5 Steps to Stop Marketplace Product Diversion: Tips for Manufacturers
Updated: Jul 10, 2022
As a manufacturer, you want to make sure that your products are being sold through authorized retailers and not on unauthorized 3P Sellers on marketplaces. When products are diverted to these unauthorized channels, it will cause product value erosion and lost revenue for the manufacturer and authorized sales outlets. In this blog post, we will discuss 5 ways to stop marketplace product diversion and protect your brand and product value.
If you have worked with an Amazon Vendor Manager, they have likely mentioned that it is up to the brand to control distribution. While Amazon is the largest marketplace, distribution control to protect product values can not be solely focused on Amazon. There are too many other options available and a holistic approach needs to be taken.
The first step is to understand how your product is currently being sold and where. You can do this by using a data scraping or e-commerce monitoring software service that will give you an overview of how sellers are listing your products, what price they are selling them, and how many units they own. This will give you a baseline to understand where your product is being sold, what price and how big the problem is.
The second step is to create an Authorized Dealer Policy if one doesn't already exist (along with a Minimum Advertised Price Policy). You can do this by working with your legal team to draft a document that states who are authorized dealers of your products and where they are allowed to sell them (i.e. their own website, Amazon, eBay, Walmart.com). This document should also include the consequences of selling your products outside of these authorized channels. If this doesn't exist and hasn't been communicated, it will allow your distribution network the opportunity to comply with your strategy.
The third step is to enforce your Authorized Dealer Policy. You can do this by sending a cease and desist letter to any unauthorized dealers that you find selling your products. This will let them know that they are not authorized to sell your products and they need to stop immediately. This is a necessary step but unfortunately does not lead to a significant change in compliance. The goal has to be, not putting your authorized sales outlets at a disadvantage by only being able to enforce sales policies against the accounts that are above board, and not allowing product values to be compromised by addressing the Grey Market.
The fourth step is to create a process to ingest the information that you are receiving and make that data actionable. There are thousands of marketplace sellers and nearly as many YouTube and Tik Tok videos showing people how to sell products there. The problem can seem overwhelming, which is why it is so important to have a process to address the issue in volume. The Counter Diversion solution was created to do just that. This algorithm analyzes tracked data, matching it with a brand's distribution data. Using thousands of data points, the software paints a complete picture of where the weak points are in the distribution channel.
The fifth and final step is to take the analysis and confidently enforce or change sales policies. With data-driven analysis, you can make informed decisions on where to allocate resources in order to get the biggest return. This could be anything from confronting specific retailers to address how they are selling your products to understanding how certain DTC strategies or promotional events are feeding the Grey Market.
Implementing these five steps will help you take control of your product's distribution and ultimately protect your brand's value. Product diversion is a complex issue but with the right tools and processes in place, it can be effectively managed.
What are some other ways that you have stopped product diversion? Let us know in the comments below!
If you enjoyed this blog post, be sure to check out our other blog posts on the Grey Market and protecting Product Values and Brand Equity.
Counter Diversion is a boutique SaaS company - we don't have marketing and we don't use high-pressure sales tactics. Our goal is to have solid, honest conversations about the issues at hand and then either recommend our service or another one that is a better fit for your needs. If you'd like to engage in that type of discussion, or have general questions about this issue, please schedule a free consultation.