Channel Management in the Age of Online Marketplaces

Oct 18, 2021 11:30 AM12:30 PM EST

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Key Discussion Takeaways

With the massive push to digital commerce over the last 18 months, the need for channel management has grown tremendously. Lack of marketplace control sinks sales through price erosion, negative reviews, and more. If you’re already in this pit, how can you climb out?

The first step is establishing expectations for authorized resellers and stopping third-party sellers who are dragging your brand through the mud. You start regaining control when you set clear expectations regarding how products should be handled and sold by authorized parties. By creating a do-not-sell list for distributors, you can cut off the supply lines for sellers who aren’t operating in your best interest. Even these first steps go a long way in securing your marketplace channels— but Daren Garcia and Denise Zmuda have much more to share.

In this virtual event, Aaron Conant joins Daren Garcia and Denise Zmuda from Vorys eControl to discuss channel management for online marketplaces. They talk about cleaning up your authorized sales channels, how to implement a MAP policy, and how to build a robust pricing structure.

Here’s a glimpse of what you’ll learn:


  • Denise Zmuda explains why channel management and sales control are essential
  • Critical components of a thriving channel management strategy
  • Daren Garcia explains the logistics of adding a MAP policy to your authorized reseller program
  • Make sure to establish clear channel control before adding a MAP policy
  • Consistently applying consequences to violators
  • Forming and sticking to your do-not-sell list with distributors through diversion agnostics
  • Building a well-constructed, legally-vetted pricing structure to avoid excessive channel margins
  • Managing promotions and quantity purchase limits
  • Avoiding the product “boomerang effect”
  • Using data and ongoing education to bring your whole team on board for channel management
  • Creating a solid product segmentation strategy without relying on Amazon
  • First steps to gaining more substantial sales control
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Event Partners

Vorys eControl

Vorys eControl is a top 150 law firm that has an expertise in implementing legal strategies to stop unauthorized re-sellers, control MAP pricing, eliminate channel conflict which all ultimately lead to online marketplace sales growth.

Connect with Vorys eControl

Guest Speakers

Daren Garcia LinkedIn

Partner at Vorys eControl

Daren Garcia is a Partner at Vorys eControl, an online seller enforcement team. He leads the firm’s international programs and advises US-focused companies about their online sales control initiatives. Daren has been with the Vorys team for over 19 years and has worked with hundreds of brands around the world to implement cutting-edge solutions.

Aaron Conant LinkedIn

Co-Founder & Managing Director at BWG Connect

Aaron Conant is Co-Founder and Chief Digital Strategist at BWG Connect, a networking and knowledge sharing group of thousands of brands who collectively grow their digital knowledge base and collaborate on partner selection. Speaking 1x1 with over 1200 brands a year and hosting over 250 in-person and virtual events, he has a real time pulse on the newest trends, strategies and partners shaping growth in the digital space.

Denise Zmuda

Head of Channel Management Products and Services at Vorys eControl

Denise Zmuda is the Head of Channel Management Products and Services at Vorys eControl. Denise counsels clients on strategies for strengthening their distribution channels. She also built the practice’s first data team and implemented a data-driven approach to services delivery. This enabled the expansion of key client budgets and mitigated churn by two substantial clients amid COVID challenges.

Event Moderator

Daren Garcia LinkedIn

Partner at Vorys eControl

Daren Garcia is a Partner at Vorys eControl, an online seller enforcement team. He leads the firm’s international programs and advises US-focused companies about their online sales control initiatives. Daren has been with the Vorys team for over 19 years and has worked with hundreds of brands around the world to implement cutting-edge solutions.

Aaron Conant LinkedIn

Co-Founder & Managing Director at BWG Connect

Aaron Conant is Co-Founder and Chief Digital Strategist at BWG Connect, a networking and knowledge sharing group of thousands of brands who collectively grow their digital knowledge base and collaborate on partner selection. Speaking 1x1 with over 1200 brands a year and hosting over 250 in-person and virtual events, he has a real time pulse on the newest trends, strategies and partners shaping growth in the digital space.

Denise Zmuda

Head of Channel Management Products and Services at Vorys eControl

Denise Zmuda is the Head of Channel Management Products and Services at Vorys eControl. Denise counsels clients on strategies for strengthening their distribution channels. She also built the practice’s first data team and implemented a data-driven approach to services delivery. This enabled the expansion of key client budgets and mitigated churn by two substantial clients amid COVID challenges.

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Aaron Conant

Co-Founder & Managing Director at BWG Connect

BWG Connect provides executive strategy & networking sessions that help brands from any industry with their overall business planning and execution.

Co-Founder & Managing Director Aaron Conant runs the group & connects with dozens of brand executives every week, always for free.

