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Once dumping occurs, it can severely damage the company's market pricing structure and deal a heavy blow to distributor confidence, forcing the company to spend money to stabilize the market. If the company fails to take effective measures, it may lose the market and trigger a chain reaction in other markets. To tackle dumping, companies need both preventive and reactive measures. Additionally, companies must analyze the causes of dumping and apply targeted solutions.
So under what circumstances does market dumping occur?
1. Dumping Caused by Company's Pressure to Stock Up
Companies sometimes pressure distributors to stock up to combat competitors and seize market channels, or to help sales staff meet sales targets. Moderate stocking can be beneficial, but only within limits. Once the pressure exceeds the market's capacity, dumping becomes inevitable.
Case: In a market in Henan, a food company had monthly sales of about 500,000 yuan and was the leading brand. To seize market advantage before the peak season, the company launched strong policy support and required distributors to stock up, resulting in a sudden influx of 1.5 million yuan worth of goods. However, after the peak season, sales did not pick up as expected. Distributors' funds and warehouses were occupied by the company's products, hindering their other businesses. When distributors reported the issue, the company did not respond clearly. In anger, one distributor sold the warehouse stock at low prices after deducting policy discounts. Distributors from other markets, upon learning this, confronted the company because the distributor not only dumped at low prices in his own area but also sold to other markets at low prices. This eventually paralyzed the market and surrounding areas.
2. Dumping Caused by Unreasonable Policies
Companies generally set uniform prices, but policies may vary for different markets and distributors, and some companies have "relationship policies" where sales staff secure extra benefits for certain distributors. When policies are unreasonable or differences are too large (especially between neighboring markets), distributors enjoying special policies may dump stock into other markets while maintaining their own profits.
Another issue is poor planning and market control. For example, if a company uses only product giveaways as a sales policy, distributors may perceive it as a disguised price cut and sell below the factory price, relying on giveaways for profit, leading to disguised dumping.
Case: A company without a planning department had its sales department use a single policy of product giveaways for convenience, without setting or controlling market pricing. As a result, distributors consistently sold below the factory price. The larger the giveaways, the more distributors dumped into other markets, driving prices lower. Eventually, distributors couldn't sell without giveaways, and the giveaway policy had to increase continuously, creating a vicious cycle. Market dumping became uncontrollable, and both the company and distributors suffered losses.
3. Dumping Caused by Company's Failure to Honor Policies
Some companies promise policy support to open markets, but once the market improves, they delay or renege on commitments. This can anger distributors and lead to dumping.
4. Dumping Caused by Changing Distributors
Changing distributors is normal, but some companies do so without a proper procedure, abruptly replacing distributors without resolving inventory or legacy issues. This can prompt the old distributor to dump stock from existing inventory or from other markets.
5. Dumping Caused by Splitting Distributor Territories
Market network下沉 and channel refinement are inevitable in competition, requiring companies to split territories that are too large for a single distributor to manage effectively. However, splitting territories harms the distributor's interests, so companies need to reach a consensus through proper procedures. Many companies unilaterally tear up contracts and split markets without a reasonable explanation, angering distributors and provoking dumping.
6. Dumping Caused by Indulging "Big Accounts"
Some long-term, high-performing distributors may dump stock into smaller or new markets to drive sales of their other products. Initially, they may be cautious, but if the company ignores complaints from affected markets, they become brazen.
7. Dumping Caused by Unreasonable Distributor Layout
8. Dumping as Retaliation by Distributors Affected by Cross-Region Selling
9. Dumping Caused by Improper Price System
Some companies set prices based on distance from the factory rather than a uniform landed price, creating price differences. In today's efficient logistics, lower-priced markets can easily dump into higher-priced markets even at normal retail prices.
10. Dumping Caused by Unrealistic Monthly or Annual Incentive Targets
Companies set monthly or annual incentive policies to ensure distributors meet targets, but often set targets beyond distributors' capabilities. To earn these incentives, distributors may resort to dumping to boost sales.
After understanding these causes, companies should take the following measures to prevent and control dumping:
- Avoid pressuring markets beyond their capacity.
- When formulating policies: minimize single product giveaways; require distributors to sell above the landed price; set a reasonable price system and enforce it; when offering strong policies to certain markets, notify other markets and ensure such policies are used only within those markets.
- Operate with integrity and pursue win-win outcomes with distributors. Honor commitments promptly; if unable to fulfill, provide reasonable explanations and measures.
- When changing distributors, ensure no remaining inventory and resolve legacy issues properly.
- When splitting territories, develop a plan for peaceful division, such as compensation or preferential policies.
- Treat all distributors fairly. Address any violations promptly and seriously, rather than letting problems grow.
- Design a reasonable distributor layout; avoid over-densifying to the point where distributors cannot operate effectively.
- Handle cross-region selling strictly according to policy to prevent conflicts from escalating.
- Ensure uniformity in market pricing (landed price) within a certain range.
- Set monthly and annual incentive targets based on market and distributor specifics.
- Once dumping occurs, act quickly: investigate, gather evidence, and take effective measures. Deal with dumping distributors seriously, up to revoking distribution rights.
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