If you’re a manufacturer, resellers are the lifeblood of your business. But let’s be honest, their focus will always be their own business. While you’d like them to be perfectly aligned with your business strategy, they can be easily lured away to chase an extra dollar elsewhere.
In this article, I’ll show manufacturers why monitoring and enforcing resellers is not just a necessary evil, but a critical revenue driver for their business. I will use activity from The Search Monitor’s reseller monitoring platform (disclosure: my employer) to provide five reseller enforcement tips focused on protecting manufacturer revenue. When you’re done reading, you’ll see how manufacturers can level the playing field between offline and online resellers and protect their distribution channels.
Challenges Faced By Manufacturers
Let’s start by describing the current hot issues.
Relationships with resellers:
Offline resellers: Manufacturers can easily upset their offline resellers by allowing them to see lower prices listed online. When this happens, current resellers are tempted to jump ship, and manufacturers find it harder to sign up new ones. For many brands, offline drives interest in the brand, and this drives traffic to online channels. So, offline channels must be protected.
Online resellers: The challenges here are likewise significant. Online resellers will tell a manufacturer that they won’t obey MAP until all other online resellers do the same. Why? A single MAP violator will steal share from all others, and resellers have no choice but to fight back with below-MAP pricing. They might not understand the offline-online challenge that manufacturers face, and only see MAP as a nuisance. They don’t see the bigger picture, especially when Amazon rewards sales volume (no matter the price) with higher rankings on the Amazon search results.
Amazon: Friend or foe?
The channel deserving most of our attention is Amazon, the leading online retailer with more than 2 million sellers. Amazon presents its own challenges to manufacturers:
- Amazon is obsessed with providing customers with the lowest prices. They reward resellers who drop their prices the most by displaying them first. That’s their brand. Many resellers have conceded their branding to Amazon and focus just on the sale. Consumers, meanwhile, don’t care about choosing unknown, low-priced resellers because they trust the Amazon brand to deliver.
- Amazon doesn’t care about a manufacturer’s minimum advertised price (MAP) as much as you’d think. They focus on customer satisfaction and try to stay out of the manufacturer-reseller relationship. When a manufacturer finds a MAP violation and wants to complain, Amazon makes it difficult by requiring one compliant form per product SKU.
- Amazon always wins. They often compete against other resellers, and when they lose, they take a cut from the winner. They’ve created an enormous channel conflict which angers both online and offline resellers.
- With so many resellers on Amazon, manufacturers are often challenged to find the real identity of their resellers. Many use fake names and have Amazon drop-ship their products, making tracking and enforcement that much harder. This can be a small number of resellers, but unfortunately can cause significant damage.
Reseller Perspective on Amazon & MAP
Resellers have strong opinions on the issue of MAP and Amazon. They view it as a true ‘catch-22’. If they obey the manufacturer’s MAP policy, they can lose sales to MAP-breakers. If they break the MAP policy and get caught, they can lose reseller rights from that manufacturer.
If you scan this Amazon forum discussing MAP challenges, you’ll see resellers explaining this predicament. One frustrated reseller wrote: “…other sellers completely ignore MAP and sell below it. As a result, we lose most sales to them. And in our experience, the manufacturers do not police MAP consistently. So, these other low ball sellers get away with it, but if we’re caught doing it, we’re cut-off and blacklisted.”
Another reseller in this form explains how his company is “forced to break MAP in order to compete with AMAZON directly . . . AND they end up making 12% off me anyway. It’s not the manufacturers that are to blame, it’s AMAZON. What other business model is like theirs?? They actually compete against their own customers.”
Manufacturer Perspective on Amazon & MAP
While the reseller perspective is compelling, manufacturers have their own opinions on how MAP should work on Amazon. One manufacturer on the Amazon MAP discussion board shared how “Amazon has in fact forced our hand because they now started saying they will not honor MAP but will match the lowest online price, which has made us enforce MAP or cut drop shippers. We have also had to introduce a policy that authorized dealers cannot sell on Amazon Marketplace or eBay.”
Another manufacturer from this forum provided advice to resellers: “You do have power in this equation – tell your manufacturer to either stop shipping to those that offer product below MAP, or lose your business. Believe me when I tell you, when enough traditional retailers send that message up stream, offenders will be stopped and you will have your minimum margin back”
With these challenges explained, let’s turn our attention to five things manufacturers can do to enforce their reseller relationships and drive more revenue.
