Retail Apocalypse – What is It?
The term “retail apocalypse” reminds me of a line from the John Travolta movie Broken Arrow. When a character explains that a broken arrow is what the military calls it when they lose a nuclear weapon, another responds, “I don’t know what’s scarier: losing nuclear weapons, or the fact that it happens so often there’s actually a term for it.”
The notion that retail stores are shutting down because so many customers are now shopping online is worrisome enough. But the fact that store closings have become so rampant that the phenomenon now has a name — the retail apocalypse — should frighten every retailer.
In fact, this trend should concern you even if your company sells online only and doesn’t operate a single physical store. Why? Because although the media often misses this in its reporting on the retail apocalypse, you know that a big part of the problem is that the internet has become a haven for gray market sellers. Those sellers use trickery to acquire products, then sell them online for less than the brands’ MAP pricing policy allows — meaning legitimating retailers like you lose business.
If you’re reading this, I’ll assume you’ve been experiencing this problem from at least some of the manufacturers or brand owners whose products you sell. If those brands haven’t solved the problem themselves yet, you can’t afford to wait for them. When they do finally take action, it might be too late for your company — and theirs.
But there are steps you can start taking now to protect both your company and even the troubled brands you represent. Let’s review a few of them here.
2 Tips for Safeguarding Your Company Against the Retail Apocalypse
1. Gather and analyze data to figure out which brands have been compromised by the gray market.
To protect your company from the damage gray market sellers can cause, you need to know which brands are aggressively and consistently enforcing their MAP policies. Those that aren’t might simply be too risky to continue doing business with, because you could get stuck holding inventory that you can’t sell because another retailer is gaming the system and stealing your customers.
But you can’t figure this out by manually monitoring the internet at all times looking for MAP violations of the products you carry. There’s just too much digital ground to cover, and those gray market sellers can change their pricing any second of any day.
That means you need to ask your suppliers how they’re enforcing their policies. If they’re relying on their sellers like you to tell them when there are violations, if they’re casually checking Google while watching College Gameday to see what’s happening with their products, or if they aren’t using real technology to both track and solve their market-control problem, then you know that they’re investing in your relationship, and the long-term sustainability of their brand. There is really only one way to even the playing field for you, and their other partners who are investing in helping them build their brand with your customers, and that’s utilizing an automated solution for MAP monitoring and enforcement that tracks all of those products across the internet, 24/7, automates enforcement daily, and delivers detailed reports about MAP compliance and violations.
Ideally, you’ll want to persuade your suppliers to sign up for such a service themselves. It will give them the ability to continuously monitor their entire resale channel online and will even help jumpstart the enforcement process when a retailer violates their policies.
But if you can’t convince your key brand partners to sign up for such a service, you might want to buy the solution for your own company. It’s this type of business intelligence that will tell you which brands to keep selling, and which ones to avoid because buying inventory from them could cost you.
2. Ask your suppliers to set up authorized dealer programs, with dealer badging and a “where to buy” locator.
Why are so many online shoppers being lured to the eCommerce pages and Amazon sales listings of gray market retailers? First, and most obviously, it’s because these unauthorized sellers offer the same products for less than the rest of the retail market — because the reputable retailers are all obeying the brand’s MAP pricing policy.
But there’s another reason: Shoppers have no way of knowing which seller online is a legitimate representative of that brand, and which has no real relationship with the manufacturer. Many customers would steer clear of a retailer they knew was selling products without the permission of the brand owner, because these shoppers would understandably worry about warranties, return policies, and customer support.
So, to protect your company, ask your suppliers to set up such a permission-based network of retail partners. This is called an Authorized Dealer Program, and it helps manufacturers and brands tighten their sales channel by limiting internal and distributor sales to only those retailers who they’ve allowed to become authorized dealers.
After you’ve joined the Authorized Dealer Programs of your brand partners, the second part of the strategy will be for them to give a simple means of identifying yourself as a legitimate retailer of the brand’s products.
This should include a digital dealer badge, which you can easily place online everywhere you list the brand’s products. The badge should also be a clickable link that pops open a window on the manufacturer’s own site and confirms that you are indeed an authorized dealer of that brand’s merchandise.
Finally, with the right online dealer management solution, your brand partner will also be able to set up a “Where to buy” dealer locator page, which will also list your company as part of the brand’s official retail family.
Don’t Wait for Your Brand Partners to Solve the Gray Market Problem — Take Action to Help Them Now
Because of the rampant problems caused by gray market sellers online, the retail apocalypse could ensnare your company whether you operate brick-and-mortar stores or not. (Although the problem is even worse if you do have physical stores, because the gray marketers’ MAP-violating discounts can make shopper “showrooming” at your stores even more prevalent.)
One of the best solutions we can suggest is to talk to your brand partners about the tools they can deploy to help with these problems: automated MAP monitoring and enforcement, online dealer management, and digital dealer badging.
If you’d like our help, let’s talk about getting your brand partners a free demo.