As many brands know all too well, the best laid strategy to manage the channels through which their goods are sold can be quickly disrupted by unauthorized sellers. Because online marketplaces like Amazon are essentially open platforms, virtually anyone able to source a brand’s products can sell there – regardless of a brand’s specific channel management strategy. Often, these sellers do not adhere to brand quality standards; they do not contribute to marketing and conversion efforts; and they do not adhere to manufacturers’ minimum advertised price policies.
While many brands are plagued by unauthorized sellers, there is still a massive amount of confusion regarding what tactics are most effective in shutting down such unauthorized sales. For example, there are seemingly countless brand protection and monitoring software companies that tout their ability to remove a percentage of unauthorized sellers using automated cease-and-desist letters. Some companies claim to have highly effective marketplace takedown tricks, while others claim to “know” secret marketplace tactics that others do not. The reality is ultimately not quite so rosy, and in fact, none of these tactics are especially effective because: (1) the law generally protects product resellers, and (2) these tactics – even if successful against some number of small, unsophisticated sellers – do not drive meaningful commercial outcomes, which is what brands need.
Instead of playing “whack-a-mole” with these tactics, brands primarily need to establish the requisite legal foundation that provides an actual basis for enforcement against unauthorized sellers. With the requisite legal foundation in place, brands can overcome the primary defense asserted by unauthorized sellers – the first sale doctrine – and leverage their foundation to conduct legally-backed, precision enforcement against unauthorized sellers. (The first sale doctrine generally enables an individual to resell a trademark-bearing product after it has been sold by the trademark owner, even if the resale occurs without the trademark owner’s consent.)
Data-Driven Enforcement Against Unauthorized Sellers
Once brands have established the requisite foundation, they should conduct enforcement in a manner that drives real commercial outcomes, as opposed to focusing on meaningless vanity metrics, such as “take down” percentages. Realistically, brands do not have the time or the resources to chase every seller on sweeping online marketplaces. Instead, brands need to leverage a data-driven process that determines: (1) which sellers are most impacting commercial KPIs and (2) which tactics are likely to be effective against those sellers. When brands are able to prioritize sellers by the level of disruption they cause and then apply the tactics most likely to be successful against those particular sellers, they are empowered to drive real business outcomes, not meaningless “takedown” numbers.
With that in mind, brands should consistently measure the success of their enforcement program at driving actual business KPIs, including, authorized sales growth, brand value stabilization, review sentiments, and any other important metrics to their business.
Brands seeking online sales control must account for the disruption that unauthorized sellers will cause. Without a strategy in place for stopping unauthorized sellers, brands will not achieve optimum, profitable growth on online marketplaces. To effectively combat unauthorized sellers, brands need to establish the necessary legal foundation and then engage in a data-driven, precision enforcement process tailored to driving real commercial metrics.
This is Part II of a running series dedicated to online sales control. Part I – which can be found here – focused on channel management, and how brands in the online marketplace era should first level-set their channel management strategy to mitigate online disruption and best position themselves to be able to govern the online marketplace channel.
Daren Garcia is a partner and member of the Vorys eControl team, where his practice centers on the representation of manufacturers and brands and involves the implementation of thought-leading strategies and enforcement systems designed to protect brand value by controlling online sales.
