Growing a distribution network is both exciting and challenging. But as your products start selling through more channels, the number of buyers you work with will increase. Intrabrand competition happens, and some online retailers could hurt your brand in their efforts to meet their sales targets.
In a perfect scenario, you would not need to compromise your margin to grow sales, and your business-to-business (B2B) price would be the same for all your buyers. But real life rarely involves ideal scenarios. Buyers will negotiate, and you will have to let go of some of your expected margins, whether via providing B2B discounts, investing in digital activation or subsidizing promotions. But do you necessarily have to sacrifice margins to grow?
It’s challenging to set up the right strategy that could protect your brand’s product price margin and grow sales, so we have put together six actions to help your brand grow without cutting into your margin.
Action 1: Set up selective distribution channels
Winning market share is the goal of any business. Choosing an appropriate distribution strategy could have an impact on the whole business model. Take intensive distribution strategy — selling through as many different channels as possible, for example. It could easily foster intrabrand competition and price wars. On the other end of the spectrum, an exclusive distribution — selling through an exclusive distributor — may be too restrictive and inhibit your growth.
Working with big brands across a large range of industries, we find that a selective distribution approach often works best. This strategy enables brands to identify specific needs of the brand or its products and select online retailers in line with those needs.
Selective distribution can reduce intrabrand competition and increase price stability. Additionally, your online retail team won’t have as many partners to handle, so they’ll have the opportunity to nurture better business relationships. And finally, by frequently monitoring your distribution channels, you will be in a better position to back your negotiations with data.
Action 2: Enforce your MAP (where applicable)
In the countries where they can be used, MAP (minimum advertised price) policies are great tools to prevent price wars and keep your products attractive to most online retailers. But as your distribution network expands, monitoring volatile prices becomes harder, making the policy difficult to enforce.
A price monitoring tool with suitable update frequency could make enforcing your MAP policy easier. Receiving notifications of price incidents allows your e-commerce team to react fast and prevent potential damages.
Action 3: Quickly detect the cause of price fluctuations
Although semi-automatic repricing for online retailers is becoming the norm, its use and implementation vary widely. The side effects of automation could lead to price fluctuations and significant price gaps that could catch you by surprise.
The challenge lies in identifying the root cause of the price change when many online retailers have already adjusted their price. To become really savvy at reading price movements in your market, you need to know who tends to initiate deep discounts and who tends to follow those leaders in their repricing.
One powerful solution to understand who leads price movements and who tends to follow them is automated, high-frequency price monitoring. In most markets, daily monitoring could meet your needs, but in some very intense and competitive markets, you may want to look into more frequent monitoring.
Product price evolution over time at selected online retailers
Action 4: Optimize keyword placement to increase search ranking
Advertising listings at online retailers is a way to gain more sales and increase the search rankings for your brand’s products. But the cost can rapidly get out of hand as you increasingly depend on ads to fuel your growth.
Keep in mind that you could also increase your search ranking organically by optimizing keyword placement and regularly monitoring your search performance.
There are several types of keywords, such as category aliases, features, use cases or even brand names. Your choice of keywords should align with the search expressions that customers are using.
Furthermore, make sure to keep an eye on your competitors’ keyword strategy. This should help you decide if you want to compete on the same keyword or focus on more niche variations and long-tail keywords to achieve a higher ranking.
Action 5: Detect and shut down the grey market
The grey market could be the result of a leak in the distribution network. One of your online retailers or distributors could have been too ambitious, so it’s short-cut solution was to get rid of the merchandise at a low price through unofficial channels. As a brand, you don’t want to experience this.
These products would surface around the web and could lead to an increase in intrabrand competition. Your buyers might start questioning the price point they are selling at and take the initiative to maintain price competitiveness. If your brand is distributing on Amazon, you might experience losing the buy box to third-party sellers. Not only does this cost you a sale, but it could also hurt your ability to sell at MSRP (Manufacturer Suggested Retail Price).
Conducting regular web searches for your brand and products’ names should shed some light on this. Identify which results lead to known online retailers and which online retailers are unknown. Make a list of suspicious sellers for further investigation. For concrete action, you could try test-buying the product to examine the quality, determine the source of this supply and trace it back to the supply chain.
Action 6: Synchronize promotions
Promotions are a great way to drive sales. Online retailers might ask for your financial support in exchange for a value-added promotion that could potentially boost your product to their front page. On paper, these look like a good deal most of the time.
The problem is that in a market where price imitation is the name of the game, a one-off promo could quickly become a new standard market price. Even if the original online retailer ends the promotion after a week, it does not guarantee that the rest of the market will go back to the original price.
A workaround to this problem could be to synchronize promotions at the market level. When you get requests for new promotions, take the opportunity to offer the same conditions to all other online retailers in the same market. If many opt in, you could have a massive, synchronized movement of prices in both directions, increasing the likelihood that promos remain temporary.
Achieving profitable growth for your business is never easy, and the effort seems to only intensify as a distribution network expands. ChannelAdvisor Brand Analytics is an e-commerce monitoring solution for big brands and manufacturers. We provide key indicators and conduct analysis for you so that you can make better decisions. Reach out today to discover how we can help protect your margin!