As more business moves online, distributors are working to combat the growing prominence of online vendors, and manufacturers are working to protect the way their products are sold through eCommerce. Online retailers are able to sell products at lower prices that are difficult for most brick-and-mortar distributors to match, due to online retailers’ lower overhead (e.g. no need to maintain warehouses or large inventories) and smaller operations costs (e.g. often require fewer staff to run their business).
The challenge that online vendors present has been discussed in-depth in recent industry articles about eCommerce, such as “Margin Call” in the January 2015 issue of tED Magazine. One potential way that “Margin Call” suggests to help distributors hold their own against online vendors is through the use of Internet Minimum Advertised Price (IMAP) policies.
IMAP restricts internet vendors from advertising manufacturers’ products below the price set by manufacturers, helping to protect a manufacturer’s brand and a distributor’s margin.
Why would a distributor want an IMAP policy in place?
- Prevents prices of manufacturers’ products from getting too low to adequately compete
- Discourages end-users from “free riding,” or visiting a distributor’s brick-and-mortar store, benefiting from the distributor’s knowledge and services, and going back online to make their final purchase for a cheaper price
- IMAPs may have margins already built in
Why would a manufacturer want to implement an IMAP policy?
- Maintains the intended value of a manufacturer’s products
- Protects a manufacturers’ brand image from becoming tarnished by dramatic discounts from online vendors
- Makes it easier for a manufacturer’s distributor trading partners to sell their products
Though not all manufactures currently have IMAP policies in place, this is a growing trend, and IDEA’s Industry Data Warehouse (IDW) is able to support IMAP. The IDW has a location where manufacturers can load their IMAPs for authorized distributors to view and extract, making the process easier to update and manage.
Providing distributors with IMAPs allows them to remain competitive when selling manufacturers’ products while maintaining the margin needed to continue to sell both online and in stores. Distributors are encouraged to ask their manufacturers about IMAP policies; manufacturers are encouraged to develop and provide these policies, creating a more efficient and effective channel.
For more information on how IMAP can be used through the IDW, check out IDEA’s previous blog post on online advertising and IMAP policies.