brand and develop a custom strategy tailored to your specific needs to address these big issues as soon as possible. Then, Pattern partners with the econtrol law firm, VORYs, to enforce take downs and save brands who find themselves caught on any stage of the death spiral.

With the right resources and expert help, we’ve helped hundreds of brands to regain their footing and control on ecommerce, win the buy box, and grow their sales.

‍Contact us today to regain your brand control.