What is supply chain management and what is the impact of distribution?
Since the beginning of 2021, supply chain management and distribution have become a hot-button issue for e-commerce teams, stockbrokers, and big-box retailers worldwide.
Distribution is the channel that enables the goods between brands and consumers from the point of origin to the point of consumption.
Your brand may implement different distribution strategies: indirect, intensive, selective, and exclusive.
The most successful distribution strategy depends on your product category, company’s positioning, and manufacturing capacity. Each aspect must be considered when considering the best retail partners.
i2o Retail’s clients have seen higher sales and better awareness using each distribution channel, but specific approaches can be an obstacle to winning in the Amazon retail space.
In many cases, companies that use indirect and/or intensive distribution have more problems with unauthorized Amazon resellers and 3rd party listings.
Brands that achieve high visibility from intensive distribution are more susceptible to inventory leakage.
Brands that have sales growth from indirect distribution will often experience issues with price enforcement, especially if the catalogue is large and difficult to monitor.
But what happens when there is no control over distribution?
Enter the world of Amazon resellers.
In the early days of e-tail, third-party resellers existed, mostly on eBay.
Today, Amazon has low barriers to entry and it is easy for individuals to sell random products out of their garages, fulfill orders via drop shippers, and do business that does not require traditional retail infrastructure.
The pervasiveness of third-party resellers leads to a poor customer experience when a well-known brand’s products are sold by random individuals with no stakes in the brand’s long-term success.
Many consumers, however, have no idea that a brand is not the driver of fulfillment behind the Amazon listing. In fact, most customers believe the company shipping their order is authorized by the brand.
The reality is many products on Amazon may be stolen, end of life and discontinued, expired and liquidated, or not eligible to be sold in a particular country.
How to mitigate your risk on Amazon:
Tighten distribution to avoid channel conflict.
Too many distributors cause intense competition across big box retail channels. As a result, your products can encounter price erosion from regular promotions or high return rates because better deals can be found elsewhere.
Find ways to avoid price arbitrage scenarios.
Companies, for example, will offer discounts on DTC. But if the discount is large enough, resellers will buy the product via DTC and then resell it on Amazon and other marketplaces at a higher price.
Companies have different pricing for different countries. When the price gap is big enough, resellers will buy from one country and sell it in another.
Consistently monitor your supply chain
Products, for example, sold at a lower price for Latin American markets are turned around in Miami and sold in the U.S.
You need tight control over your supply to control volume and reduce oversupply.
Prioritize vendor relationship management
Build trust and maintain regular communication with your distribution partners. Show that you care about their success because they benefit when your product’s reputation is protected and they suffer when it does not.
Advance notification should be provided when marketing activities are planned that could impact sales.
Enforce MAP and other brand policies
Be clear about your organization’s MAP policy and where there is leeway to discount. It is also important to define misuse of MAP.
Align with distribution partners to determine product seasonality outside of holidays when there may be authorized discounts during a specific time of year like Mother’s Day, Back to School, etc.
Determine best practices to control volume and reduce oversupply
It is tempting to maximize wholesale purchase orders to boost the bottom line. Oversupply, however, can force the need to move or liquidate inventory fast. This can lead to price erosion, and constant discounts, and diminish the customer’s mindset about scarcity.
Make data-driven decisions with problem-solving and insight-driven software
Explore working with a company that specializes in reseller management. They can discover and remove unauthorized Amazon listings from 3rd party sellers. As important, they can identify Brand Registry violations and instantly remove unauthorized sellers.
To learn more about how to improve your distribution management and protect your brand from unauthorized resellers, book a 30-minute discovery call.