The European Court of Justice (ECJ) ruled in Luxembourg early December that luxury goods manufacturers could restrict unauthorised distribution of their products through third-party platforms such as Amazon or eBay.
Specifically, it concerned the cosmetics manufacturer Coty, which sells its products only through authorised dealers and makes this a strict requirement. It is contractually prohibited, for example, for partners to sell the cosmetics through third-party platforms. When one of the authorised retailers – the online perfumery parfumdreams – nonetheless offered Coty products on Amazon, the cosmetics manufacturer then filed a petition before the Higher Regional Court in Frankfurt. The court, however, saw in Coty’s terms a possible violation of EU competition law and asked the ECJ for clarification.
In Luxembourg, it was finally decided that such so-called selective distribution systems and, consequently, a distribution ban on luxury goods at third-party platforms would be allowed if it served to “preserve the image of luxury”.
The case of Coty makes clear that online retail, with its countless sales channels and its transparency, brings not only advantages, but also disadvantages. Openness and anonymity do not allow certified retailers to sell via unauthorised distribution channels, on the so-called grey market. Alongside this is the problem of product piracy, to which Birkenstock, for example, has recently reacted. The shoe manufacturer stopped selling its products on the European sites of Amazon on January 1st, 2018. The company believes that Amazon is not energetic enough in tackling product counterfeiting.
Manufacturers of quality brands, in particular, fear a decline in the value of their products and a loss in their image. On the one hand, they face the challenge of increasing their sales, by which collaboration with retailers and marketplaces can be highly profitable. And secondly, the safeguarding of their brand image is of essential importance.
We show you today how you, the manufacturer, can maintain this balance and also keep an eye on your sales partners.
Choose your distribution partners sensibly
If your products suddenly become offered on third-party platforms, or even fake goods are sold under your own brand, then this can not only cause a loss of value, but is also especially dangerous to your brand image. Brand development, after all, is a long process and, devoid of a suitable online environment, will suffer noticeable damage. You can also find tips for protecting your brand in our article “Preserving your image: How to avoid the grey market.“
In view of this risk, decide quite consciously how many levels of distribution you use and how intensively, as well as which distribution channels and distribution partners you choose. Many brand manufacturers even sell their products in so-called selective distribution. This means that the manufacturer selects their retailers on the basis of certain criteria. In addition, the products may not be resold to third parties that do not meet these requirements. The criteria may include, for example, the marketing methods, the structure of the assortment, the layout of the online shop or even the reputation.
Opt for intelligent channel monitoring
Despite a deliberate selection of retailers and distribution partners, however, manufacturers also need detailed information on the selling of their products from price comparison portals, online marketplaces and in online shops. This requires a monitoring strategy. Use intelligent technologies here, such as blackbee channel monitoring. Monitor your market and stay in control of your brands.
With blackbee channel monitoring, you will see:
- which of your products are offered by which retailers on price comparison portals, online marketplaces and in online shops.
- when a new retailer sells your products on the Internet.
- the product lifecycles and popular product variations of your branded products.
Daily updated and highly valid data creates an informational advantage, offering you the opportunity to react faster and more efficiently to current occurrences in eCommerce.
Do you need further information on channel monitoring in eCommerce? Contact us now – we look forward to hearing from you.