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Distribution control is key as the digital environment grows. Digital monitoring of third-party distributors is now an important part of a brands online protection strategy.
In just two years, global e-commerce sales grew by an unprecedented 45.8%. A large part of this growth was attributed to the global pandemic (which impacted buyer behavior like nothing before). This, combined with the expanding number of active internet users which reached 63% globally emphasized the importance of digital monitoring and distribution control.
With the emergence of new channels where sellers can trade products, and the ever-increasing number of consumers who prefer to purchase products online our (exclusive e-commerce research study found that 97% of consumers have made an online purchase in the past 12 months), companies are experiencing and reporting reduced visibility and control of their online sales strategy.
Digital monitoring of where your products are sold and by which seller using a cross-channel tracking solution that provides visibility and delivers useful data is the key to managing your online distribution network.
In this article, we take a closer look at problems many brands face in their day-to-day activities, the issues that arise when distribution control is lost, and the options available to help manage your entire distribution chain.
The only way to guarantee that your products are being distributed through the channels you have chosen and by authorized sellers is through digital monitoring, providing visibility of who is selling your products in both local and foreign markets.
Authorized distributors: a third-party who has the legal right to distribute a company's products through online retailers, physical stores or both. These distributors must comply with certain requirements that vary depending on the legal terms of agreement.
Unauthorized distributors: a third-party who sells products of a company without having legal permission to do so. These sellers often infringe the MAP (minimum advertised price) of products, and fail to promote or highlight product features in an accurate manner, (this can be considered a grey market / gray market situation).
Authorized and non-compliant distributors: a third-party who has the legal right to distribute a company's products through online channels, in physical stores, or both. However, in contrast with authorized distributors, these distributors do not respect their contractual distributor agreements. Problems that may arise with these types of authorized and non-compliant distributors include parallel imports that occur when an original product is sold to unauthorized markets and countries, and gray markets that occur when authorized distributors are clearing stock through unauthorized channels.
An increase in the number of available digital marketplaces and channels where products are sold has made it far more difficult for brands to monitor and protect their online distribution strategy.
If you don’t have an effective distribution control solution in place to monitor distributors and manage third-party sellers then it is extremely easy for authorized distributors to trade your products outside of your contractual agreements. Moreover, it is also simple for unauthorized distributors to sell your products without your knowledge.
When planning online distribution strategies, companies define authorized market channels where they wish to showcase and sell their products, and also listing unauthorized channels where companies do not wish to sell their products for various reasons. Once defined, distribution monitoring is crucial in the interest of online distribution control.
Online marketplaces drive more sales and revenue than any other e-commerce channel. In 2021 they generated $4.9 trillion of the total e-commerce market revenue, so, it's little surprise that so many brands and resellers can be found promoting their goods here. However, being the preferred channel for more than 70% of global consumers does not come without its dangers…
Due to the sheer number of digital marketplaces across the globe, the vast number of registered sellers that operate here, and an endless array of products on offer, retaining visibility is imperative.
Online marketplaces, such as eBay, Amazon, and AliExpress, drive more sales and revenue than any other e-commerce channel. Amazon alone already has more than 1.9 million active sellers.
This high number of active sellers makes it harder to maintain visibility, and with reduced visibility the possibility of authorized sellers failing to comply with their contractual agreements and the existence of unauthorized sellers without your knowledge increases. This negatively impacts your distribution strategy, third party seller relationships, and ultimately your product sales and brand reputation.
Gray markets refer to the trade of authentic products, either through an unauthorized channel, by an unauthorized distributor, or both. Therefore, the product is authentic, but it has been sold in a non-compliant manner.
There are various reasons why original items may be sold in this manner, but the most common occurs when authorized sellers’ clear excess stock, or due to demand from markets or regions where the original item is unavailable. Many brands have a lack of online sales control which allows grey market vendors to take advantage.
Vendors or distributors have also been known to use official brands as mere warehouses, making advanced sales of products that they don’t have in stock, becoming third parties that do not add any value to your distribution chain.
Fake branded products known as counterfeits, are sold under your company's name without your authorization. These products are usually made of low quality materials which negatively impacts your revenue and reputation.
Products made from low quality materials are not only harmful to your brand, but may pose a real health risk to the end user. Faulty electronics, products for use on the hair or body which are made from toxic ingredients, or items which do not meet minimum safety standards can cause serious injury or even a risk of death.
Counterfeits are created with the primary purpose of deceiving consumers, exposing online shoppers to negative experiences. In fact, when consumers unwittingly buy counterfeit products, they often blame the official brand. According to our latest e-commerce research study 28% of customers stopped buying products from the official brand as a result of buying a fake branded product online.
Resellers do not always respect predefined contractual agreements regarding pricing, stock, image, etc. Many promote items for a reduced price which attracts online shoppers to their store, encouraging customers to make a purchase due to lower prices than those offered by other sellers.
Having a misaligned sales strategy throughout your channels can hurt your reputation and your revenues. Externally, it can also damage your relationships with other distributors as they can consider that their requirements are not being recognized or that you are favoring others over them.
Parallel imports occur when an authentic product is imported by a third-party (for example your approved distributor) to an unapproved location without your knowledge or consent.
You have no control of any changes made to the product, the information that is provided at the point of purchase, or the quality, packaging, or the condition of the product itself.
This can harm your future expansion plans to new markets or regions, your branding strategy. Your products might be available on online platforms without your brand guaranteeing the product environment (packaging, description, shipping expenses...) and above all, your relationships with your resellers.
A good relationship with your distributors is essential not only for operational purposes, to maintain a cost-effective distribution channel strategy, but also to maintain your reputation and increase your consumers' trust in your brand and in your products.
Many brands have a lack of online distribution control which opens the door to various threats including those mentioned above (grey market situations, fake branded products, and misaligned sales strategies). Distribution monitoring throughout the digital channels where your products are being sold and by which seller with a cross-channel tracking solution provides you with greater distribution control.
Using the latest AI and machine learning technology we adapt our service to your individual business needs. Moreover, our automated, distribution channel monitoring and protection software provides you with full visibility of your products sales throughout not only the digital distribution channels in which you operate, but also those you don't.
Overall, Smart Protection´s Online Distribution Control solution will enable you to have full visibility of where your products are being sold online, access data and insights to back up your business decisions, and take action when activity is happening outside your agreed distribution agreements.
