01 September Minimum Advertised Price Enforcement: 5 Tips to Keep in Mind
Today’s retail market is dominated by online shopping. Consumers look to get their hands on deals that they cannot find in traditional brick-and-mortar stores. Unfortunately, this isn’t always ideal for retailers.
Minimum Advertised Prices (MAP) are set by brands or manufacturers and are the lowest price that a distributor or reseller can advertise products online. MAP pricing is an arrangement between the brand or manufacturer and reseller on an agreed lowest (advertised) price for a product. There might be a blanket policy imposed by a producer, or resellers may come to a negotiated MAP.
MAP agreements mean that a seller cannot list an item below a specified price. Suppliers maintain their brand image and, in an ideal situation, resellers keep their profit margin. If a blanket MAP policy is implemented by a manufacturer or brand, it can also prevent price wars among resellers.
It’s worth bearing in mind that MAP policies only apply to ‘advertised’ prices. Resellers don’t have to make the sale at the specified price, but the item must not be displayed at a lower cost.
However, minimum price enforcement can present challenges for resellers and manufacturers alike. For resellers, it can be limiting and squeeze margins. For manufacturers, it can be incredibly challenging to monitor the prices across so many different platforms, let alone enforce them across them all.
1. Understanding the Challenges of MAP Pricing for Both Manufacturers and Resellers
For resellers, the restrictive pricing means that excess inventory could go unsold. You cannot add them into sales, clearances, or bundles, to make some return on your purchase. MAP can result in large amounts of deadstock for some online resellers. It’s important that minimum advertised price enforcement still allows a reseller to compete where possible.
Manufacturers need to understand the challenges that MAP presents for resellers. This is why a negotiable MAP policy might be the right choice for your product line. In some cases, a dynamic pricing structure may provide more flexibility.
Minimum advertised price enforcement isn’t easy for manufacturers, either. This is especially true for those with their own ecommerce companies to run. They might even be competing in the same space as their resellers or suppliers.
As a supplier, it can be difficult to keep track of resellers. Online marketplaces like Amazon are so vast, and some companies might have hundreds of resellers on the platform. Amazon US doesn’t provide information on business entities, so tracking retailers can be extremely time-consuming. Not to mention the resources and time required to enforce a MAP violation.
It’s important to understand the challenges of minimum advertised price enforcement from both sides of the agreement, in order to overcome them.
2. Provide a Clear MAP Policy
For brands, your MAP policy needs to be crystal clear on your expectations for your minimum price. It’s important not to leave any room for interpretation. Ultimately, as your business and the number of resellers grow, violations are more likely to occur.
Clarify what is considered compliance and non-compliance. Ensure that your retailers know how to follow your policy, and what to look out for.
The consequences of a policy violation also need to be explained within your policy documents. Minimum advertised price enforcement isn’t just about making sure resellers follow your rules. You also need to carry out appropriate reactions when your policy is not adhered to.
If there are no visible consequences of non-compliance, then your policy is far less enforceable. Provide a comprehensive and clear MAP policy document for each reseller, as part of your agreed contract.
3. Identify Key Retailers
Depending on the number of resellers, it can be challenging to keep track of your product and its prices. This becomes even more difficult if your agreed retailer begins to sell on other marketplaces, like Amazon. With over 12 million individual products available on Amazon, it would be nearly impossible to crawl through the marketplace’s catalog.
Take the time to identify your key retailers and resellers. This could be based on the amount spent with you or their selling success. Keeping control of your product pricing means knowing which retailers are the most popular for your product.
Monitor any changes in their sales. An increase in sales might indicate that they are breaching your MAP policy. Keeping on top of your most popular resellers sets a benchmark for your other stockists.
For this reason, smaller resellers may be more time-consuming than it’s worth. The more stockists you have for your product, the more storefronts you need to monitor. Consider removing contracts with less profitable businesses.
4. Monitor Amazon Sales
As mentioned, the Amazon marketplace creates challenges for managing your minimum advertised price enforcement. It’s important to be aware that many consumers shop at Amazon for the reduced price, over the high street alternatives. Therefore, your resellers are more likely to cave to demand and reduce prices below your specified MAP.
There are several ways to rein in this trend. Amazon offers a service called Amazon Brand Registry. This allows you to restrict the number of storefronts that sell your brand. Ultimately, a smaller number of resellers means less monitoring of MAP pricing and less violation of your agreement.
You might also want to consider removing digital sales on Amazon from your contracts and remove Amazon reselling altogether. Unfortunately, this can cause difficulties during your contract negotiations, as many smaller retailers rely on marketplaces like Amazon. There are nearly 2 million SMEs selling on Amazon, and this contract restriction is likely to impact your ability to secure deals with these organizations.
5. Price Monitoring Solutions
Finally, it’s important to monitor the prices currently listed with your resellers. Price tracking tools can help scour the web for your products, and provide up-to-date information on their advertised price.
Amazon’s Automate Pricing is one example of a price tracking tool. The tool uses your SKUs to find listings of your products and provide recent pricing information. This software can help to improve your minimum advertised price enforcement, and spot listings for products that elude a manual search.
You could also make use of product serial numbers, to help keep track of your stock. If you find an item advertised under your MAP, you can purchase the product, and use your serial number to track the shipment and distributor. This may seem convoluted but could save brand reputation and price competition in the long run. At Yardline, we understand that running an ecommerce business isn’t always easy. That’s why we have experts in the online retail industry, to help to guide your business through the challenges. We offer expertise, and cash advances, to scale your business for the next step.