Why Retailers Break MAP Policies and How to Stop Them

In today’s highly competitive and almost completely digitalized world, price matters the most. Whether a brand’s product is worth the elites’ attention or not comes from price, when everything else dissolves behind the screen. Today brands aren’t fighting for experience or services, because mostly they don’t have to provide one.

The era of going to a shopping mall and leveraging the rich experience of luxury and suggestion is dying slowly, and businesses know that. Retailers knows that and they are preparing for the same. But due to which it also becomes a bit more difficult today to track the MAP violators. But before we talk about MAP violation, let’s first understand why retailers break MAP policies, is it a shortcoming from the side of manufacturers or the greed of retailers.

We already have a blog where MAP pricing is explained, where from what is MAP to how to enforce MAP, everything around it is covered. If you wanted to read that, then do visit MAP Monitoring software.

In this blog, we will mainly focus on breaking down the main causes why retailers or resellers cross the line called the MAP policy and how it has significantly increased after digitalisation took over the market, and how that can be stopped or at least to a considerable extent.

But before we start our blog, let’s first structure it, to know what topics we are going to cover in this blog, and does it have for what you came here.

What is MAP Policies?

Before we understand why retailers are willing to risk legal consequences than following a simple policy. But first let’s understand what actually MAP policies are and how they can affect the business in the market.

MAP policy, which stands for “Minimum Advertisement Price”, is mainly a policy which brand enforces in their retailers, distributors or resellers so that it restrains them from advertising the prices of their products lower certain amount. It is important to understand that restriction of the MAP policy is only limited to advertised prices; there is no control of manufacturers or brands on what price a distributor sells products.

So, we can say that MAP policies exist not to bind the hands of resellers, but to retain the image of their brands, especially in a world where price is considered the main factor when quality is measured.

To understand what is MAP and why it is very important for a brand image, check out What is MAP monioting and Why does it matters to brands.

Why Retailers Break MAP Policies?

Now that we have the basic knowledge about the MAP policies and their power, let’s dive into the minds of retailers, resellers or distributors to understand what motivates them to break the MAP policies.

1. The Race to the Bottom

A great businessman once said that competing based on pricing is a race to the bottom.

Nothing could be closer to the truth in the business world, but resellers do not understand it, nor does the platform where they are selling. Today, the price is the main factor by which the seller wins “Buy Box” or can earn a spot on price-comparison engines, leading e-commerce platforms where they promote cheaper stuff. Due to this, the MAP violation on Amazon is increasing significantly.

Due to this, sellers are lowering their prices, undercutting their margin just to snatch another sale from their competitors, not understanding that this isn’t just harmful for their business and profit, but also for the image of the brand.

2. Automated Repricing Software

Today, manual labor mostly brings inefficiency with it, but the advanced tech isn’t versatile enough to rely on it completely. There have been many cases happened since the time tools like dynamic repricing tools took over the task of making pricing decisions from the human manager.

Now, there needs to just one unauthorized seller’s MAP violation who is willing to sell their products below the MAP prices and all the resellers and distributors prices will went to the loop of alteration, and it could lead to a infinite loop of comparing and reducing with the speed of light, before the manager could save the losses as well as the their brand’s image, in addition to that MAP violation impacts on margin which is another drawback not many stress on.

Giving control of your prices to someone is like handing over your business and profit to someone. I am not saying that one should not adopt high-tech tools and be devoted to the traditional method, even when they are a cause of your inefficiency, when there are solutions. It’s just you should try tools that also have a lower cap for prices that will ensure you will never violate MAP, nor will your sales be the reason for your losses.

Try Prodfinity’s Dynamic Repricing Tool to control your pricing even in Automation.

3. Excess Inventory Pressure

In business, inventory acts just like water; if water is stored for too long, it will be home to insects and diseases.

Similarly, if a product’s stock flow halts or a product is overstocked, then it will cause less room for other products, or retailers will have to pay higher storage costs. Due to this, these sellers are willing to clear their stocks to get back to the capital, even sometimes the prices are being advertising way lower than the MAP set price, tarnishing the image of the brand and in long run, the resellers quality assurance as well.

4. The “Showrooming” Threat

As we have discussed before, today’s customers prefer e-commerce platforms in comparison to the traditional shopping process in showrooms. The only reason for this amount of digitalization around the market isn’t due to convince of getting products while sitting in the comfort of their home, but in addition to that, the prices of products are significantly lower in comparison to the mall or market.

