Common Mistakes Brands Make in Combatting Unauthorized Online Sales
As the volume of product sales on online marketplaces continues to dramatically rise, more and more manufacturers are scrambling to control their online sales. With hordes of vendors offering various “solutions” to these issues, resulting in confusion over the best path forward, companies make several common mistakes when trying to reestablish control over their brands.
Mistake #1: Relying Solely on Minimum Advertised Price (MAP) Policies
Many brands first attempt to rely on MAP policies to solve their online sales challenges. MAP policies simply inform a brand’s retailers or resellers that the company will choose not to do business with those who advertise the products at prices below a manufacturer-selected minimum price. However, when a brand lacks control over its online sales and has a number of unauthorized online resellers violating its MAP policy, it becomes very difficult for the brand to attempt to hold its authorized sellers to the policy – indeed, authorized sellers often refuse to adhere to MAP when doing so would put them at a significant competitive disadvantage. Making matters worse, the offending unauthorized sellers typically pay no heed to the brand’s MAP violation notices and continue their harmful practices, knowing that the brand cannot legally compel them to follow MAP. Finally, brands may receive reams of MAP violation data from their monitoring company but cannot act on the majority of it because the brands have no idea who the anonymous offenders are or where they are obtaining their products. For these and other reasons, MAP policies alone are not a viable online sales control strategy.
Mistake #2: Sending Cease-and-Desist Letters to Unauthorized Sellers without Viable Legal Claims
Some brands attempt to engage vendors to send cease-and-desist letters to unauthorized sellers. But if these letters are not based on a viable legal foundation, they are often ignored. Most high-volume, disruptive sellers have received many such cease-and-desist letters before and are not intimidated by them. These sellers are well-versed in the “first sale doctrine,” which, broadly speaking, allows for products to be bought and resold without repercussions from the brand owner, with certain well-defined exceptions. Occasionally, these sellers will retain lawyers who warn brands to stop harassing their clients. Although cease-and-desist letters may be effective against certain small-scale sellers, the reality is that most brand damage is caused by large, sophisticated resellers, and brands need to do more than send them scary letters. In sum, relying on cease-and-desist letters without a viable legal foundation is not a winning strategy.
Mistake #3: Submitting Marketplace Counterfeit “Tickets” to Remove Unauthorized Sellers
Many brands also try to leverage marketplace takedown procedures to remove unauthorized sellers. A common tactic is to file tickets with marketplace administrators asserting that unauthorized sellers are selling counterfeit or otherwise infringing products when they actually are not. Tactics like these have gotten brands into trouble with the marketplaces—some companies have even had their brands suspended from selling on certain platforms. Moreover, the suspended sellers may attempt legal action against the brand, contending that the brand unlawfully disrupted their business. And even when the counterfeit claims are legitimate, the ticketing process often results in the proverbial game of “whack-a-mole”—brands may get a listing removed here or there, but they never solve the larger problem, and the sellers eventually return. Thus, this too will not deliver lasting success for brands seeking to control their online sales and may even expose brands to unwanted legal risk.
Mistake #4: Measuring the Wrong Data
Another common mistake is that brands focus on data metrics that ultimately are not true indicators of business success and brand value. For example, brands may be incorrectly focused on the number of sellers “removed” or the number of MAP violation notices sent. These are vanity metrics that typically have no meaningful business impact. The metrics that matter for most businesses are the percentage increase in sales made by authorized sellers and the percentage increase in overall pricing policy compliance. If these metrics are not improving, then the brand should reevaluate its strategy.
As the above examples illustrate, brands seeking to succeed in the online marketplace world cannot rely on half measures to sustain online sales control and long-term brand equity. Instead, brands must implement a comprehensive strategy that integrates business, legal, and technology components in a way that drives real business value for their unique situation.
To learn more about viable strategies for achieving online sales control, download our free white paper by clicking here.