Unauthorized sellers can pose a significant challenge for brands seeking to protect their brand integrity and maintain control over their distribution channels. A well-crafted authorized reseller agreement is essential for managing these risks and ensuring that only authorized retailers are selling your products.
In this blog post, we'll delve into the myths and realities of unauthorized sellers. We'll explore the various types of unauthorized sellers, their potential consequences, and strategies for effectively managing them. By understanding the nuances of this complex issue, brands can develop a strategic approach to protect their interests and minimize the risks associated with unauthorized sellers.
What is an Authorized Reseller Agreement?
An
authorized reseller agreement is a legal contract between a brand and a retailer that outlines the terms and conditions under which the retailer is authorized to sell the brand's products. These agreements are essential for protecting brand integrity, maintaining control over distribution channels, and ensuring that retailers comply with the brand's pricing and marketing policies.
Key components of an authorized reseller agreement typically include:
- Grant of Authority: The agreement grants the retailer the right to sell the brand's products within a specified territory.
- Material Differences: Authorized resellers must ensure that the products they sell are identical to the manufacturer's original products in terms of quality, features, and performance. This includes adherence to the manufacturer's specifications, materials, and manufacturing processes.
- Product Authenticity: Authorized resellers are obligated to source products directly from the manufacturer or authorized distributors to guarantee their authenticity and avoid the sale of counterfeit or unauthorized goods.
- Packaging and Branding: Authorized resellers must use the manufacturer's approved packaging and branding materials to maintain brand consistency and protect the manufacturer's intellectual property.
- Minimum Advertised Price (MAP): The agreement outlines the brand's MAP policy, which sets the minimum price at which the retailer can advertise the products.
- Distribution Restrictions: The agreement may limit the retailer's ability to sell the products online, in specific geographic regions, or to certain types of customers.
- Warranty and Support: Authorized resellers are responsible for providing the same level of customer support and warranty services as the manufacturer.
- Intellectual Property: Authorized resellers are granted limited rights to use the manufacturer's trademarks and copyrights for the purpose of selling the products.
- Termination provisions: The agreement outlines the circumstances under which either party can terminate the agreement, such as breach of contract or failure to comply with MAP policies.
By carefully drafting and enforcing authorized reseller agreements, brands can establish clear expectations with their retail partners and protect their brand reputation.
The Myths and Realities of Unauthorized Sellers
It's a common misconception that all unauthorized sellers are harmful to a brand. While some may pose significant risks, others may have a minimal impact or even present opportunities. Understanding the different types of unauthorized sellers and their potential consequences is crucial for developing effective strategies to manage them.
Not all Unauthorized Sellers are the Devil
No self-respecting brand wants to have unauthorized online sellers. After MAP compliance, getting those undesirables removed is one of the primary rules of brand protection. For some brands, it’s an obsession. They invest endless blood and treasure to that single-minded objective. And who could blame them? Unauthorized sellers cause authorized sellers to violate MAP; they sell counterfeit, un-warrantied, or expired products, and they confuse consumers. Or do they?
First, let’s define what an unauthorized seller actually is. Per standard brand protection, an unauthorized seller is any online seller for which the brand has not given permission to sell its products. And it can be nuanced. Some brands say legitimate customers are allowed to (ergo, authorized) sell in their own
e-commerce stores, but they can’t sell in marketplaces like Amazon or Walmart. For other companies, anyone who has a category-specific online store (e.g., pet) is okay. Otherwise, they’re not. For other brands to be authorized, they must know where the store has inventory. There can be and are lots of rules governing this. We recommend that brands think deeply about this and then create an actual authorized reseller agreement that sets out consistent criteria.
The Realities of Unauthorized Sellers
Before you lose your mind over it, you need to realize that not all unauthorized sellers are boogiemen. Sometimes, they may represent opportunities. Let’s dig in and dispel some of the myths.
- They violate MAP prices more than authorized sellers. This is often false. In fact, data shows that more MAP violations occur with authorized sellers. Some unauthorized sellers don’t even have your products. They find your images online and then list the products for a high price because they buy them from another seller that does stock it and that other retailer ships it to the consumer.
