My Retail Partners Are Mad at Me: Why You Need to Fight Margin Erosion

Pattern Data Science

September 3, 2019

Fight Margin Erosion

You sell a shirt at $34 in your brick-and-mortar stores. Customers go in, find one they like, and all seems well—until they price-check the shirt online and find the exact same one on Amazon for only $18.

Your retail partner calls, telling you that if you don’t get your online prices under control, they’ll slash your margins by 50%—or worse, will stop carrying them altogether.

Sound frustratingly familiar?

Fight margin erosion

Out of nearly 3,500 consumers surveyed across the U.S. and U.K., 80% said they check prices and reviews on Amazon before making a purchase, according to The Future Shopper Report from commerce company Salmon.

Well, that’s no biggie if your product prices are consistent. If they’re not… It can cause a whole host of problems for brands and their retailers, said Whitney Gibson, Vorys Leader of Online Seller Enforcement.

“It ends up causing margin erosion in retailer’s brick-and-mortar channels because retailers are going to come back and negotiate with the brand and basically point to these unauthorized sellers and use that to lower the price of their products, or they’ll actually go to the next level and refuse to carry the products,” Gibson said.

Avoid price bargaining

Getting in control of your brand by enforcing MAP not only ensures that your consumers are getting a consistent experience across all platforms, it ensures that your retailers can’t use lower online prices to bargain for better prices themselves.

“Retailers are going to essentially use online prices as a bargaining chip for them in the relationship. They’re going to say, ‘We need better pricing because obviously they’re getting better pricing online,’” said Garrett Bluhm, former VP of eCommerce and Strategy at Pattern. “So it creates a little bit of conflict there when you’re trying to standardize or harmonize your pricing across markets.”

That conflict can end up driving down your prices as you give concessions to your retailers to try and keep them happy. So how can you grow your brand but stay in control without giving in to lower and lower prices?

“You’ve got to manage growth and at the same time you’ve got to manage control,” said David Wright, Pattern Founder/CEO.

At Pattern, we can help you grow by empowering you to get your pricing under control. Get in touch below to learn more about our MAP enforcement solutions.

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