Brands and retailers know better than anyone — one bad apple can ruin the whole bunch. 

In a competitive market where consumers can compare and shop for the best prices in an instant, sellers are incentivized to offer the most competitive prices. But pricing is a delicate dance between brands, their retailers and consumers to ensure fair value, profit margins and the highest quality products.

What can you do to prevent deep discounts from eventually driving your products off the digital shelf? Here’s everything you need to know about price erosion and how to stop it.   

What Is Price Erosion?

Price erosion is what happens when a retailer or a marketplace seller discounts a product to a new market low (meaning it offers the best online price for this item) and triggers a chain reaction where other sellers lower their prices in a “race to the bottom.” This results in a loss of profit for all sellers of this product, , as well as potentially damaged partnerships between the brand and its retailers. 

While consumers may benefit from lower prices in the short run, price erosion can result in lowered quality or total elimination of the product down the road. 

With so many sellers, high-traffic marketplaces can be hotspots for potential price erosion. Sellers, both authorized or not, may compete on a listing to offer the best possible price. Retailers and sellers on other marketplaces could pick up this new price and try to match it, or worse, beat it. This could happen even if your retailers signed a minimum advertised pricing (MAP) policy: either they knowingly violate it, or they have automated repricers that are not configured with a floor price.

Why Is Price Erosion Bad?

What’s wrong with a little competition? A lot — especially when prices are so low that no one wins. Beyond losing a sale here or there, all parties involved get hurt by price erosion’s long-term effects. Namely:

• It diminishes product and brand value. Deeply discounted products come across as cheap and lose their exclusivity, harming luxury brands and those that tout high product quality. 
• It disincentivizes retailers. When their profit margins shrink and they lose to competitors, retailers have no reason to continue selling price-eroded products. This is especially true when authorized retailers cannot move below MAP pricing to compete with the offending sellers. 
• It risks total brand revenue. If they can’t achieve desired margins, retailers may push for refunds or markdowns, cutting into brand revenue. Plus, consumers may begin to expect discounts, holding out on full-price items or failing to purchase at all. 
• It forfeits retail partnerships. Price erosion can force retailers to break ties with your brand and partner instead with competitors who have more beneficial pricing policies. 

Even worse, price erosion isn’t specific to e-commerce. It can trickle down to brick-and-mortar sales too. While these stores can still secure sales by offering coupons and price-matching programs, it results in lost profits from making up the difference. 

How Can You Avoid Price Erosion?

Price erosion is not a problem with a quick and easy solution. However, you can take proactive steps to curb its influence.

Create a MAP and Other Seller Agreements

If you don’t already have a minimum advertised price (MAP) policy in place, it’s imperative you create one before going any further. Your network of sellers can’t adhere to your MAP rules if you don’t have them. You can also devise a reseller agreement that outlines all of your expectations prior to beginning the relationship. These rules give you leverage to take disciplinary or even legal action if needed down the road. Please note that MAP policies are often illegal outside of the US.

Choose Retailers Wisely

The more the merrier, right? Unfortunately, one of the main causes of price erosion is a wide distribution with too many sellers. Rein in access to your products by being strategic about the channels and marketplaces you sell on in addition to the selling partners you choose. Create an approval process and select sellers who have:

• Similar brand values and who practice integrity
• High ratings
• A positive and credible online presence
• A compliant return policy

From there, keep in close contact with your authorized sellers and regularly audit your approved partners list to ensure credibility. 

Regularly Assess Your Pricing 

The market is constantly in flux, warranting the need to modify prices and thresholds over time. Be realistic about your MAP policies so retailers can comply. If the MAP is too high, it might fail. If it’s too low, you may leave money on the table. 

Automate Price Monitoring

There are too many sellers and channels to manually monitor price fluctuations. Implement an automated price monitor to be your “eagle eyes” across the internet so you can spot price fluctuations and MAP violators early and often. Look for a high-frequency price monitor: if multiple sellers drop their price, it can tell you which one did it first.

Stop Price Erosion Before It Starts

The market is too saturated with competing sellers to not have a pricing strategy in place. Rithum’s Managed Services experts can guide you through the process to devise a pricing strategy, implement price monitoring and make the biggest impact on your profit margin. Over 20+ years, we’ve helped companies fight pricing wars with proven technology and ironclad strategy. Let us help you execute the best repricing options to accomplish your goals and continually monitor performance as circumstances change. 

Contact us to learn more or request a demo with our team of e-commerce experts today to get started.  

The post What Is Price Erosion and How You Can Stop It appeared first on Rithum.

This is the final installment in a three-part blog series on the 3 Global E-Commerce Tactics to Address for Success in 2023. Check out the first installment on adapting to changing consumer behavior and the second on increasing product visibility and shoppability to learn more. 

The market has long been bracing for a potential recession in 2023. Consumers have felt the pull too, preparing for harder times by shying away from large purchases and opting for the necessities instead. 

Instead of shying away, we believe now is the time to double down, tune up your consumer/partner relationships and execute digital shelf operations with precision and heightened attention to detail. 

