{"id":114988,"date":"2023-02-02T14:57:51","date_gmt":"2023-02-02T14:57:51","guid":{"rendered":"https:\/\/www-dev.channeladvisor.com\/blog\/uncategorized-au-2\/what-is-price-erosion-and-how-you-can-stop-it\/"},"modified":"2023-11-29T10:44:59","modified_gmt":"2023-11-29T10:44:59","slug":"what-is-price-erosion-and-how-you-can-stop-it","status":"publish","type":"post","link":"https:\/\/old.rithum.com\/au\/blog\/what-is-price-erosion-and-how-you-can-stop-it\/","title":{"rendered":"What Is Price Erosion and How You Can Stop It"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Brands and retailers know better than anyone \u2014 one bad apple can ruin the whole bunch.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">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.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">What can you do to prevent deep discounts from eventually driving your products off the digital shelf?<\/span><span style=\"font-weight: 400;\"> Here\u2019s everything you need to know about price erosion and how to stop it.\u00a0\u00a0\u00a0<\/span><\/p>\n<h2><b>What Is Price Erosion?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">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 \u201crace to the bottom.\u201d 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.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">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.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">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.<\/span><\/p>\n<h2><b>Why Is Price Erosion Bad?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">What\u2019s wrong with a little competition? A lot \u2014 especially when prices are so low that no one wins. Beyond losing a sale here or there, <\/span><i><span style=\"font-weight: 400;\">all<\/span><\/i><span style=\"font-weight: 400;\"> parties involved get hurt by price erosion\u2019s long-term effects. Namely:<\/span><b><\/b><\/p>\n<ul>\n<li aria-level=\"1\"><b>It diminishes product and brand value.<\/b><span style=\"font-weight: 400;\"> Deeply discounted products come across as cheap and lose their exclusivity, harming luxury brands and those that tout high product quality.\u00a0<\/span><\/li>\n<li aria-level=\"1\"><b>It disincentivises retailers.<\/b><span style=\"font-weight: 400;\"> 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.\u00a0<\/span><\/li>\n<li aria-level=\"1\"><b>It risks total brand revenue. <\/b><span style=\"font-weight: 400;\">If they can\u2019t 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.\u00a0<\/span><\/li>\n<li aria-level=\"1\"><b>It forfeits retail partnerships. <\/b><span style=\"font-weight: 400;\">Price erosion can force retailers to break ties with your brand and partner instead with competitors who have more beneficial pricing policies.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Even worse, price erosion isn\u2019t 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.\u00a0<\/span><\/p>\n<h2><b>How Can You Avoid Price Erosion?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Price erosion is not a problem with a quick and easy solution. However, you can take proactive steps to curb its influence.<\/span><\/p>\n<h3><b>Create a MAP and Other Seller Agreements<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">If you don\u2019t already have a <a href=\"https:\/\/www.rithum.com\/blog\/marketplaces\/what-is-a-map-pricing-policy\/\" target=\"_blank\" rel=\"noopener\">minimum advertised price (MAP) policy<\/a><\/span><span style=\"font-weight: 400;\"> in place, it\u2019s imperative you create one before going any further. Your network of sellers can\u2019t adhere to your MAP rules if you don\u2019t 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. <em>Please note that <\/em><\/span><em><a href=\"https:\/\/www.rithum.com\/blog\/marketplaces\/what-is-a-map-pricing-policy\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">MAP policies<\/span><\/a><span style=\"font-weight: 400;\"> are often illegal outside of the US.<\/span><\/em><\/p>\n<h3><b>Choose Retailers Wisely<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">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:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Similar brand values and who practice integrity<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">High ratings<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A positive and credible online presence<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A compliant return policy<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">From there, keep in close contact with your authorized sellers and regularly audit your approved partners list to ensure credibility.\u00a0<\/span><\/p>\n<h3><b>Regularly Assess Your Pricing\u00a0<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">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\u2019s too low, you may leave money on the table.\u00a0<\/span><\/p>\n<h3><b>Automate Price Monitoring<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">There are too many sellers and channels to manually monitor price fluctuations. Implement an <\/span><a href=\"https:\/\/www.rithum.com\/au\/solutions\/brand-analytics\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">automated price monitor<\/span><\/a><span style=\"font-weight: 400;\"> to be your \u201ceagle eyes\u201d 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.<\/span><\/p>\n<h2><b>Stop Price Erosion Before It Starts<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The market is too saturated with competing sellers to <\/span><i><span style=\"font-weight: 400;\">not<\/span><\/i><span style=\"font-weight: 400;\"> have a pricing strategy in place. <\/span><a href=\"https:\/\/www.rithum.com\/au\/managed-services\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Rithum\u2019s Managed Services<\/span><\/a><span style=\"font-weight: 400;\"> experts can guide you through the process to devise a pricing strategy, implement price monitoring and <\/span><a href=\"https:\/\/www.rithum.com\/au\/resources\/library-webinars\/maximizing-retailer-partnerships-with-brand-analytics\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">make the biggest impact on your profit margin<\/span><\/a><span style=\"font-weight: 400;\">. Over 20+ years, we\u2019ve helped companies fight pricing wars with <\/span><a href=\"https:\/\/www.rithum.com\/au\/solutions\/\"><span style=\"font-weight: 400;\">proven technology<\/span><\/a><span style=\"font-weight: 400;\"> and ironclad strategy. Let us help you execute the best repricing options to accomplish your goals and continually monitor performance as circumstances change.\u00a0<\/span><\/p>\n<p><a href=\"https:\/\/www.rithum.com\/au\/contact-us\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Contact us<\/span><\/a><span style=\"font-weight: 400;\"> to learn more or <\/span><a href=\"https:\/\/www.rithum.com\/au\/request-a-demo\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">request a demo<\/span><\/a><span style=\"font-weight: 400;\"> with our team of e-commerce experts today to get started.\u00a0\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Brands and retailers know better than anyone \u2014 one bad apple can ruin the whole bunch.\u00a0 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 [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":114916,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"tags":[13207,8337,9670,9410,13208],"asset-type":[13744],"audience":[13407,13410],"bio":[14335],"topic":[15166,15167,5153],"class_list":["post-114988","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","tag-automated-repricer-au","tag-brand-analytics-au","tag-map-au","tag-pricing-uk-au","tag-retailer-partnership-au","asset-type-blog-au","audience-brands-suppliers-au","audience-retailers-au","bio-rithum-team-au","topic-brands-au","topic-scot-au","topic-marketplaces-au"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v25.3.1 (Yoast SEO v27.5) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>What Is Price Erosion and How You Can Stop It - Rithum<\/title>\n<meta name=\"description\" content=\"Learn everything you need to know about price erosion and what your brand can do to stop it. 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