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Discussion Transcription

Aaron Conant 0:18

Happy Monday everybody. My name is Aaron Conant. I'm the Co-founder and Managing Director of BWG Connect. We're networking and knowledge-sharing group with 1000s of brands who do exactly that we network and now we share together to stay on top of the newest trends, strategies. pain points, also do a lot with partner selection as a whole, if you're looking for any help across the digital space, you know, we work together as 1000s of brands here to identify those top service providers across the board, those that come highly recommended from within the network. So that's everything from Amazon, to direct to consumer to drop shipping to international expansion, whatever it might be. We've got a shortlist of the top ones out there. And that's how we actually find the experts to jump on the calls with us here. So a couple housekeeping items as we get started. We want to get as many questions answered today as possible. So if you have any questions along the way, don't hesitate to drop them into the chat. Drop them in the q&a portion there or you can always email me questions Aaron And that's, you know, live during the call, but they could also be an hour afterwards tomorrow next week, you ever have any questions in the digital space, I connect with 30 to 40 brands a week and kind of just networking knowledge share across the board and more than happy to set aside time love those conversations, it's how we propel the network. The last thing is starting three to four minutes after the hour and just you know, we're going to wrap up with three to four minutes in the hour to go to as well. So you're gonna have plenty of time to get on to your next meeting without being late. And so we're gonna go ahead and kick this off. You know, I don't think anybody's surprised with the, you know, massive push the digital over the past, you know, 1618 months or so, you know, it's been accelerated three to five years, all of a sudden channel management is popped up over and over again, but used to be for a lot of brands just a nuisance is now you know, a, it's getting to the C suite as an issue around growth and profitability and brand protection. And you know, we've got some great friends, great partners, the network over for easy control. We actually had an in-person event with them last week, it was fantastic. And just it's just top of mind for us as a whole. So, you know, I'm gonna go ahead and kick off the call today, you know, Daren, I'll kick it to you to do a brief intro on yourself in Vorys eControl, and then we can kick it over to nice and then kind of jump into the content

Daren Garcia 2:37

as a whole. So I'm good. Yeah, that's great. Thanks, Aaron. And thanks, everybody, for jumping on Daren Garcia here from Vorys eControl. I'm joined by my colleague, Denise Zmuda, who has joined us from the business world and leads our channel management work, among other things at eControl. So we're both looking forward to talking to today, Denise will do most of the talking. So I'll let her get right to it. Thank you for joining.

Denise Zmuda 3:00

Alright, thanks, Daren. This is Denise and as Daren mentioned, I did come from the practitioner space, I worked actually for a brand that implemented the eControl solution. But before that, we were pretty disciplined as it relates to our channel management practices, and had authorized reseller programs in place even before putting an additional layer of the eControl solution on top of that. So I'm very excited to come to you today to try to impart some of the best practices that I've not only gathered over the last 2530 years, but also to bring to light some things that I've even discovered based on the practices of some of our clients that we've been able to get our arms around with them and get control of some of the leakages that were taking place within their channels of distribution. So, you know, as Aaron just mentioned, and Daren does on numerous occasions throughout his various presentations with the exponential growth of eCommerce comes a significant amount of violations that can disrupt your sales and your brand value if you don't have your arms around what's going on in that space. And these violations are always changing. They're always shifting, new players are popping up, new issues abound. And in part, this is because of the fact that you are dealing with independent businesses who are operating in their best interest. They're not necessarily operating in your best interest. Everyone is looking to increase their revenue and in some cases, their profitability. And so when they are doing that they're looking for ways to maximize both. And this can cause some interesting behavior particularly online when they are trying to achieve those goals and objectives. If you Don't have controls in place from a channel management standpoint. So it's really important. And I think you've seen this before, from presentations that Daren has conducted that you not only address the tip of the iceberg where a lot of the obvious activity comes to fruition but also put measures in place that help you to get control of things below the waterline. And so that's the type of thing that we're going to dig into today. Because if you don't, you know, not having that control can really send your marketplace sales asunder as advertising and content, reviews, and price erosion come to bear on these marketplaces and really put you in a compromised position. So control is the key to the sales becoming optimized. And that control comes in the form not just of enforcement, but also putting those foundational elements in place. And it doesn't just impact in a positive way marketplace sales. But it also can prevent some omnichannel disruption that I'm sure many of you experience with your brick and mortar channels as well. So our goal here is to impart some knowledge so that you aren't harmed on the age of online commerce, but instead that you are strategically and holistically evolving your practices to account for some of these perilous areas and ensure that you are not a victim of that. So we view channel management as table stakes in the eCommerce age. And I think there are two components to that from a strategy standpoint, one is just developing a defined route to market strategy, particularly on marketplaces, but also then, setting clear expectations with your channels of distribution regarding how you want your products to be handled, and how you want them to be sold by authorized parties. And when you set that foundation, you start to set those expectations and concert to get the control that you need. So let's dig into some key components of this channel management strategy. From a marketplace standpoint, particularly Amazon, if you don't have a defined strategy for how you want to be presented on that platform, you can face a really chaotic environment. I know I experienced this, even with the authorized reseller program that I had had at my previous company, it didn't address the online age. And so we were supremely surprised to see the multitude of third-party sellers that are representing our products in a very poor way that we were completely unaware of, we had a significant amount of intra brand competition and complaints from our traditional brick and mortar authorized sellers. And we even had those channels come to us and say look, I don't even know if I can invest in your brand anymore, because it's just not worth it for me to do so when I'm operating in this environment. So our experience is that it's very important and a good best practice to limit sellers, particularly on Amazon to just one who deeply understands how to optimize growth there. I'm a firm believer and ensuring you're leveraging the channels for the right activities to bring your products to market and marketplaces are such a unique skill set that you need to have to be successful there. That choosing the right seller to best represent you there is credibly important. So that's number one. And I think it's important to think about this slightly differently than we traditionally have. From an offline standpoint, when you're dealing with dispersed geographies, it makes absolute sense to try to scale your distribution because you're trying to reach corners of those geographies that you just can't, through one particular channel partner, however, online, particularly on marketplaces, you don't need that geographic coverage. That consumer is going on Amazon, they're searching for a product, they're not searching for sellers. And once they find the product that they are looking for, they just need one seller to answer that virtual front door. So ensuring you've got the right person there, representing your company in the way you want it represented, and representing your products in high-quality way is extremely important to get to when you're dealing with the likes of Amazon. Now, determining who serves in that capacity is another question that you need to go through if you haven't already. Depending on how much involvement you want to have day today and how much control you want to have over that experience really can help dictate how you go market there. So if you have the resources and the expertise to be the seller of record on the marketplace, and you want an extreme amount of control, you being the seller of record makes good sense. I know for me, we did not have a traditional channel that was expert on online marketplaces. So we chose to go with a single seller who grew up on the platform and knew how to optimize it for the brands that they represented. So we chose an exclusive third-party seller. I won't go through all of these examples. But as you can see here, it really depends on what your internal expertise is on what capacity you have, and the level of control that you want to have over your presence on the likes of Amazon that really dictates the type of seller that you select for representation of your brand. And once you've made the determination around how you want to go to market on Amazon, and with whom it makes it easy, then to apply particular policies that help to define for your authorized channels across the board, including the entity that's representing you online. How do you want your products represented, where you want them represented? Where are they, in particular, can represent them, and to whom these authorized sellers can sell products? And putting those two things in place really helps to structure your channels of distribution from, at least on the Amazon Marketplace. For my previous company, what looked like the left into something a little bit more defined and structured on the right setting, that expectation is extremely important. So that all of the authorized channels that you have representing your product, know what your expectations are, again, these are independent businesses operating in their own best interest. So it is incumbent upon you to explain to them how you want your products handled and what the consequences are of that not happening.

