Online sales management is a crucial foundation for the eCommerce channel, particularly the online marketplace, to grow profitably as brands increasingly realize. We described the four pillars of online sales control in the first post of this series. We'll delve more deeply into the first pillar in this post: e-commerce channel management.
Limited distribution on online marketplaces like Amazon is crucial to maximizing growth and maintaining brand equity. To put it another way, brands prefer to have a small number of sellers—ideally just one on online stores like Amazon (whether that seller is the brand or an exclusive seller).
Since many brands have steadfastly pursued wide distribution for years to get their products in front of as many consumers as possible, this reality presents an immediate challenge for brands.
As a result, unauthorized sellers can easily find and sell various goods across many B2B and B2C verticals online, creating intense intra-brand competition in the online marketplace channel. In turn, this causes decreased sales, a lower return on marketing investments, defective goods, unfavorable customer feedback, and significant brand value erosion in the brand's other trade channels and the online marketplace.
This leads us to our first rule of e-commerce channel management in the age of the online marketplace: the disruption of online sales begins below the surface in the traditional problems facing the brand, not on the marketplaces themselves. Instead of addressing the issues of their conventional channel practices supporting unauthorized online sellers, many brands need to concentrate more than just enforcement on online marketplaces like Amazon. This results in the idiom "whack-a-mole" game, which is not a successful tactic.
Given this reality, most brands must implement the following channel management strategy.
● They must specify the channels for sales that are permitted.
● Make it clear that customers may only sell through their official channels.
● Put an end to any market sales without the brand's express consent.
This is frequently achieved through an authorized reseller program, which is a program whereby the brand issues policies to its customers outlining where and how products can be sold in an authorized manner.
Distributors and retailers are frequently happy to receive these policies because they are accustomed to them. Without such e-commerce channel management, there is no regulation regarding who can and cannot sell on online marketplaces, and the marketplace channel quickly devolves into chaos. Implementing an authorized reseller program is thus a crucial first step in channel management that enables brands to bring orders back to their channels and avoid disruptions in the online marketplace caused by their authorized sellers.
Monitoring Authorized Channels Effectively for Compliance
To understand where and how products are leaving their official channels, brands should carefully monitor online marketplace activity as they implement their authorized reseller programs. Almost always, the brand's business practices encourage divergence and unauthorized sales. Possible offenders include:
● There are too many distribution incentives.
● Differences in international prices.
● Excessive retail margins.
OR.
Some other procedure enables products to be redirected from legitimate channels and profitably offered online.
We call these underlying behaviors "root causes.". "Brands that are most successful at limiting online sales will have done their research to find the source(s) of their illegal online sales. Ending the "whack-a-mole" game and ensuring that the seller makes online sales and in a way that is consistent with the brand's go-to-market strategy require this crucial step. Numerous typical root causes of illegal online sales are highlighted in the chart below.
To Sum Up
One of the four foundations of online sales control is channel management. As the primary contributor to online sales disruption is frequently channel management practices, it is frequently the first pillar we advise brands to address in their journey toward online sales control.
The iceberg concept should be used to inform internal stakeholders about this reality. Authorized reseller programs should be put in place to reduce channel chaos. Reach out to us @1800-257-7750 or info@loveinstore.com. and we promise you a worthy journey toward success.