Focus on the Things You Can Control

While you can’t change the economy or directly influence consumers’ purchasing habits, you can step up your digital shelf execution. That way, when consumers are finally ready to purchase, they know exactly where to turn. We recommend that you: 

• Lean into personal relationships. One currency that doesn’t fail in a recession is personal connections. Spend time nurturing retailer relationships and strengthening ties that will be harder to sever when push comes to shove. This is even easier to accomplish when you have Brand Analytics data in hand to streamline partners’ jobs with the ability to spot pricing mistakes, check content accuracy and compliance and monitor out-of-stock products.
• Fine-tune the details. If retailers start carrying less of your brand SKUs, counterbalance by stepping up your digital shelf execution. Win the digital shelf by making products easy to find and seamless to purchase. Audit SKUs for prices, stock rates, visibility and content so the surviving products you do have on the shelf perform at their peak. By staying attentive to the performance of each product, you can help maximize conversion rates. 

Improve Execution, Recession or Not

You can’t always predict consumer behavior or economic volatility — but you can stay alert and proactive in your approach. Even without a looming recession, you can always step up your e-commerce game with strategic execution that prioritizes:

• Staying in tune with consumer behavior trends
• Expanding to and selling in the channels where target customers browse, research and shop
• Executing advanced retail media campaigns that target the right audiences
• Fine-tuning content and product details to increase visibility
• Streamlining customer experiences from click to purchase
• Doubling down on key campaigns and SKUs to maximize conversion
• Monitoring campaign performance and product analytics

Rithum’s Managed Services professionals help you spot trends early and often, so you can tweak campaigns and achieve goals even in an atypical environment. With solutions like brand analytics, and professional guidance in digital marketing and automated feed management, we help you spot the program areas that need immediate attention while planning ahead for growth.

Download the full eBook, 3 Global E-Commerce Tactics to Address for Success in 2023, for more tips and tactics as you navigate the year ahead.

The post 2023 E-Commerce Series: Drive Excellent Digital Shelf Execution (Part 3) appeared first on Rithum.

Consumers continue to seek their favorite brands on marketplaces like Amazon, Walmart, Target and eBay — but these aren’t the only profitable options for selling your products. Each marketplace reaches a different audience and has a different set of listing requirements. Winning in different marketplaces requires a three-pronged approach of:

1. Launching successfully
2. Building a winning strategy
3. Defending your brand’s position

Whether your brand is new to marketplaces or has been looking to grow its online presence for a while, these three phases will help set you up for e-commerce success.

Launch Successfully

It’s important to take the right steps to thrive in a new marketplace. From preparing your retailer network to ensuring data feeds are accurate, you must address several essential elements from the start:

1. Register your brand. This is the first step to ensuring consumers receive accurate information about your products. Start by enrolling in brand verification and registration programs for greater control over your listings. 
2. Address your retailer network. Rithum makes this easy with solutions like Where to Buy Online, sending consumers directly from your website to preferred retailers’ listings, and Brand Analytics, helping you manage online distribution, grow sales and protect your reputation. 
3. Meet data feed requirements. Each marketplace has its own unique structure. To comply, it’s essential to transform your data to meet the specifications of each individual destination. This includes both sending product information and receiving order data. Rithum Product Feed Management enables you to meet these requirements, deliver the data in a variety of formats and track the success of feed delivery. 
4. Resolve listing errors. Consumers expect a positive experience with your brand no matter what marketplace you list on. But listing errors can cause products to appear incorrectly — or not at all. A system that flags and resolves errors will keep your listings available and visible in any fast-paced online selling environment. 

Build a Winning Strategy

Now that you’re up and running, it’s time to win in the marketplace and stand out from the competition. This requires full visibility of the competition present in major channels to understand how other sellers are promoting and positioning their products. This is especially true on Amazon, where identifying small changes as they happen may make all the difference.

One of the most important factors in marketplace competition is price. Yet, it’s difficult for brands to price competitively while still protecting retail networks. To help, automated repricers allow you to set parameters around pricing values while preventing the potential for undercutting retailer listings. 

A winning marketplace strategy also requires maximizing product visibility through advertising. Rithum’s Retail Media Services helps connect your products with more consumers on marketplaces and retail sites with expertise from a team of e-commerce professionals. These experts provide the proper support to ensure no opportunity is missed and your campaigns are executed in a cost-efficient manner. 

Lastly, incorporating multiple fulfillment solutions into your strategy allows you to build more resilient fulfillment operations. The Rithum platform is designed for maximum flexibility, supporting a wide range of fulfillment options, including owned warehouses, Fulfillment by Amazon (FBA) and Walmart Fulfillment Services (WFS) and third-party logistics providers (3PLs).

Defend Your Position

Once you’re thriving in a marketplace, it’s important to defend your position with vigilance. One of the best ways to do this is through benchmarking. This allows you to use the data you collect from online distribution channels to improve your processes, strengthen retailer connections and boost revenue. Consider monitoring categories like:

• Assortment and stock to ensure products are on sale where they should be
• Price and promotions to understand the pricing dynamics within your online retailer network
• Search and digital shelf to ensure customers find your products anywhere they’re on sale
• Content and reviews to showcase your brand at its best

In addition to benchmarking, Rithum Brand Analytics empowers your brand with the most helpful, intuitive dashboards and insights on things like exports and extracts, email notifications and more. With all the nuances selling online can bring, having an expert with years of e-commerce expertise and a suite of tools for all levels of your brand in your corner makes all the difference.

Get more tips for winning in the marketplace by downloading our white paper, The Three Phases of Winning Marketplace Strategy for Brands. 

If you’re ready to learn more today, request a demo to see how Rithum can help you thrive in today’s e-commerce landscape.

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