Once you have that control, you can start to layer additional authorized channel controls in place. One of them is a map policy. We say map policy is a tool and not a strategy. I know this from firsthand experience, that having a map policy prior to having that channel control ends up putting your authorized channels in a very precarious position and in fact, causes you to have to penalize them. While you have no authority to leverage this policy over your unauthorized channels. It just doesn't work. They don't have to comply, because there's nothing you can do to them from a product supply, you know, withholding perspective that is going to affect them. So it's very, very important that this is layered on top of an authorized reseller program and gray market control approach versus something that stand-alone or done prior to that, when thinking about about policy, you want to make sure that it complies with the law. So either have an attorney-drafted or review one that you have drafted on your own to ensure that it does that. And you want to make sure it covers appropriate products and advertising. And it is something that you're willing to enforce consistently. And that is incredibly important. From a product standpoint. My experience and the experience of others is that it's not appropriate for all products, you want to make sure that you're focusing on products with higher price points that differentiate your brand in the market. And that have a premium image and a strong brand value that you wish to protect. So really be selective as it relates to what products you Paul, under your map policy. You want to make sure that you treat it as a unilateral policy. So you have to make all of the decisions relative to enforcement unilaterally. And it is important to not have the sales team involved in that process, the best practices to have one person that's administering that map policy on behalf of your company. And that conversations are funneled through the approaches through that map administrator and not through the sales organization to ensure that there are no communications that could be perceived as an agreement on price. So that's extremely important.

Aaron Conant 14:34

Just Just one question that comes through is, you know, are we able to share the deck afterwards? And then I want to get to that point because that hasn't come up before as a best practice, which is so fun. We'll set up a separate person is this somebody in the finance team? Like, where do you get where do most companies get the map administrator from and then anytime this comes up, it's a firm directive to all sales doesn't matter who it is. They to bounce it through the map administrator.

Daren Garcia 15:02

Yeah, I mean typically Aaron, you know, it's, we see him come You know, sometimes the legal department handles it sometimes the marketing department sometimes just the calm, I think, you know, it's not incredibly complicated but having that you know, we call it a maps are you know, kind of single point of contact on map where, you know, all of the inquiries that go to map at, you know, Acme Corp comm flow through and it and it just the, you know, what is the name, that person can go and receive any advice or counseling they want with respect to any nuanced issues, but it just allows the company to speak with one voice and to have one protocol for handling those things, I mean, left on left on governed, I guess you just run a risk of people going out and saying, Oh, it's okay, if you violated or if you raise your price, we're okay. And those sorts of things, which all, you know, are legally unwise to do. And so that's really the point functionally, I've seen it work across a number of departments with with good success. And I think the basic principles are fairly straightforward such that, you know, a lot of different people can grasp pose, and then run it effectively. And then we can make we're happy to make the deck available, we'll send a link out to everybody, so they can have just electronic access to it.

