Selling on an ecommerce platform can sometimes feel like a game of chess where being out-maneuvered can knock you out of the game. The most common way brands are out-maneuvered is via price.
On Amazon, third-party sellers are rewarded for offering low prices, and that often means they’ll undercut your pricing to get ahead. This behavior (called price erosion) makes it very difficult for other merchants to sell your product without eating into their own margins, and without proper checks on the sellers contributing to erosion, you may see your profits plummet. That’s what makes maintaining price stability on Amazon so important: it protects a brand’s margins and ultimately, the brand itself.
There are several things you can do to maintain price stability and regain control of your brand on Amazon. What works for one brand may not work as well for another, but these are five proven tactics that can help.
1. Create and enforce a MAP policy.
A MAP (Minimum Advertised Price) policy is a policy set by a manufacturer that tells resellers the lowest price they can advertise for that manufacturer’s products. MAP policies apply to _advertised _price and don’t limit the actual price a seller can set for a product. Brands set them to protect themselves from price erosion.
A good MAP policy outlines advertised price suggestions on specific products and the consequences for vendors who violate the policy (i.e. being banned from selling the product, having their account frozen). When effectively enforced, MAP policies incentivize third-party sellers to not undercut other sellers on cost, keeping pricing stable and giving other retailers a fair chance to sell a brand’s product in the market.
Note: before setting up a MAP policy, you’ll want to consult with a lawyer or legal team to ensure your brand doesn’t run afoul of antitrust laws.
2. Limit your distribution.
Cutting the number of distributors selling your product can also help you maintain stability and take back control of your brand. Limiting your distribution allows you to more easily monitor where your product is being sold and at what price. It also helps you to retain authorized distributors who are following the rules while removing those who are not.
It may feel uncomfortable to cut off distributors, especially those you have developed a strong relationship with, but if a seller continues to violate your pricing policies, the harm done to your brand in the long-term by keeping them will be far greater than the harm done by cutting them out.
3. Retain competitive pricing.
One reason why sellers may be undercutting your pricing on Amazon and creating instability is because your pricing is not as competitive as it should be in the first place. If your competitors are selling similar products at a noticeably lower price, it will be much harder for third-party sellers to move your product and more enticing for them to lower the price so that customers will have the incentive to purchase from them.
To find competitive pricing that works for your brand, conduct analysis on similar products across the market that can help you determine what prices make sense.
4. Enact quality control procedures.
Often Amazon pricing is unstable because your products are being sold by unauthorized sellers who have no incentives to stop and no control. One way you can prevent this from happening is by enacting quality control policies or procedures.
An example of a quality control procedure is serialization. Stamping or printing each one of your products with a unique serial number allows your warehouse to track them more easily so you can identify leaks and ensure your customers are getting legitimate products. Serialization takes time and money, but it’s one way to protect your margins.
5. Use tech to monitor prices.
In order to get your pricing stable, you need to be aware of price drops, and the good news is there is plenty of technology available to help you monitor price shifts around the web. Chrome extensions like Honey and WikiBuy can help you compare a product across the web to other marketplaces. Extensions like Keepa can show you price fluctuations.
Another tech tool you can use is Predict. Predict is comprehensive, in-depth software that allows you to see data on MAP violations, how competitive your products are, and how much it’s costing you.
With the right tools and the right policies, you can stay on top of the game when it comes to price stability on Amazon. Read more about how to maintain prices on Amazon with our eBooks below, or contact a Pattern representative to learn how we enable our brands to gain pricing control on marketplaces.