- They cause authorized sellers to break MAP. Again, this is often false. Based on the data, there are three types of online sellers that a brand should be aware of. The first is their key accounts. You know, the big guys. These merchants tend to only price match prices with each other (e.g., Amazon, Target, and Walmart are in lockstep with pricing), and they tend to be the deepest discounters out there. Then, there are the authorized specialty stores. Because they don’t get the same pricing as the big guys, they don’t have the margin to play with. So, they tend to price-match other specialty stores.
- They steal the buy box from authorized sellers on Amazon. The truth here is mixed: true and false. Sometimes they do, but authorized sellers with optimized listings, customer service, and fulfillment practices can still win the buy box. And, even if the unauthorized sellers do get the buy box from time to time, that data shows they don’t get any sales! So, brands should look to advisors to help them identify the threats and prioritize their efforts.
- They’re all counterfeiters or diverters. False. Yes, these sellers exist. And they’re bad. But not every unauthorized seller is out to defraud consumers. Some may be honest to God, small resellers who legitimately bought your products from distribution. Others may be actual brick-and-mortar customers who didn’t realize they needed permission to sell the in-store products online. Many times, when they understand that they need to get permission, they’ll remove the products willingly. Or, if handled properly, they can even become great customers.
- They all rip off consumers. This is also false. While some bad sellers exist, many unauthorized sellers have real products, list them at MAP, and ship on time and professionally. But, as we said, we didn’t realize that they’re not allowed to list them online or on marketplaces.
Leveraging the Presence of Unauthorized Sellers
Unauthorized sellers can sometimes work to your advantage. Their broader reach can act as free marketing, driving awareness for your products to new audiences. You can also learn from where these sellers are thriving—maybe there’s a demand in channels or markets you haven’t tapped into yet.
However, it's important to protect your brand's integrity and maintain control over your distribution channels. By implementing a strong authorized reseller agreement, you can establish clear guidelines for authorized retailers and minimize the risks associated with unauthorized sellers.
A Proven Strategy: Blending MAP Policy Enforcement and Authorized Reseller Agreements
The brands that see the most success tend to take a blended approach, combining consistent MAP Policy enforcement with strong authorized reseller agreements. This dual strategy addresses violations while allowing for more flexibility in responding to market dynamics.
The only winning strategy is monitoring products closely and acting based on real data—not assumptions. It’s important to focus on the facts and remain adaptable, whether the issue is MAP compliance, distribution control, or brand protection.
Take a Strategic Approach: Stop, Think, Act, Review
Instead of reacting with a heavy hand right away, it’s better to have a measured plan:
- Stop: Take a moment to assess. Who are these sellers? Do you possibly know them by another name? Did someone else in your organization sell them the products and not realize?
- Think: Analyze the impact. Are they discounting? Do they have good ratings? Are any of your authorized sellers price-matching them? What impact are they having on pricing or buy-box sales? If there’s nothing objectively bad other than you don’t know who they are, could they be harnessed for your benefit?
- Act: Once you’ve assessed the true nature of the seller and its impact, decide on a course of action. This might mean reaching out, addressing your sales and distribution strategy, or, if necessary, taking legal steps.
- Review: Periodically revisit your strategy to ensure it remains effective as market dynamics change.
The Bottom Line
While it’s true that some unauthorized sellers have counterfeit or grey-market goods or rip off consumers by taking money and never shipping, they aren’t always the greatest threat to your brand. As a matter of fact, most of them aren’t. The key is to understand the nuances, address the real challenges, and explore the potential opportunities they bring. Overreacting can lead to missed opportunities, unnecessary friction, and needlessly spending money. Instead, focus on finding balanced, strategic solutions that protect your brand without alienating potential partners or customers.
Experience the Benefits of an Authorized Seller Agreement with MAPP Trap
Protect your brand and maintain control over your distribution channels with MAPP Trap. Our powerful platform helps you effectively manage unauthorized sellers, enforce MAP policies, and safeguard your brand's reputation.
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