Many manufacturers believe they can control their brand and pricing independently. They assume that by selling directly on marketplaces or working with multiple retailers, they can expand their reach while maintaining profitability.

However, managing international sales requires more than just listing products online—it demands strict distribution control, enforcement of pricing policies, and the ability to block unauthorized sellers.

Without a structured distribution system, manufacturers face legal, logistical, and competitive challenges that they are not equipped to handle alone.

1. Managing a Foreign Market Requires Significant Resources

Challenges manufacturers face when managing sales abroad:

  • Navigating local laws and taxes: Import regulations, VAT/GST rules, and marketplace-specific compliance.
  • Handling product certification and approvals: Every country has different safety and quality standards.
  • Enforcing contracts and policies: Preventing unauthorized sellers requires legal action, which is expensive and time-consuming.
  • Managing logistics and warehousing: International shipping, customs clearance, and inventory control.

The consequence:

  • Manufacturers spend excessive time on administrative tasks instead of focusing on production and innovation.
  • Compliance risks increase—non-certified products may be blocked or fined by local regulators.
  • Marketplaces take advantage of legal loopholes to allow gray imports and price dumping.

Trying to manage sales alone means dealing with endless operational challenges.

2. Marketplaces Do Not Listen to Manufacturers, But They Must Listen to Distributors

Why marketplaces ignore manufacturers:

  • Marketplaces prioritize sellers who generate high transaction volume, not individual brands.
  • A single manufacturer has no leverage, but a distributor controlling multiple brands can negotiate.
  • Marketplaces only follow legal restrictions—if distribution rights are not enforced, they allow any seller to list products.

The consequence:

  • Manufacturers are powerless against price manipulation—marketplaces allow unauthorized sellers to compete.
  • Customer complaints and fake reviews accumulate, damaging the brand.
  • The manufacturer must either accept the platform’s rules or stop selling altogether.

Only distributors with legal control over distribution rights can force marketplaces to comply.

3. Internal Conflicts Between Manufacturer Departments Create Loopholes for Gray Imports

Even within a manufacturer’s organization, different departments often work against each other, creating loopholes that allow gray imports to flourish.

How internal conflicts lead to parallel imports:

  • The international department negotiates with official distributors, ensuring controlled pricing.
  • The local sales department focuses only on domestic sales, offering lower prices to clear inventory.
  • Smart traders exploit these price differences, buying products locally and reselling them in other markets.

The consequence:

  • Gray imports flood marketplaces, destroying official pricing structures.
  • Distributors lose motivation to invest in marketing, knowing they will be undercut.
  • Retail partners stop stocking the product, as marketplaces offer lower prices from unauthorized sources.

Without strict distribution policies, manufacturers end up competing with their own gray importers.

4. Gray Importers Take Advantage of Weak Distribution Policies

Why unauthorized sellers thrive on marketplaces:

  • They buy products at lower local prices and sell in high-margin regions.
  • They avoid marketing and support costs, relying on the manufacturer’s efforts.
  • They undercut official distributors, driving down prices for the entire market.

The consequence:

  • Official channels lose profitability, leading to long-term market instability.
  • Customers receive inconsistent service, damaging brand reputation.
  • Retailers and wholesalers refuse to stock the product, seeing no reason to compete with online discounters.

Gray importers act as parasites, benefiting from a manufacturer’s branding efforts without contributing to growth.

5. Without Distribution Control, Marketplaces Dictate the Rules

Once a manufacturer allows unrestricted marketplace sales, the platform gains control over:

  • Pricing—forcing discounts and manipulating price perception.
  • Visibility—charging for advertising and controlling search rankings.
  • Brand representation—allowing unauthorized sellers to modify listings.

Why this is dangerous:

  • Manufacturers lose brand control—fake listings, counterfeits, and manipulated product descriptions appear.
  • Traditional retail partnerships collapse—stores refuse to compete with uncontrolled online pricing.
  • Price dumping becomes the norm, leading to constant margin compression.

The consequence:

  • The brand becomes dependent on the marketplace, with no alternative sales channels.
  • The manufacturer loses the ability to set long-term pricing strategies.
  • Customer loyalty shifts from the brand to the marketplace itself.

Once a manufacturer surrenders control, they are no longer in charge—the marketplace is.

Conclusion: Why Manufacturers Must Work with a Distributor

Distributors solve all of these problems by:

  • Blocking gray imports through controlled pricing and legal ownership of brand rights.
  • Enforcing Minimum Retail Price (MRP) policies to prevent price dumping.
  • Handling legal and logistical complexities in foreign markets.
  • Negotiating with marketplaces from a position of strength, ensuring compliance with brand protection policies.

Manufacturers should focus on production and brand development—distribution control should be handled by experts.

⬅️ Read Chapter 2: How Marketplaces Profit from Chaos | 📖 Back to Table of Contents | ➡️ Read Chapter 4: The Optimal Sales Model