Aaron Conant 16:21

Yeah, awesome. It's just amazing how complicated this has gotten over just even the past, you know, 18 months or so, writing all the fine-tuning in, there's other, you know, legal aspects that pop up, like when people, you know, say, hey, that's a counterfeit, to try to yank somebody down. And I will probably get into some of that as well. But there's a lot of nuances on the legal side of things to do, what not to do, and how to avoid them,

Daren Garcia 16:45

I guess I would say, and I want to let, Denise has a lot of stuff to share. But I do want to say, you know, on the legal side of it, you know, there's so many companies, so many companies that do this incorrectly, that are having people sign their map policies or embedding their map policies and what their reseller policies or their you know, dealer agreements and those sorts of things are telling people you have to sell it map and, and, you know, all any, anytime you you step back and say what are we doing, and if you're trying to get people to agree to your map, or to commit to you that they will follow your map, you're basically violating those key principles of unilateralism and, and that's, you know, that ought to be sort of a yellow flag, not necessarily a red but a yellow flag that goes up and it merits sort of closer, closer attention. So I'll stop talking now. But yeah,

Denise Zmuda 17:34

yep. So the only thing I would, you know, sort of end with here is, again, consequences really should be applied consistently, regardless of who the violator is. And the egregious pneus of the violations, it doesn't matter if it's a you know, a fraction of a percent off map versus, you know, 5% off of map, or if it's your largest seller, versus your smallest one. And then consequences are applicable to both direct customers and indirect customers and indirect customers can be, especially if you end up cutting supply off to those indirect sellers as an example, having them on a do not sell list. And providing that do not sell those to your distributors is really important. So they understand from a supply standpoint, that they are not to be providing supply of your product to those indirect sellers. So it's an important enforcement component of this, especially for selling to tear through distribution. And avoid consequences that could be deemed coercive or would avoid a menu approach. Keep it simple is always the best approach here and again, have the policy vetted by Appropriate Legal Counsel who can help you. I mentioned but I want to mention again, that it's really, really important. And I know this from firsthand experience in my previous company, we had a map policy in place from the early 2000s, which served us well throughout the course of time once things came up from an online standpoint, and we didn't have the controls in place that eControl provides on top of our authorized seller program, we really dealt with a lot of challenges from our authorized sellers, saying how can you hold me to a mat price when you're not doing anything about these other sellers? The problem was we didn't know who the sellers were and we had no way of effectuate policy against them. So having that flip-flopped and not having channel control first, can really put your authorized sellers at you know, a disadvantageous position and really penalizes them. And so I would recommend you know, either suspending your map policy until you can get channel control or if you don't have a map program or policy today, wait until after you have your channel cleaned up to put it into place. Those are really good practices to keep in mind. Once you have the author reseller program in place once you have your gray market controls in place, and once you have that policy in place, you're in a position to start monitoring and effectuating. enforcement. And depending on whether or not it's a price versus a nonprice violation, there are different levers you can put in place. Again, if you have a mop policy, and it specifies the enforcement protocols that the brand is going to undertake, they'll obviously follow those from a nonprice violation standpoint, selling on Amazon when they are authorized to do so we're doing other things, there are other consequences that you can bring to bear. But you do want to make sure that you are enforcing not just against unauthorized sellers, but also your authorized channels because you want to show them that you are serious about these channel controls. And at the end of the day, it's in the best interest of the entire ecosystem to have them in place. So it benefits everybody.