The resellers who are selling in the marketplace are desperate for sales, and sometimes even get triggered with the impulse of capturing a customer, by providing discounts like “in-cart” discounts or limited time offers where the prices are concerningly low, which can even lead to retailers relationship damage around the market.

How to Stop MAP Violations

Now we know what MAP Policy is and what the reasons are why the resellers are willing to violate it at the risk of legal consequences as well as brand equity damage. But understanding the cause of the problem is never its last stage; it’s the beginning from where the healing can start.

So now, in this chapter, we are going to discuss about the practices that can protect your brand from third-party selling violations and authorized sellers too, so that your brand can start healing finally.

So, let’s get into ways by which one can stop the MAP violations.

1. Implemented Automated Price Monitoring

As you have heard many times in the last few years, modern problems need modern solutions.

Similarly, when we are trying to catch the resellers and distributors who are selling the product in multiple e-commerce platforms like Amazon, Walmart, eBay and whatnot. A normal manufacturer will check one or two major platforms, believing that the seller is implementing the MAP standards.

For example, a seller is selling on three platforms, Amazon, Walmart and eBay, and you checked the two major platforms, only for the user to perform a MAP violation on eBay.

In this scenario, businesses and manufacturing companies should implement a price monitoring tool, which will not only cover all the platforms but also keep a watch on them in real-time, so that the moment they alter their prices even at midnight, you will have the evidence to take action against them.

Have a Prodfinity’s Retail Price Monitoring Tool and Monitor your Retailer’s Prices at Background.

2. Clean Up Your Distribution Channel

There is a huge difference between MAP agreement vs MAP policy. If the unauthorized resellers are selling your products at way sell than they should, then either there are some of your distributors who don’t come under the MAP agreement, or they get it from the diverted shipments or liquidator.

The way by which you can avoid it is by making your distribution more tight and ensuring that every distributor has signed your MAP agreement and knows exactly what will be the consequences if they violate it.

3. Use a “Three Strikes” Enforcement Policy

The warning shouldn’t be so severe that the violator doesn’t even get the chance of correcting their mistakes; on the other hand, they shouldn’t be so lenient that the warning loses its impact and doesn’t motivate the offender to correct their mistakes.

Enforce three strikes enforcement, where if the reseller or distributor violates the MAP policy more than three times, then they will have to suffer legal consequences; on the other hand, the manufacturer should provide an official warning when they violate the MAP policy.

4. Limit Non-Compliant Sellers on Marketplaces

Understanding the violation and its impact on the brands, the major e-commerce platforms are also taking action by launching programs like Amazon Brand Registry, which allows the manufacturers to report the “counterfeit” or unauthorized listing more efficiently.

Even when the MAP agreement itself has the power to stop the unauthorized seller from tarnishing the brand’s image, these tools facilitate it even more.

FAQ

Q1. What is prohibited under the MAP rule?

The MAP rules prohibit any user, whether they are lenders, brokers, and services to misrepresent of any material in any commercial platform or commercial communication. It also forbids them to have a false claim about the interest rates, the prices of the products, fees or payments, etc.

Q2. Are MAP policies legal?

Regardless of what most of the retailers and resellers believe, MAP policies legality is not questionable; if enforced seriously then there are legal complication towards the violators. The issue isn’t with the MAP policy, but its enforcement, as it requires a dedicated team that needs to keep watch on their resellers if they are following the policy or not, which most of the companies were not able to do, and that’s why retailers break the MAP policy.

Q3. What are MAP violations?

MAP (Minimum Advertised Price) violation happens when a retailer or reseller advertises the price of a certain product below the minimum price established by the manufacturer. This violation can happen by many means, like listing price on the website, discounted prices on the carts, or hidden vouchers to reduce the prices. All these activities are the most common MAP policy violations.

Q4. What are the 4 types of policies?

As per the economics and business researchers, there are mainly 4 types of policies that are implemented around the world. All the policies around the world are categorized into the following these 4 categories: distributive, regulatory, redistributive, and constituent. These categories are then divided into many more categories, but the base of policy categorization are these 4.

Q5. Does a store legally have to honour a mismarked price?

In normal cases, the store is not legally obliged to consider the price which are reduced mistakenly. The silly mistakes like misplacement of decimal, converting $500 of TV into $5. While there are stores that do reduce their prices to offer if they can, just to honour the customer’s efforts and retain the store’s goodwill around the market.