Kicking off the new year with great excitement, gap intelligence launched its newest service, Lookout in the first week of January. Lookout is an online price tracking service designed to identify MAP/UPP policy violations. By further developing the capabilities of our existing web crawling technology and our GFD quality standard, Lookout now enables gap intelligence to help its manufacturer clients create win-win channel situations to a) protect the value of their brand and products by preventing price erosion and b) help their channel partners maintain healthy margins. Lookout can help our clients manage this extremely challenging business issue more efficiently.
Thousands of Violations Being Captured Weekly
For this blog, I chose PC monitors and TVs as they are widely distributed products. I was amazed by the number of violations captured during this particular month of tracking.
- Of the PC monitor SKUs tracked, 6,750 violations were confirmed (1,688 weekly, 40 unique violations per SKU on average)
- 3,760 TV violations were confirmed (940 weekly, 63 unique violations per SKU on average)
Lookout for the Marketplaces
Where do these violations occur most? It’s mainly the Marketplaces. This client’s four targeted Marketplace sites accounted for 71% and 53% of all respective monitor and TV violations that we identified.
Who Are The Most Wanted Reseller Suspects on the Top 4 Marketplaces?
Some violations captured are caused by the shopping site hosts themselves (direct), but the majority were from third party resellers (Marketplace). For example, of all TV violations on Marketplace 1, just 7% of them were sold direct from the site. Marketplace 2 on the other hand, saw 25% of all its violations coming from its direct site for both monitors and TVs.
- Monitor price violations on Marketplace 2 were concentrated to a few sellers (25% direct, 44% Reseller 8, 27% Reseller 2)
- TV price violations on Marketplace 4 were also concentrated in only three sellers (13% direct, 43% Reseller 6, 37% Reseller 13)
- Violations on Marketplace 1 and Marketplace 3 tend to be more scattered among many resellers, which poses a greater challenge for manufacturers, and a greater need to manage this part of the channel
Authorized Resellers vs. Unauthorized Resellers
Roughly half of violations on Marketplaces were by resellers not authorized to sell the products. This could be seen as a problem to solve, or an opportunity to target. Manufacturers may choose to build a business relationship by contacting those unauthorized resellers and convert them to authorized resale partners. Otherwise, they risk their products being sold at below-MAP prices while risking damage to the end-customer experience who may unknowingly purchase from less-capable providers.
How Deep is the Illegal Discounting?
We discussed the frequency of violations and who is violating the MAP policy, but how bad are they? The overall average violation is approximately 16% below MAP, but they get as bad as 29% below the manufacturer’s approved pricing level. For example:
- On Marketplace 1, over a quarter of monitored MAP price violations were offered with discount levels exceeding 10%
- On Marketplace 3, 30% of all TV violations were offered with discounts ranging between 10% and 20% below MAP
MAP violations have been a big problem for quite some time, but the growing role of Marketplaces among both sellers and buyers makes managing MAP and UPP compliance more urgent than ever. This is, in part, why we are so excited about the new Lookout service.
If you are someone who monitors online marketplaces and your pricing and brand equity, please give us a call at 619.574.1100 or write us at info@gapintelligence.com to learn more.
