Table of contents

The Illusion of Easy Sales

At first glance, marketplaces seem like a simple and convenient sales channel. They promise access to millions of potential buyers, automated logistics, and ready-made infrastructure for online sales. For manufacturers, this appears to be an opportunity to scale quickly without investing in distribution networks.

However, the reality is far from this illusion. Marketplaces do not create stable sales—they create chaos. Once a manufacturer starts working with a marketplace without strict control over pricing and distribution, the following problems arise:

1. Price Dumping and the Devaluation of Products

Marketplaces encourage price competition between sellers offering the same product. Since many sellers fight for visibility, they continuously lower prices to rank higher in search results.

Why does this happen?

  • Marketplaces reward lower prices with higher visibility.
  • Sellers are forced to cut prices to win the “Buy Box” (default purchase option).
  • Promotional campaigns and discounts are controlled by the marketplace, not the brand owner.

The consequence:

  • Manufacturers lose pricing power—retailers and distributors stop buying if they see lower prices on marketplaces.
  • Buyers begin to perceive the product as cheap, rather than valuable.
  • Profitability collapses as margins shrink across all sales channels.

Without pricing control, your product becomes a commodity rather than a brand.

2. Gray Imports and Profit Loss

Once a product is visible on a marketplace, it attracts unauthorized sellers who find ways to import and sell it independently. Gray importers do not invest in marketing, certification, or local compliance—they simply undercut prices.

How gray imports flood the market:

  • They purchase products from other regions at lower local prices and sell them internationally.
  • They bypass official distribution agreements, damaging pricing integrity.
  • They avoid certification and compliance costs, making their prices artificially lower.

The consequence:

  • Official distributors lose sales, leading to weaker retail partnerships.
  • Customers buy from unauthorized sellers, reducing control over service and product quality.
  • The brand loses credibility when low-quality or uncertified versions circulate.

If manufacturers don’t control distribution, they will compete with their own gray importers.

3. Complete Dependence on Marketplaces

Many brands believe that they can use marketplaces as an additional sales channel while keeping their existing retail partners. However, marketplaces quickly become the dominant channel, and once a brand becomes dependent on them, it loses negotiation power.

How marketplaces create dependence:

  • They control product visibility and rankings, pushing sellers to pay for advertising.
  • They increase commissions over time, reducing profitability.
  • They introduce private-label alternatives, competing directly with the brands they sell.

The consequence:

  • Manufacturers no longer control their sales strategy—they are at the mercy of marketplace algorithms.
  • Traditional retail stores refuse to stock a product that’s cheaper online.
  • The brand loses direct relationships with customers, making loyalty harder to build.

Once a manufacturer relies on a marketplace, they no longer set their own terms—the marketplace does.

4. Loss of Brand Control

Marketplaces make it easy for counterfeit products, unauthorized sellers, and parallel imports to mix with official listings. This confuses customers and weakens brand reputation.

How brand control is lost:

  • Unauthorized sellers flood the platform, listing products without approval.
  • Customer service becomes inconsistent—buyers associate problems with the brand, even if they bought from a gray importer.
  • Counterfeit products appear, damaging trust.

The consequence:

  • Negative reviews increase, affecting sales across all channels.
  • The manufacturer loses brand identity—the product becomes just another generic listing.
  • Legal action becomes expensive—chasing unauthorized sellers drains resources.

If manufacturers don’t enforce strict distribution rules, marketplaces will define how their brand is perceived.

5. The Need for a Balanced Sales Strategy

Marketplaces should not replace traditional distribution networks. Instead, manufacturers must ensure controlled pricing, prevent gray imports, and balance all sales channels.

The right approach:

  • Marketplaces should work only with official retail partners, not wholesalers.
  • Prices should remain consistent across online and offline sales channels.
  • Distributors should enforce pricing and brand protection policies.

Conclusion:

Marketplaces do not create long-term brand value—they create price wars and dependency. The only way to benefit from marketplaces is through strict distribution control, a strong pricing strategy, and active brand enforcement.

⬅️ Back to Table of Contents | ➡️ Read Chapter 2: How Marketplaces Profit from Chaos