Success Story: A Life Raft for Liquidation Issues

Blogs | April 14, 2021

The Client: 
The client is a global manufacturer of portable power tools, cordless outdoor power equipment, and related accessories. It has six brands in its portfolio of products, including lawnmowers, handheld devices, hedge trimmers, chainsaws, and snow/leaf blowers. Its products range in price from $20-$700 each. Our focus for this project was tracking their SKUs for inventory management and MAP compliance.

The Situation: 
POTOO has been working with the client for over three years. The client recently ended a partnership with a major home improvement retailer. As a result of this termination, the retailer drastically reduced the price of all of the client’s remaining inventory to make room for new items. The client needed a quick solution to access all of its remaining inventory with the retailer. Once confirming inventory, they had to monitor price discrepancies on the retailer’s website and determine how this was influencing third-party sellers on Amazon. 

The Importance of Having a MAP Policy: 
The client used POTOO’s Price Tracking Dashboard to check for price discrepancies from third-party sellers on the marketplace. Additionally, through POTOO’s tools, the client was able to ensure that their remaining retail partners, all of which had signed a Partnership Agreement, were still abiding by MAP (Minimum Advertised Price) regardless of the pricing that their recently terminated retailer was listed at. 

If a partnership were to end, a brand must protect itself against liquidation tactics by ensuring that their MAP policy remains active until all/or most of their inventory is depleted.

More About MAP: 
* While a product can be sold under MAP, the price advertised must go no lower than the price determined by the manufacturer.
* The only sellers held to this standard have a signed contract with the brand stating that they will abide by the set MAP pricing structure. 
* This policy, applicable to both online and brick-and-mortar stores, was put into place to protect manufacturers from brand erosion.

Best Practices for Brands Ending a Retailer Partnership: 
Brands must always keep track of their authorized and unauthorized sellers for price compliance. If they don’t, they risk losing thousands, if not millions, in sales. The repercussions for authorized sellers falling below MAP are much easier to enforce if they signed a MAP policy with a specific clause that prevents listing items below MAP. However, brands need to track all third-party sellers, even those who have not signed any partnership agreement, as well. 

Once a retailer ends a partnership with a brand, they will likely liquidate any remaining inventory as quickly as possible. When the products are large and take up a lot of space, it becomes particularly urgent, which was our client’s case. In some scenarios, brands might choose to buy back remaining inventory to avoid potential issues that might erupt from liquidation. 

A few things for brands to consider before ending a retailer partnership:
* Do you know how much inventory remains with the retailer? 
* Can you buy back your brand’s leftover merchandise with the retailer?
* Do you have a strong MAP Policy/Price Clause in place with the retailer?
* How will you enforce any MAP violations or price gouging in the future?

During this program, the POTOO team discovered that 44% of listings on the retailer’s eCommerce platforms were violating MAP. In some cases, prices were reduced by more than 50% of the suggested retail price. To remain competitive, third-party sellers were price matching what they saw on the retailer’s website, causing the brand to lose thousands of sales. We had to act quickly to eliminate any further damage to the brand’s reputation and bottom line. POTOO worked directly with the client’s sales team to monitor all MAP violations. When a discrepancy was discovered, our team acted on behalf of the client to communicate with the non-compliant sellers. 

This situation was unique and something that all brands should include in their eCommerce strategy. POTOO’s Dashboards provide all the necessary data needed for the client to conquer thousands of improperly priced listings on the marketplace. Ultimately, the POTOO team discovered 60 listings outside of Amazon that were violating MAP. After only four weeks of consistent outreach, POTOO had the price corrected on 57% of these listings. 

Does your brand need help developing or enforcing a MAP Policy? Connect with one of our eCommerce experts today to learn more about how we can support you.

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