Table of contents

To prevent price dumping, gray imports, and dependency on marketplaces, manufacturers need a structured sales model. Without a well-planned distribution strategy, brands risk losing pricing control, retail partnerships, and long-term profitability.

The ideal approach is to balance marketplaces, retail chains, and traditional distribution—ensuring that all sales channels operate in harmony rather than in competition.

1. The Correct Sales Structure: Roles and Responsibilities

📌 How the system should work:

1️⃣ Manufacturer → Produces the product and sells only to the distributor.
2️⃣ Distributor (Wholesale Supplier) → Manages imports, pricing, and controlled sales channels.
3️⃣ Wholesalers → Supply products to retail stores, chains, and marketplaces but do not sell directly to consumers.
4️⃣ Retail Chains & Traditional Stores → Buy from wholesalers at a controlled price.
5️⃣ Marketplaces → Should only work with retail sellers, not with wholesalers.

🚨 The consequence of ignoring this structure:

  • If manufacturers sell directly to marketplaces, they lose control over pricing.
  • If wholesalers start selling directly to consumers, they create unfair competition against retail partners.
  • If marketplaces allow any seller to list products, gray imports flood the market.

🔴 Each channel must have clearly defined rules—otherwise, price chaos is inevitable.

2. Why Marketplaces Should Not Compete with Retail Chains

Marketplaces should complement traditional retail, not destroy it. However, many brands allow price imbalances, making online sales much cheaper than offline.

📌 Why price parity is crucial:

  • If marketplaces offer lower prices than retail chains, stores stop ordering the product.
  • Retailers cannot compete with uncontrolled online discounts, leading to stock clearances and lost sales.
  • Consumers lose confidence in pricing, expecting permanent discounts.

🚨 The consequence:

  • Retail partners refuse to carry the product, knowing they cannot compete with online prices.
  • Marketplaces dominate the sales channel, making the brand dependent.
  • Brick-and-mortar sales decline, reducing customer engagement and product visibility.

🔴 Brands need a consistent pricing model across all channels—marketplaces should not undercut traditional retail.

3. Discounts on Marketplaces Should Not Go Below Wholesale Prices

📌 How marketplaces manipulate pricing:

  • They pressure sellers to offer discounts through promotional programs.
  • They reward the lowest price with increased visibility, forcing competition downward.
  • They run platform-wide sales events, encouraging aggressive price cuts.

🚨 The consequence:

  • If marketplace discounts fall below wholesale prices, distributors stop ordering stock.
  • Retail stores lose sales, leading to fewer product placements and brand visibility.
  • Sellers compete on price instead of value, damaging long-term profitability.

✅ Solution:

  • Set a Minimum Advertised Price (MAP) policy to prevent excessive discounts.
  • Ensure marketplace promotions are aligned with retail pricing agreements.
  • Require marketplaces to only allow authorized sellers with controlled pricing.

🔴 Price consistency ensures that all channels remain profitable—uncontrolled discounts destroy pricing power.

4. Small Wholesale Retailers Need Special Conditions

📌 Why small wholesalers play an important role:

  • They bridge the gap between bulk wholesalers and direct consumers.
  • They support niche markets that large retailers ignore.
  • They help prevent excessive dependency on marketplaces.

🚨 The problem:

  • If small wholesale retailers offer lower prices than official distributors, the entire system collapses.
  • Retail chains refuse to stock products that are already cheaper elsewhere.
  • Marketplaces use these resellers to undercut official pricing, leading to price dumping.

✅ Solution:

  • Establish tiered pricing—small wholesalers should have structured pricing that does not disrupt the market.
  • Restrict small wholesalers from selling on marketplaces unless they follow MAP policies.
  • Ensure that wholesale buyers cannot offer retail discounts that harm larger retail chains.

🔴 Every segment of the supply chain must have clear rules—small wholesalers cannot disrupt the market structure.

5. Why Controlling Distribution Prevents Price Chaos

📌 Without a controlled sales model, manufacturers lose:

  • Pricing power → Marketplaces and unauthorized sellers set prices.
  • Retail partnerships → Stores refuse to stock unprofitable products.
  • Brand reputation → Discounted products lose perceived value.

🚨 The consequence:

  • Once retailers abandon a product, only the marketplace remains.
  • Marketplaces dictate all business conditions, forcing constant price reductions.
  • The manufacturer loses direct engagement with consumers, making brand loyalty impossible.

✅ Solution:

  • Marketplaces must be an extension of retail, not a competitor.
  • Pricing must be structured to protect all sales channels.
  • Distribution rules must be enforced to prevent price dumping and gray imports.

🔴 Manufacturers who ignore structured sales models become victims of their own pricing mistakes.

Conclusion: The Key to Market Stability Is Distribution Control

The best sales model balances online and offline channels, maintains price consistency, and enforces clear distribution rules.

📌 Key takeaways:
✅ Manufacturers should not sell directly to marketplaces—they must work through authorized distributors.
✅ Marketplaces should not undercut retail stores—pricing must be controlled.
✅ Small wholesalers need structured pricing to avoid disrupting larger retail partners.
✅ Distribution enforcement is necessary to prevent price dumping and gray imports.

🚀 The next step: Understanding how a distributor actively protects pricing, blocks unauthorized sellers, and enforces sales policies.

⬅️ Read Chapter 3: Why Manufacturers Cannot Manage Sales Alone | 📖 Back to Table of Contents | ➡️ Read Chapter 5: How a Distributor Protects the Market