Now, one of the things that you'll want to think about, because I mentioned again, that these entities are independent, and they make decisions in their own best interest. And in sometimes they make those decisions knowingly, and sometimes they're just operating as they always do, in in an unknowing way, or potentially supplying unauthorized sellers. So when I think about unauthorized sellers getting supply, it's through some diversionary activity. And oftentimes, it's distributors that may be supplying those entities if you sell their two-tier distribution. And when you're first getting going with your channel controls your authorized reseller program and your gray market controls that you've put into place, you may not have a do not sell list fully formed early on. And so you may be finding there are some unauthorized sellers who are supplying products to consumers on Amazon, you're going Gosh, where in the heck are these people getting product, I have all these authorized seller programs in place, I've got map policies, I've got gray market controls, we've got some sellers here that keep popping up, like who is giving them supply. Now we'll go into a little bit more detail in on later slides as to where some of that stuff might be coming from. But one useful tactic that I would encourage folks to consider is one that we actually provide here at eControl, and we call it diversion diagnostics. And the goal here is to try to identify where these unauthorized sellers are actually getting their supply. So if you sell through two-tier distribution, and you are able to get transactional data from those distributors, and you can often build those requirements within the auspices of your authorized seller program. So I've done that in a past life. So through two-tier distribution, and as part of being a part of that, as a distributor, it was a requirement to provide sell-through data. And that in large part was to help compensate sales reps that were supporting those indirect sellers. But if you can get that transactional data, we can work with brands to try to identify looking at that transactional information. And using open source intelligence and social media and public records, an analysis of that, and our product diversion database, we have all sorts of investigative and enhancing investigative tools that we use using all of that data to go where is that supply coming from. And when you identify as an example, whether or not a distributor is providing product to an unauthorized seller, you can start to build that do not sell list and work proactively with your distribution partners to pull that program together and get even greater control and shore up those leaks that might be occurring within your channels of distribution. Now you may find as you're doing that work, and you uncover where some of those diversionary leaks are originating, you might have to do some deeper analysis and go Gosh, what's the root cause of why this is happening? In Part, it may be because the distributor doesn't know but you might have some recalcitrant distributors who are just going to do what they do. Or you might have some other entities within your channel ecosystem who are like, Look, I'm looking to make a buck. And again, I'm operating in my own best interest. So I am going to do what I do. And I'm going to continue selling the way I sell and your channels are your problem and you go figure it out. So you want to figure out if you're somehow fueling those behaviors through some of the activities that your business is undertaking. And the root cause may be from just general arbitrage and some of it might be minor and you know, it's nothing that you can really put a lot of channel control around, but you could have some practices through distribution that are driving those leaks. You want to get your arms around. So what we're going to do next is start to dig into some of these root causes that we've identified of gray market product flow. So again, you've put your authorized reseller program in place, you've set expectations with your channels, but things are still going on, that are causing a lot of unauthorized seller supply in the markets, you want to try to get your arms around it. So we'll start to dig into each of these in more detail in the subsequent slide. So let's head into it. From a pricing and promotional practices standpoint, one thing that we've observed with some of the clients that we've worked with, and this is something that I got my arms around early in, in my channel career at my previous company is ensuring that you've got a well constructed legally vetted pricing structure. That is mitigating differentials between similarly situated channels. Think for it the most basic level if you had a distributor who you intend to be supplying other resellers in your network because you can't reach those resellers directly for a number of economic reasons. So you're using distribution to do that. And you've got first-tier retailers that are selling directly to consumers. If for example, you didn't put expectations in place around that two-tier distribution partner and what their role is in your ecosystem, and you gave them wholesale discounts and you gave the retailer retail discounts. That distributor is at an unfair pricing advantage relative to that retailer, if that distributor goes and tries to secure the same type of business as that retailer. So think for an example, if you had a distributor in that model, and you didn't set the expectations with that they are not allowed to sell on Amazon. Well, they might set up shop on Amazon and compete with the retailer, they might go ahead and use the their differential to compete in ways you just didn't intend them to. So you want to ensure that you not only put your reseller program in place, you not only specify the roles and responsibilities you expect each of your channel members to play. But you also align your pricing structure to that and ensure it's vetted from a legal standpoint.

close cousin of this is what I call excessive channel margins. If you're providing excessive margins through your channels of distribution, you are essentially providing them additional margin room from which to discount. So they probably have a certain amount of margin that they are looking to make within their business to cover costs and make a profit. But if they have extra margin room available, they have extra room to discount and still keep themselves whole. So again, operating in their own best interest, they may not necessarily be concerned around about the ecosystem at large, and they just might start discounting at levels you didn't intend. So you want to make sure that your channels are profitable, but you want to make sure that you're not overcompensating folks for the work that they are doing on your behalf. Another area to keep in mind is as it relates to two-tier distribution. And again, like I said, I worked in an organization who relied very heavily on two-tier distribution. And we used rebate incentives for sure. And in the days of old, we would use unit volume discounts as well. So what I mean by that is, the more that you buy, the more of a discount you get on a per unit basis. And what these two types of incentive programs can can cause if you're not careful, is that distributor is chasing after a particular discount or a particular rebate amount after say, a quarter. Let's assume in this case, you have a quarterly rebate incentive. And so they may stock too much inventory stock more inventory than natural demand is going to support. The carrying costs of that inventory are going to be too great for them to hold on to that for too long. So they are going to look for ways to offload that inventory. If they've made enough margin on those volume discounts and those rebates in order to afford some gray market dumping, if you will, into under authorized sellers hands that are going to end up showing on Amazon, they may just well do that. So you want to have your reseller program, as well as being really, really careful around how much volume discounting you're doing and what kind of rebate incentives you're putting into place. And if you can, you can't in every situation, structure that receipt of that rebate incentive based on sell-through data. So in my previous company, none of the distributors received a growth incentive rebate without that sell-through data that allowed us to validate sales that are made to the different resellers that we were intending that rebate to apply too. So that's a practice to consider if it makes sense for your industry in your business. Okay, moving on to promotions, I think promotions unit, they can take so many forms and flavors. So keep some of these principles in mind, they may not directly apply to your business, but they're important to keep in the back of your head as you're thinking about promotion. Sometimes they are not coordinated well within organizations if you have a particularly large organization with lots of silos. So that's one area that can create some challenge for folks. But if you do have the ability to manage promotions, pretty deliberately, I think it's important that you want to think about whether or not if you have promotional discounts tied to unit quantities, from a consumer standpoint, that the quantities that you're identifying actually makes sense for the product and what a rational consumer would actually buy. So as an example, I was asked to help a client assess the quantities to provide with a particular promotional discount. And I didn't even have to look at the discount amount. But when I looked at the quantities that they were suggesting, that a consumer could potentially buy, I could just not see an average consumer buying in that quantity, unless they are non-authorized sellers trying to stock up. Or maybe they were buying it, you know, for their family. As you know, holiday presents or something along those lines, it just didn't make any rational sense that an average consumer would be buying those products. So that is just a real obvious example of things to think about.

