Welcome back to another edition of The Brand Data Revolution. To all the moms out there who seemingly do it all, we hope that your Mother’s Day weekend was a good one. This week, we’ll dive into your favorite online marketplace and explore how a well-crafted MAP policy and a consistently executed MAP program can do more than simply help you win the buy box.
As you know, in today’s complex world of e-commerce, maintaining profitability on platforms like Amazon is a never-ending challenge. Between the limited help that Amazon provides to brands and the cut-throat business tactics they often employ as the 800-pound gorilla, running your business successfully on the marketplace is often easier said than done.
One significant hurdle brands face is the dreaded CRaP designation – a term coined by Amazon for products that “Can’t Realize a Profit.” Once a product is labeled as CRaP, Amazon may cease ordering it, remove it from promotions, or even delist it entirely, leading to substantial revenue losses.
Understanding the CRaP Designation
CRaP products are typically those with low profit margins for Amazon and – yes – it’s safe to say that the name alone implies a less than desirable future for products that receive this designation. Factors contributing to this classification include:
- Price Matching: Amazon’s algorithms automatically match lower prices found on other platforms, which can erode margins.
- High Shipping Costs: Bulky or heavy items incur higher fulfillment costs, reducing profitability.
- Low Retail Prices: Items priced under $15 often don’t cover the costs associated with storage and shipping.
- High Return Rates: Products with frequent returns increase costs and decrease profitability.
- Overstocking: Excess inventory leads to markdowns, further impacting margins.
These factors are often exacerbated by inconsistent pricing across various sales channels, which brings us to the importance of a robust MAP policy.
The Role of MAP Policies in Preventing CRaP
As you’re likely already well aware, a Minimum Advertised Price (MAP) policy sets the lowest price at which a product can be advertised, helping to maintain consistent pricing across all sales channels. At it’s most basic function, a strong MAP policy prevents your products from becoming CRaP by:
- Maintaining Price Integrity: By enforcing consistent pricing across all resellers and channels, you prevent would-be rogue sellers from undercutting prices, which can trigger Amazon’s price-matching algorithms and reduce profitability. Once the dreaded “Race to the Bottom” starts, stopping the downward spiral is nearly impossible.
- Protecting Brand Value: Consistent pricing reinforces brand perception and prevents the devaluation of your products. When would-be customers see a uniform price across direct sites and marketplaces, they are far more likely to feel confident in their purchase.
- Reducing Margin Erosion: Preventing price wars among sellers helps maintain healthy profit margins for both you and Amazon, eliminating the need for supplemental payment in the form of rebates, allowances, and chargebacks.
Implementing Proactive MAP Enforcement
To effectively prevent CRaP designations, it’s not enough to simply have a MAP policy and enforcement program in place – you must enforce it proactively, consistently and leveraging best practices in order to get the most out of your team’s efforts. Consider the following steps:
- Monitor All Sales Channels: Use best-of-breed tools to track pricing across all platforms where your products are sold.
- Make Sure You’re Seeing Everything: Too many brands assume that just because their providers are including specific sites or marketplaces in their scope of work, they are receiving everything available on those sites. At Pervasive Mind, we talk to brands every day who are shocked at what their current provider is not showing them in their daily reporting.
- Identify Unauthorized Sellers: Regularly audit who is selling your products and ensure they are complying with your MAP policy.
- Take Swift, Consistent Action:When violations are detected, act quickly to address them through warnings, sanctions, or legal action if necessary. We recommend you treat all resellers and partners equally, not only to avoid potential claims of collusion, but also because you’ll be setting the tone for your entire program and establishing that you mean business.
- Educate Your Partners: Constantly work to educate your resellers to ensure all authorized sellers understand your MAP policy and the importance of adhering to it.
The Downstream Impact of CRaP on Your Business
Without the aforementioned best practices, the impact on your business is real, tangible, and lasting.
Let’s say you’re a smart home brand, and one of your flagship SKUs – a connected thermostat priced at $149 – ends up on Amazon’s CRaP list. That one designation might seem isolated, but the ripple effects inside your business can be significant.
- Loss of Prime-Eligible Exposure: CRaP products are often no longer stocked by Amazon Retail (1P), which means they may lose Prime badging, Buy Box priority, and promotional visibility. Sales drop almost immediately, not just on Amazon but across all channels, due to the subsequent lowered discoverability.
- Channel Conflict: If Amazon drops the product but your other authorized sellers are still carrying it, they may interpret that signal as an indication of slowed sales and may discount it further to move inventory. This creates downward pricing pressure that’s hard to reverse, eroding your MAP strategy even more.
- Strained Retailer Relationships: Brick-and-mortar partners often raise concerns when Amazon undercuts their pricing. When that product suddenly disappears or fluctuates erratically on Amazon, it undermines their confidence in your brand and damages your retail shelf strategy.
- Revenue Shortfall: Let’s say that the thermostat generated $500K annually on Amazon. If Amazon delists it and your 3P sales don’t pick up the slack (due to lower visibility or Buy Box loss), you could be looking at hundreds of thousands in lost revenue, often with little warning, leaving you to explain the drop to internal stakeholders.
- Internal Confusion: As sales teams scramble to explain lost revenue and marketing teams lose traction on bundled campaigns, product teams start questioning pricing architecture. In other words, CRaP doesn’t just hit Amazon revenue – it can often create friction across the organization.
This is why strong MAP enforcement isn’t just about pricing – it’s about protecting your product’s long-term viability across key channels and the long-term financial outlook of the business.
Beyond MAP: Additional Strategies to Avoid CRaP
While MAP enforcement is crucial, there are additional consideration you can take, coupled with specific strategies to reduce the likelihood that your products will receive the CRaP designation:
- Optimize Packaging: Reduce shipping costs by designing packaging that minimizes weight and dimensions.
- Bundle Products: Selling products in bundles can increase the average order value and improve margins.
- Improve Product Listings: Accurate and detailed product information can reduce return rates.
- Manage Inventory Levels: Avoid overstocking by aligning inventory with demand forecasts.
Final Thoughts
Preventing your products from being labeled as CRaP on Amazon requires a multifaceted approach, with a strong and proactively enforced MAP policy at its core. By maintaining price integrity, protecting your brand value, and implementing strategic operational practices, you can safeguard your products’ profitability and ensure sustained success on Amazon.
📩 If you’d like help understanding how your brand can leverage best practices to maximize profitability, drive revenue, and protect your brand reputation, the team at Pervasive Mindis here to help.
