Pricing Violation Trends: What They Mean for Manufacturers and Retailers
Amazon Prime Day marked the marketplace giant’s largest sales day ever, surpassing last year's Black Friday and Cyber Monday. With the growth of online marketplaces such as Amazon.com comes the proliferation of pricing violations. A new study from ORIS finds that third-party sellers on Amazon are undercutting minimum advertised price (MAP) by 13 percent, while eBay sees about a 20 percent differential and direct-to-consumer sites undercut MAP by an average of 14.7 percent.
The data also shows that, on average, top U.S. brands are experiencing a 27.7 percent pricing violation. While last year’s data found that pricing violations were more likely to occur after 5 p.m. and on weekends, the new study finds that pricing violations are now happening every day, and are almost evenly distributed among weekdays and weekends. Therefore, it's critical that brands create and manage a MAP policy.
Unauthorized sellers many times are the first to move in lowering a price, forcing authorized sellers to follow suit in order to compete for business. This domino effect impacts everyone involved, including the consumer. While it feels good to get a cheaper price, unknowingly the consumer could be purchasing from an unauthorized seller and thus won't receive proper post-sale support should they require it (e.g., dealing with returns or repairs).
Since brands today need to capitalize on big shopping events, like Prime Day, it's critical that manufacturers can easily identify unauthorized sellers and ensure the consistency of their pricing policies. Here are a few simple ways brands can get started:
- Go big … and go small. Check out the big marketplaces as well as smaller, independent websites. While Amazon is often blamed for starting price wars, in reality it's monitoring other websites and is the first to match another site.
- Track it all. Keep a detailed log of the history of all seller violations and your correspondence with them, and keep it in one place so it’s easy to find. Doing so will help you identify patterns and repeat violators.
- Search everywhere. Don’t just rely on Google to monitor your pricing. Comparison shopping engines (CSEs) usually get their information from data feeds, and it may take hours or days for them to pull a new pricing feed and update their reports. On off-hours it's important to click all the way through to the site to verify the price of a product.
Understanding when and how pricing inconsistencies are most likely to occur is the first step in ensuring brand integrity. Therefore, it behooves every manufacturer and retailer to take note of the trends.
Pamela Springer is the CEO of ORIS Intelligence, a provider of actionable insights that preserve pricing integrity for manufacturers.