We understand the concepts: what does “price dumping” mean, what are its reasons and why brands need to deal with dumping | Z-PRICE

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We understand the concepts: what does “price dumping” mean, what are its reasons and why brands need to deal with dumping

In the modern world economy different methods are used to eliminate competitors. Один из наиболее популярных – is dumping prices for certain commodity units. Why and to whom does it need, why is it so important for brands to monitor violations of recommended prices, according to what scheme websites are dumped and what suppliers should do with this - we will describe all these issues in this article.

Итак, dumping is the sale of products and services at specially low prices. This technique can be used by manufacturers, suppliers and sellers in the domestic and foreign markets. Usually dumping is short-term as keeping the price at a minimum level for a long time is not profitable even for large companies.

Dumping and price reduction - what is the difference?

Нередко в интернет-магазинах можно наблюдать снижение цен, но можно ли это назвать демпингом?

Let's look at examples where the standard cost reduction is not related to dumping:

  •  manufacturing costs decreased;
  •  reduced cost of sales of products;
  •  a special marketing program provides for a change in product positioning.

The above actions can reduce the price of products and attract the attention of the client without reducing the profitability of the company.
While dumping is a radical conquest of a certain market even by working to your own detriment.

The main reasons for price dumping are:

  •  Market conquest.

    Newbie retailers often resort to lower prices. And no wonder this is one of the ways to stand out from the group of competitors by attracting buyers with a relatively low cost of products.

  •  Increasing customer loyalty.

    Of course consumers tend to buy a product at a better price. Due to low prices the buyer can become a regular and, besides, bring a potential customer. The principle of word of mouth is already working here.

  •  Warehouse unloading.

    Both large and small websites which have their own warehouse often encounter the problem of selling “frozen” pruducts, and for this they resort to various promotions and sales.

  •  Crowding out competitors.

    A particular website keeps prices low until other competitors go broke. Thus, he becomes a monopolist in the market and sets prices at will, buying up the products of bankrupt companies.

What is the pattern of retailers dumping and how do manufacturers respond?

According to statistics approximately 20% of websites to one degree or another dump producer prices. In pursuit of a client they are even willing to work at a loss, thereby sacrificing the interests of existing suppliers. Thus, due to an uncontrolled decline in website prices dumping poses a serious danger to the online trading market as a whole.

It is worth noting that most often a violation of the pricing policy of brands occurs according to the same well-established scheme, which can be compared with the “domino principle”. Its essence lies in the fact that it is worth lowering the price to one retailer, as other websites “pull up” behind it down to major players in the market.

Таким образом для поставщика так важно в кратчайшие сроки определить первого нарушителя рекомендованной цены and through various methods of combating dumping to regulate the prices of their products. Otherwise if you do not quickly respond to the situation, the brand risks losing control of prices. In such a situation it will be extremely difficult to identify those websites that were the first to dump.

В любом случае, какие бы цели не преследовали ритейлеры, демпингуя рекомендованные цены, для поставщиков это всегда негативная тенденция и отклонение от запланированной стратегии продаж.

Как же производителям эффективно противостоять нарушителям РРЦ?

Here is the action algorithm:

  •  Regular monitoring of market prices (automatic or manual).
  •  Committing violations
  •  Активные действия по «выравниванию» цен (e-mail рассылка, обзвон нарушителей, ограничение поставок).

Based on the feedback from the brands and of suppliers , а также many years of experience, можно сделать утвердительный вывод: эта схема работает на практике. Конечно, каждый из представленных этапов имеет ряд особенностей и это тема для отдельной статьи, которая в скором времени будет опубликована в our blog.

В заключение, добавим, что dumping prices is a negative phenomenon in online trading, which negatively affects all market participants - from manufacturers to websites. Therefore, it is so important to deal with any of its manifestations in the market and adhere to a single pricing policy.

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