And I did work with another client. Just as another point of example, because of the way in which the quantity purchase limits were provided, they were pretty healthy to begin with. But they didn't have a really good tracking mechanism to see if a particular individual was buying above those quantities beyond a single day. So an unauthorized seller was literally going in day after day, and ordering up to that quantity and then going back the next day and ordering again, taking advantage of that promotion, and buying in quantities that could then be sold online. So just things to keep you know, as crafty as we might think we are some of these sellers are even more crafty than we are. So you have to kind of think like them. Um, the other thing to keep in mind is compound and couponing. And I think at the retail level, this can come in the form of you know, some sort of, you know, special promotion on a product compounded with a you know, friends and family type discount, and maybe an enhanced discount off of the purchase with a retailer credit card. So trying to get your your your mind around some of the other promotional activity that might be taking place that allows a consumer to to compound coupon, if you will, on those particular purchases is something to keep in mind. And again, it's not particularly viable in every situation. But if you are able to pay sales channels for a promotion based on proof of sale, I think that's another way to kind of keep things in check. Okay, another thing to keep your minds or your eyes on and and your minds around as it relates to promotional practices. And this might not be a direct promotional practice, but it's in the same vein. liquidated product we see with some of the brands that we work with showing up on Amazon. And the challenge here is that comes up under the same acent as the brand's new products. So unlike in a brick and mortar store, where a consumer is going to a clearance spin, or a clearance rack, and they can clearly touch and feel the product and know that it's being liquidated and is an as is product. They don't have that luxury on Amazon when it's tied to the brand's new product, Ethan so this can create a lot of challenges for brands, not just from a price erosion standpoint, but also from a quality control standpoint. So you really want to try to focus in this area and mitigate some of the liquidation practices that can end up showing up on Amazon. So if you're able to have a really disciplined inventory management process with some of your customers and distributors, if that's possible at my previous company, there was a lot of discipline between the supply chain organization and the the stocking requests that were coming in from distributors and people involved in between those two organizations to make sure that, you know, inventory made sense. In some industries, a stock rotation program can work well whereby the distributor is allowed a certain amount of inventory that doesn't sell through to be rotated back to the brand so and a equal value of new inventory can be Picked up in exchange for that rotated product. A pure buyback program can be an effective tool, depending on the financial makeup of that buyback program. So you have to do some analysis with your finance team to make sure that makes sense. And in some cases that may make sense to just have authorized liquidators that you're looking for your channels to be working with that abide by your selling policies and programs. So those are some strategies to think about as it relates to liquidated product that might be worth considering.

Okay, the other component of root cause that I wanted to go through this morning include sort of internal alignment or misalignment, one area where we see arbitrage, that can take place within the brands that we support is when you have products that you are looking to sell offshore from the United States, and you're leveraging either distributors here that are taking that product internationally, or you're selling to international distributors. And these products can Boomerang back to the United States and end up on Amazon. And the reason why this can be so prevalent is that in some of the geographies where you're intending your products to be sold, they're often sold at lower prices than us products. So your wholesale price to distribution might be a little bit lower as a result of that, but it just ends up coming back to the United States and causes a major headache for you. So I think a couple of things to keep in mind is, you know if you're able to build a bridge to international, you know, departments within your brand, and try to provide some coordinated effort here, there's some way to really carefully evaluate and monitor the international distributors that you're signing up to make sure that they're reputable. And yet, this not only helps in terms of them abiding by your policies, but also in certain countries, it can be really difficult to get rid of distributors once you sign them on. So you want to make sure you're signing up with reputable folks. So you're not stuck with somebody that's very difficult for you to not be stuck with anymore. The other tactic that you can try in concert with this is to explore geographic product variations. So what you're selling in Europe might be physically and formulaically different than what you are selling in the United States. You can even take that further and segment what you're selling on Amazon as an example between you know that in brick and mortar and then even more so you know, geographically speaking, certainly, the cost of that is something that your organization has to take into consideration. But providing that segmentation can be a useful tool to kind of manage the situation there. And then, getting alignment between sales and front office and organizations can be really, really useful. I know I spent a lot of time when I was bringing forth not just our authorized reseller program, but the Vorys eControl program. I spent a lot of time getting folks aligned across a number of different functions that I knew were going to have to be involved in the process so that we could all understand what we needed to get our arms around and why and rallying the organization behind that. So on the sales, customer service and marketing front, it's really useful to implement protocols that help to get those organizations educating consumers about the harms that can be caused by unauthorized sales, and the benefits of purchasing from authorized sellers. Some organizations tie warranties or satisfaction guarantees just to their authorized sellers, you want to make sure your consumers understand that purchasing through authorized sellers bring additional benefits that they aren't going to receive through unauthorized sellers. We've also seen practices put in place with brands to have order processing and finance teams take a good hard look at customer orders that looks significantly deviated from the norm. So if you've got some new seller that you've signed up or that sales assigned up and suddenly they've got some real wild, substantive order that they've put into place, you might want to scrutinize that order a little bit and understand what that seller is looking to do with your products. So putting some of those controls in place and have that heightened awareness can be really, really effective. And in any situation where you're trying to put some channel controls in place, whether it's the full control program, just an authorized reseller program or a combination of both. Getting C suite buy-in for that you control program really increases the chances of success, particularly when it is backed up with quantification And so we're going to go into that next. I know it was very useful for me once I got everybody on board with the fact that we had an issue on Amazon. And we had a significant amount of Interbrand competition that was inhibiting that we had a risk of inhibiting our growth, to get everyone on board. But one of the key things that helped to get everyone on board was seeing what was going on out there with data. So there are certain things that you can't quantify from an unauthorized seller standpoint. But there's certain things you can so once we saw the number that we're operating on Amazon, and the bound of negative reviews that we had had, and the amount of revenue that was going through there, through these entities, we did not know it really opened the eyes of everybody. So really getting that level set is incredibly important. And once you have that, you can start to produce meaningful metrics on the effectiveness of the programs you subsequently put in place. And so that's an incredibly, incredibly important, having ongoing education. And bringing folks along on those KPI reports, if you will, is incredibly powerful to show everybody the results of how providing a healthier environment for the channel overall, and particularly on Amazon can help the brand so we produce reports like this, this is a report that was incredibly effective for me, just to see the trend line as it relates to the volume going through unauthorized sellers, the trend line on the increases through authorized sellers showing that you know, we're making a difference in terms of pushing our sales through to through the channels that are best suited to support and and effectively support our brand on the Amazon Marketplace. so incredibly powerful reports that are data-driven, that take the subjectivity out of these types of conversations and add a level of objectivity that is very difficult to dispute. And bringing that forward on a regular basis is really, really important to bringing folks along. And then, as I mentioned before, one of the things that we do here is to track source so we track seller source intelligence, this is another effective tool to potential use, if for example, the source of diverted product tends to be the same old distributor, the same old entity time and time again. Could it be that the distributor doesn't have their processes set up in a way that can support the program? And how can you work with them in order to do that? Or do you have a significant amount of diversion coming out of the warehouse club space? Well does that then suggest that we need to have a different, you know, price pack architecture in place through those channels of distribution to mitigate the ability for an unauthorized seller to take advantage of that pricing model and move it to Amazon. So this type of insight not only helps to show progress, but can help to also point you in the right direction on how to mitigate the issues that you're seeing over time. And once you get all of that under your belt, you're in a really good position to leverage sales control for growth. So once you get your brand stable online, and you know you're able to get things under control on online channels, you can start to really have good conversations with your brick and mortar organizations rather than them complaining about what are you going to do on Amazon, you can start to really have good business conversations about how you're going to drive growth. And a healthy channel is just better for everybody. That healthy ecosystem really puts you in a position of strength to start having business conversations that are focused on growth versus focused on how you're going to mitigate the chaos.

