When you design and manufacture a brilliant product, you’re probably more than eager to throw it onto the market and share it with the world. The easiest way to do this is to build an incredibly strong network of resellers that will improve your reach and help your customer base grow. There are lots of options out there, but finding the right retailer to sell your product can take some work.
There are plenty of reputable retailers to choose from, and if your product is a game-changer, they might be coming to you. This can make you feel like the coolest kid on the block, which is awesome, but you have to choose smartly. A retailer can be huge, but that isn’t worth much if they aren’t respectful of your brand value.
Some retailers only have a wide audience because of their price perception. Price perception is a reflection of how consumers perceive a company’s pricing strategy. Many larger retailers are perceived as low-cost leaders, like two of the biggest retailers in the world: Amazon and Wal-Mart.
These retailers often compete solely on price and are willing to slash prices regularly to boost sales. Take Wal-Mart for example. Wal-Mart struck a deal with pickle brand Vlasic. The food maker was thrilled to be on the shelves in one of the largest retail chains in the world, but that excitement quickly turned to desperation when Wal-Mart continued to drop the price of the pickles.
This price drop eventually led to Wal-Mart paying Vlasic less and less for their gallon-sized jars of pickles until Vlasic was almost making nothing from each sale. Vlasic made the mistake of viewing Wal-Mart as an indispensable channel, even though they were cutting margins and leading them down a path of lost money. This is because Wal-Mart has a price perception to uphold, and they will go to great lengths in order to do so.
This day in age, the price is still a huge deciding factor in the consumer’s shopping process. And now that transparency is at an all-time high, retailers engage in price wars regularly to win sales over their competitors. Because of this, you have to make sure you build a reseller network you can trust. Prices have a direct influence on brand value, and when prices are dropped your brand is often the one that gets hurt.
There are ways to prevent price wars from harming your brand, and one of the most popular is an established minimum advertised price (MAP) policy. This is an agreement between you and your reseller that ensures that your products’ prices will not be advertised at a price lower than an established threshold. Some resellers violate MAP and there are ways to keep your products out of those retailers’ hands.
Keep Your Reseller Network Focused to Your Vertical
Approaching a retailer like Wal-Mart can be tempting, especially with its broad audience. However, it’s not actually a very good idea if your product is relatively young. Initially selling to big-box retailers can hurt your identity, and ultimately cheapen your brand before it has the strength to grow on its own.
These retailers are inexpensive, but more importantly, they’re unfocused. They sell almost everything under the sun. So how is your product going to stick out in such a wide assortment? Build an initial network to help your brand grow by selling within your vertical. This would include retailers who sell items that are specific to your product’s industry. You can make a name for yourself, and establish a price. You can also grow a core customer base by doing this.
Understand Reseller Pricing/Promotion Strategies
Once you’re ready to grow your network to some bigger name retailers, do your research. Check out their website and look at the prices they offer for goods similar to yours. There are tell-tale signs of MAP violations directly on their sites, and frequent price cuts are one of them. Sometimes these discounts can be difficult to catch because they find loopholes in MAP agreements. For example, if a price is hidden, they are probably violating MAP since they’re technically not advertising the low price.
Discounts can also be a sign of MAP violations. There are two common ways retailers discount products online. They can advertise discounts on specific products, and they can also discount the entire transaction. When a retailer is offering discounts on specific products or offering buy one get one free deal, that can be a bad sign for your product’s MAP.
Consider Selling Direct to Consumer
Many manufacturers have started selling directly to the consumer, completely eliminating the middleman. Doing this can set an example for other resellers, and more importantly, it can solidify your MAP policy. Retailers know you won’t undercut their prices because of your MAP, and you can show them how it’s done.
You might think that selling your items yourself can lead to tense relationships between you and your retailers, but that is far from the truth. In a study conducted by Forrester Research, 82% of manufacturers that started to sell directly to consumers noted improved relationships with their retailers. About 54% began to fulfill reseller orders themselves, which can keep you in the selling process and put pressure on retailers to obey and respect your MAP.
Building relationships with retailers that will acknowledge and respect your MAP agreement is incredibly crucial for your brand value. Constant price wars can ultimately cheapen brands, but MAP policies can prevent them from happening in the first place. Without them, a domino effect can occur. If one retailer drops your product’s price, many can follow to stay competitive.
Luckily, you have the power to choose who you sell to. Putting your product in the hands of respectful, trustworthy retailers can make a world of a difference for your brand. Do your research and take baby steps to make sure your reseller network is just as strong as your brand value.