Tip #1: Protect Your Trademarks
You’ve devoted significant resources to build brand assets such as your company name, slogans, and product names. Resellers, meanwhile, know they can leverage these keyword searches to drive sales. Our ad monitoring data has revealed instances of resellers breaking manufacturer rules by bidding on trademarked terms in AdWords and BING (and competing against manufacturers) or displaying branded terms in ad copy or landing pages.
Make sure you monitor search engines, landing pages, and other reseller sites at least weekly for these violations. Further, monitor the sneaky places where violations can occur, such as mobile sites and remarketing ads. In the world of paid search ads, make sure you geo-target your ad monitoring to find violations that can vary by city and country. Protect your brand at all costs and contact brand offenders quickly to remove the violations!
Tip #2: Identify Resellers Selling Below MAP
You’ve established minimum advertised pricing policies to protect your brand and create a level playing field between offline and online resellers. Violators, even just one, can jeopardize this delicate balance.
Just like with trademark monitoring, you need to monitor how your prices appear on Amazon and other comparison shopping sites. Your MAP monitoring should answer questions such as:
- Which products is it happening on?
- How long has it been going on?
- How many sellers are doing this? What percentage of your sellers do this? Any repeat offenders?
Don’t rely on other resellers to tattle-tale on MAP-breakers on your behalf. Take the reins and monitor yourself, and contact the MAP-breakers ASAP to adjust their prices. Take more serious actions with repeat offenders.
If you let your retailers battle each other for the lowest prices, you quickly create a race to the bottom, where you’re only competing on price and a manufacturer’s brand equity quickly erodes. L
Tip #3: Identify Unauthorized Resellers
While you’re looking for brand usage and MAP violations, you should also be receiving seller reports and scanning for unauthorized resellers. They might only be selling a few products, and only for a quick sales period (i.e. Black Friday), but they are competing against your other approved resellers (who need to know they’re being protected!).
Amazon is the first place to start due to the sheer number of resellers on the network. Check often—daily during high-volume periods—and contact them with time-stamped screenshots of their misdeeds. Proof helps a lot. In some cases, try working directly with the websites to have unauthorized resellers removed.
Tip #4: Identify Amazon resellers selling counterfeit goods
Another challenge that manufacturers face on Amazon is counterfeit goods. These could be former distributors who are creatively unloading past inventory. Or, you, the manufacturer, never even produced the product, and a reseller is pretending that you did to drive a quick sale.
Amazon has recently, and finally, taken stronger action to curb this pervasive activity. They’ve launched a large-scale ‘brand-gating’ program for any seller on Amazon (that is not Amazon). Resellers must submit proof that they can sell a brand’s products (three recent invoices and a letter from the brand owner) to ‘un-gate’ the brand for sale. New sellers must also pay a fee that can be $1,500.
Brand gating should help brands reduce the presence of counterfeit goods, but clearly presents a challenge to the reseller community. Resellers operating an arbitrage might find it difficult to get the proof from the brand. Authorized resellers, meanwhile, should have the proof they need.
Brands need to learn about this new program ASAP and communicate the implications to their resellers. The size of their reseller network could deteriorate quickly without this effort.
Tip #5: Measure your resellers’ search visibility
My last tip for driving greater revenue from resellers is the concept of search engine visibility.
Smart manufacturers have learned that they need to monitor their resellers’ search engine visibility in both paid text ads, product listing ads (PLAs, now called Shopping Ads), and organic listings. These manufacturers are sharing this visibility data with their resellers to help them:
- improve their paid ads (i.e., by improved bidding or targeting strategies), and
- improve their organic listings (i.e., by SEO techniques such as content creation).
At the end of the day, a manufacturer’s job is to support their resellers, and improved search visibility on profitable keywords helps everyone. This is especially true of smaller resellers who don’t have the time, resources, or general know-how to monitor their own search appearances and confirm they’re appearing as prominently as possible.
Final Thoughts on Reseller Enforcement
Reseller enforcement is hardly a glamorous task. And it definitely can be frustrating. The analogy of herding cats comes to mind often for me.
The revenue benefits of reseller enforcement are undeniable and should be a priority. It helps demonstrate support for your reseller network, leading to greater retention and making it easier to add new resellers. Many of my clients view it as an investment into the long-term health of their reseller network. Luckily, advances in technology have made it easier to patrol resellers, identify problem areas, and quickly head off damaging issues.
I’ll leave you with a parting thought: What will online retail be like in five or ten years if manufacturers do not enforce resellers, and if Amazon continues to create a channel conflict between offline and online channels? Will price and customer reviews drive 90% of sales? Will brands even matter, other than Amazon’s?
The Search Monitor tracks online ads and prices on behalf of manufacturers.
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