So with that, I'm at the end of my time as it relates to your channel management practices. I think from here, we can talk a little bit about how you can go from putting those foundations in place to really defending your go-to-market strategy.

Aaron Conant 44:22

If I jump in here, some questions like in this is that is this a good time to do that, and I want to make sure we get to this. So let's go. So one that comes in is the Amazon KPI report produced by Amazon for three p or one p position, or does Vorys produced this based on data. So I think that was going back to one of your reports you had

Daren Garcia 44:45

that based on data. Yep.

Aaron Conant 44:48

All right, awesome. So the next one. How does product segmentation work on Amazon unless you join a program like transparency product packaging doesn't help, you know, all packaging being sold under current essence is not a prohibition. And Amazon will not stop those sales from happening, correct?

Daren Garcia 45:09

Yeah, I think that, fundamentally, you know, the the premise of the question reveals a gap there, because Amazon won't help you with any of this. And, you know, so your ability to control all of this will depend really solely and exclusively on your ability to implement the legal foundations and things that NIS touched on. And we've spoken about those on other on other calls, but you have to be able to take the position, regardless of, you know, segmentation strategy now, and I'll just segmentation specifically here in a minute. That products being sold by unauthorized sellers are legally different than those being sold by unauthorized sellers. And, you know, those differences, importantly, don't have to be physical. And so that's Denise touched on that briefly with differentiated warranties, and guarantees and things like that. So unless you have a true counterfeit issue, or you know, an issue where somebody stood up with duplicate a sin, or they've otherwise engaged in something that is, in fact, violative of Amazon policies, Amazon will not do anything about that for you. And it's going to, you're going to put two slides forward, Denise, if you would, please. You know, ultimately, to stop those issues, you're going to have to put in place this complete solution, we touched on various components of this today, specific to channel management, where IE, if you recall, where we started below the waterline, but there are other key components here, that will enable your ability to enforce against unauthorized sellers. Now, with respect to segmentation, you know, segmentation can be effective, where you don't have anybody selling the same product that you have, you know, segmented, or a portion for Amazon or Walmart, or whatever your intended strategy is, the one weak spot that those strategies have is that there's nothing unless you're set up the right way, ie through something similar to this, there's really nothing preventing people from acquiring your other products that you don't want to be sold on Amazon and selling them there. And so while it can provide some relief, specific to those specific agents, that you've segmented to Amazon, and that's, again, that's assuming that Amazon believes that they're, in fact different from those that might be sold at Walmart, or Costco, or whatever, um, you know, you still are going to have to face the fact that, that your products, unless you have the full foundation in place, are still going to show up there and sit potentially alongside of those that are segmented to Amazon and therefore create perhaps another, you know, layer of confusion or dilution for your customers.

