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How Brands can avoid and respond to Marketplace Price Wars
Brands avoid price wars by monitoring (3P) prices online. Avoid lack of price integrity across ecommerce channels with SiteLucent Price Tracking Software.
Sellers who offer the lowest pricing options on a marketplace can take over the Buy Box from you as a brand owner/vendor. What should you do and not do in this situation?
To avoid sellers taking over the buy box from you as a vendor, manufacturer, or brand, you have to show and convince the marketplace that you are a reliable seller, providing high-quality products and top-notch customer service.
If your products have (near)perfect performance metrics, you may be able to price higher than other sellers and still win/keep the Buy Box.
To avoid a price war you should not allow too many resellers in a distributed area - set proper territories. If possible, switch to a selective distribution model (for at least some products) to cut off supply to unauthorized sellers, that are not within your brands' selection of distributors and resellers.
But what do you do if a market participant (retailer, 3P seller, or competitor) succeeds to undercut you by continuously lowering product prices to capture greater market share?
The effects of Price Battling
Brand and / or product loses value:
When in a price battle, 1 retailer pushes a price lower, others follow or go even lower. Customers get confused because of this and products lose value.
When prices are not stable, buyers know this and can wait to purchase until a price drop. Those who already bought the products and see the price drop, feel cheated, which results in higher returns and degradation of a brand.
On Marketplaces, price wars can lead to losing product listings, become “ineligible” for advertising, lose buy box placement and buy box eligibility.
Price battling can weaken the distribution channel:
When wholesalers and retailers lose interest in promoting, or even stop selling your products.
To keep your prices stable and competitive, and to be aware of losing the Buy Box, it is necessary to monitor listings and prices constantly. Not only the prices of sellers on the platform, but also external sites of retailers, and even competitors.
If your product is available for a lower price elsewhere, they are often using an aggressive pricing strategy where the offering is not even profitable. Amazon’s pricing algorithm will find that price and match it. The item is then also no longer profitable for Amazon.
This lack of price integrity across eCommerce channels could throw your product onto the CRaP (Can’t Realize any Profits) list – Amazon’s label for the items that are structurally unprofitable to sell on its marketplace.
What NOT to do if you lost the Buy Box to a seller with a lower price?
Do NOT lower the prices of your products.
- Once you win back the Buy Box, it is almost impossible to negotiate your prices back up.
- You risk the item ending up on the CRaP list which means you risk among others: losing product listings, become “ineligible” for advertising, lose buy box placement and buy box eligibility.
- You risk that the item can't realize any profit for yourself, due to VAT, fees, shipping, and other costs.
Example of margin calculation when selling on marketplaces
What to DO about this?
- Enforce a Minimum Advertising Policy (MAP) in countries where they are used, to prevent other sellers (on and off the platform) from undercutting your prices.
- If they do, warn these sellers about their violation of your MAP/MRP policy. If the situation persists, take necessary actions.
- Evaluate the profit margin of your products. For instance, consider reduce shipping costs by packing smarter and lighter, or shipping products in a multipack instead of per unit.
- If you lower your price to win back the buy button, offer discounts for a limited duration (but only if you can protect your margins).
How Can SiteLucent Help?
Keeping prices stable and avoiding price wars is an overall indicator of success on 'the digital shelf'.
SiteLucent software continuously crawls eCommerce shop and marketplace shelves, looking through the customer lens to capture anything a shopper can potentially see, including product prices.
Continuously monitoring product prices of your products, 3P sellers, retailers, and competitors, on all eCommerce channels, can help you protect your brand from price wars, and keep your prices competitive at the same time.
By setting up alerts on product prices, you save yourself and your team time and effort. Receive an email or notification whenever a price drops, and take action.
Besides prices, product detail pages are full of other eCommerce touchpoints that are helpful to monitor for you as a Brand-owner or eCommerce professional.
Are you selling your brands' products on multiple online channels, including marketplaces?
We'd love to show you how your brand and products can:
- Drive eCommerce sales
- Be brand-compliant on all eCommerce channels
- Avoid channel conflicts
- Lower return rates
- Win the buy box
Or all of the above!