Is There a Solution to Price Erosion?
Price erosion most often happens to brands when they don’t have a MAP policy in place, or when they’re unable to enforce their MAP policies. And for retailers looking to improve their eCommerce sales growth, price concessions can hit hard and fast.
Competing with this price erosion in various marketplaces requires a professional approach. Here at Pattern, our eCommerce and Amazon consulting experts have gotten to the bottom of price matching.
What is price erosion?
In a nutshell, when retail sellers start lowering their prices to win the Buy Box on Amazon and other eCommerce marketplaces, it can slim brand’s margins as they make price concessions over and over again to match those sellers’ prices.
When both brands and their sellers start to drag down prices, this creates a whole host of problems for brands, said Melanie Alder, Pattern CIO and Founder.
“In the race to the bottom, pricing erosion happens for brands,” she said. “During that process of pricing erosion, the brand is the one that suffers, and so it’s all about protecting their price and, essentially, their margin.”
A brand-by-brand solution
When talking about solutions to price erosion, Chris Vincent, Pattern’s EVP of International, said it’s important to think about the problem individually.
“Increased margin pressure is one of those areas where there are a number of different tools that you can drive towards fixing that, but really it comes down to a brand-by-brand solution,” Vincent said.
Why? Well, for effective brand protection and to maximize their eCommerce sales growth, some sellers will likely take a more hard-line stance on their price erosion problem and cut off supply to those retail sellers, but others who are more partnership-based won’t be willing to sacrifice those ties just yet.
“I don’t think there’s any one solution out there in the market that we’re seeing is super effective at the moment,” Vincent said. “The question really is, how much pain does the brand want to take now, and how are they going to sort it out, and what is their game plan for the long term?”
Just because there isn’t one fix-all solution doesn’t mean that solutions don’t exist, however. At Pattern, our eCommerce and Amazon consulting experts work with our partner brands to create individualized plans tackling price erosion problems in whatever way works best for their brand.
How do we do it? By:
- Creating a MAP policy that brands can enforce.
- Helping brands identify unauthorized sellers through our proprietary software.
Want a customized pricing erosion solution? Contact us below.