Aaron Conant 47:57

Awesome. One more question. Can you publish a do not sell list and make it available? Yes.

Daren Garcia 48:03

I mean, yeah, the overwhelming majority of the time, yes, I mean, I won't get too deep into legal weeds, companies that have very, you know, massive degrees of market share. And, you know, that can in effect move markets, or the only source of supply for a particular product. You know, there's some additional legal nuance there. But, you know, if you're selling a product and face decent competition from from your true competitors out there, you know, when they're competing products and things like that most companies can look to that strategy.

Aaron Conant 48:35

Great, awesome. There's one more question that comes in, but we're gonna address that on a separate one of these, it's what's the best practice for transitioning from one p to three p? Well, we'll do probably eight to 10 of those calls over the next year, so probably once a month. So you know, just you know, for those looking for an answer to that, well, we'll capture that in a different webinar, that's

Daren Garcia 48:56

maybe a four-hour event. So in the interest, I think I think we want to wrap this in the next three to four minutes to let people go, so I am. If you would please, Denise, you just go forward to slide 56, which is kind of the the whack a mole versus eControl type, type approach. You know, for companies out there, the channels, you know, Amazon, Walmart, other online marketplaces, both domestically and internationally are just all of a sudden too big. And, you know, certainly with COVID, lifts and everything, just capturing an ever-increasing share of revenue and all of a sudden, these channels, you know, have gone from, you know, even big, sophisticated companies saying, Well, what is this? How should we think about as a marketing funnel, the sales channels, it's something else, too, you know, a significant and material portion of revenue that all of a sudden has to be profitable. And so you Your ability to kind of go out there with sort of what we would call half measures or fragmented, you know, software-based tactics or trying to send scary letters and things like that and playing in a reactive type way, you know, really is going to, you know, leave you behind in terms of relative to I guess I should say those companies that are intentionally wading into these channels potentially as intentionally asserting the control necessary and leveraging that control to drive their sales and profitability. So now, you know, not only are your marketplace sales, not disrupted and really optimized for growth, but also you can take that, that image that that reality to your to your omnichannel partners to your offline partners and say, Hey, guys, look, you know, we're clean online, we're profitable, we're the one you should continue to invest in and give the shelf space to, and use that as a competitive advantage offline. And so that really, is what the this whole notion of eControl is, is trying to drive rather than setting brands up to play whack a mole, which is not really particularly commercially effective or of much interest to us. I want to end on slide 59, if we could Denise just because as we, as we couple down. One more please. Yeah, as we will circulate this around. But you know, this is something cool that we haven't shared publicly before that wanted to put out there for everybody. And you'll get it when we when we send a link. But this is really a sales control diagnostic tool that Denise put together, leveraging her channel management, decades of channel management, expertise, and really, you know, a really simplified way to go through various key components of channel control and channel management in today's market, and allowing you to self grade your organizations in plotting on that little graph there in the middle, where you fall on certain of these things. And to the extent and you can follow along on the, on sort of the directions, it's, it's pretty self-explanatory and pretty easy. But, you know, I think where you do end up in that urgent challenges box are caught, you know, in that area of the grid, you know, those are really areas that that should be, you know, surfaced, you know, bubbled to whatever level two they need to internally in the organization to intentionally and cross-functionally, you know, kind of rally around managing those to a better position or better outcome, because those are the things that are going to really hurt, sales, growth, profitability, really across the entire Omni ecosystem today. And as with everything in this in this world, you know, these things, you know, you can't boil the ocean, you can't, you know, eat the whole, often here at once. I mean, it's a big shift, and brands just kind of need to start walking the right path. Understanding that wherever you start on that path, you know, you can always typically take more control on but you just want to make sure that you're at least moving in the right direction, as opposed to, you know, and I don't say this critically, just kind of head in the sand thinking that things will kind of magically, better themselves in these respects mean, it's our experience that when these things settle in, or you start having these challenges that they only grow and increase and lessen until brands take the affirmative steps necessary to address them. So I will stop there, Aaron, and allow you to deliver on your promise here. Yeah.

Aaron Conant 53:24

We, I know we tackled a ton of questions along the way, there's some that we didn't get a chance to get to, but more than happy to connect anybody afterwards. With the team over Vorys eControl. They're great friends, partners, supporters of the network for a long time now. And literally hundreds of brands that are in the network, you know, encourage anybody you want to follow up copy of the presentation will connect you or to them, worth putting some time on the calendar to pick their brains in the space, their overall leaders as a whole. Also, if you're looking for other connections, you need help across the board, anything in the digital space, just overall discussion on digital strategy, what's working, what's not all the way to partner selection from direct consumer to international expansion to Amazon, don't ever hesitate to reach out. Look for a follow up email from us. We'll be in touch with that. We're gonna wrap up right on time. hope everybody has a fantastic Monday. Have a great rest of the week. Everybody take care of stay safe and look forward to having you at a future event. Thanks again. Denise. Thanks, Daren.

Denise Zmuda 54:17

Thanks, everybody. Thanks, Aaron. Thanks everyone.

Aaron Conant 54:19

Already with you.

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