The Diversion Problem: Unauthorized Sellers are robbing you blind
Updated: Jul 19, 2022
We've all been there. You're scrolling through Amazon, and you see your brands new product, that just launched into the market significantly discounted. As you research the listing further, you realize that the "seller" is something strange, like a random person in China or someone selling out of a house, apartment, or UPS store. All the hype, marketing, and inventory that you have placed with other sales outlets is now compromised by unauthorized sellers who are undercutting your prices and stealing your sales. So, what can we do about it? In this post, we'll discuss the diversion problem and how to deal with unauthorized sellers.
The diversion problem occurs when your product is sold by unauthorized sellers below the value that you’ve set for it in the marketplace which allows your retail partners to hit their margin requirements and drives your brands’ position in the market. Continued attacks on your product values will have a major impact on your profitability and hurt other retailers who have made a significant investment in your product. When customers see that they can get the same product for a lower price online, they are less likely to buy it from the retailer or will ask them to match the price.
If you are not actively managing your distribution channel, there is no question, unauthorized sellers are negatively impacting your profitability, product values and, brand health. So, what can you do about it?
We have our favorite option from the choices below, but there are a few things you can do to deal with unauthorized sellers and protect your product values.
You can contact Counter Diversion to track down the source of the products unauthorized sellers are listing. This can seem difficult and overwhelming, but if you can find out where they are getting the product from you can put a stop to it. With the right process, tools and engagement, it’s easier than most people think.
You can take legal action against the unauthorized sellers. This may be difficult and expensive, but it is an option and can be an effective way to set an example that other knowledgeable sellers will take future Cease & Desists more seriously.
You can work with Amazon, eBay or other marketplaces to get the listings removed. This is usually inconsistent and time consuming. If you are successful on one marketplace, the listings will migrate to another, and the product is still in the wrong hands.
The growth of marketplace sales channels like Amazon have made all product listings and the values tied to those listings more visible. Premium products should command a premium price and drive your consumer loyalty. Outlets that you allow to sell your products must value your brand as much as you do. They need to be willing to invest in a premium overall consumer experience for the sake of your brand and their future as a retailer. Otherwise, they risk damaging your brand and reducing the overall value of your products.
Most premium brands carefully select the right distribution outlets to ensure that their products are presented in the best possible light and that their value is properly reflected. While marketplaces may be able to replicate some of this with solid detail pages and the advantage of consumer reviews, and convenience, multiple listings on one detail page or on one marketplace will always put pressure on product values. This opens the door to individuals that do not value your brand or their relationship with it. The ultimate question becomes, if a brand invests in the research and market need for a product, the product development cost, the inventory, the marketing, the effort to select the right distribution, the sale of the product to the retail outlet, convincing the buyer to invest their open to buy budget on that product, why wouldn't the brand invest in protecting this entire investment? If you're not already, TRY IT, every retailers who values your brand will applaud your efforts.
In other posts we discuss maximizing the inventory manufacturers have on hand to drive profitability and in future posts we will discuss the delicate balance of total distribution and the impact private labels have on market share and profitability.
Managing the distribution channel is the most important thing a brand can do for long term health. Unauthorized sellers are robbing brands of profitability, product value and brand equity daily. Follow us on LinkedIn and schedule a free consultation to learn more about how we can help. Also, leave us a comment on your thoughts and other topics around brand protection you would like to know more about.
Thanks for reading!
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, please schedule a free consultation.