In a Bid to Protect Brand Integrity, Some Companies Opt to Ban Third-Party Website Sales

Mar 8, 2012

Topic: Retail

Prohibiting dealers from selling on third-party websites does not appear to have slowed the growth of two of the outdoor industry’s most popular brands — Vibram FiveFingers and The North Face. Since imposing the restriction on dealers five years ago, the two brands have seen their sales continue to grow at double-digit rates.

Vibram FiveFingers reached $100 million in annual sales five years after its launch, and VF Corp. reports that The North Face sales grew 24 percent in the Americas in the fourth quarter of 2012.

Vibram USA decided against selling to Internet-only retailers six years ago — before they shipped their first pair of Vibram FiveFingers — figuring that in-store sales professionals could best ensure consumers a proper fit of the five-toed shoe. While Vibram FiveFinger dealers are allowed to advertise on third-party sites, they may not list products for sale there. All sales must run through the authorized dealer’s own e-commerce site.

While The North Face does sell to Internet-only dealers, it, too, requires all sales go through an authorized dealer’s checkout cart.

This approach helps ensure that consumers know they are working through an authorized seller. The advantage to the dealer is that they own the customer relationship and all the data that comes with the transaction.

“Our activity-based model focuses our distribution and growth strategies on the advantages of working with our specialty dealers,” said Michael Millenacker, vice president of sales for The North Face. “Our products are highly technical, and specialty dealers are vital in conveying technical benefits to our consumers. It’s central to our brand.”

The policies also seek to assure consistent prices.

“We did not want to train people to wait for product to go on sale. Third-party websites tend to draw consumers who are primarily price-driven,” said Michael Martin, vice president of sales at Vibram USA. “This way, consumers know that when they buy a pair of Vibram FiveFingers, it’s not going to go on sale in a week. Consumers want to know that, especially in today’s economy.”

Martin notes that the policy is not aimed at any particular website, but all third-party retail marketplaces, which generally focus on drawing shoppers by aggregating listings from multiple sellers in a bid to offer consumers competitive prices.

“If you get 500 or 1,000 dealers online,” said Martin, “the only way they can entice people to buy is to lower the price. We did not want to train consumers to wait for product to go on sale.”

Martin said Vibram USA is usually able to resolve infractions of its distribution policy within 24 hours. It has never had to cut off a dealer for violating its online distribution restrictions.

The experiences of Vibram and The North Face demonstrate that specialty brands can grow rapidly and still protect their core specialty dealers.

“We are not going the route of revenue growth at any cost,” said Martin. “We currently do not sell to big box, we do not sell to department stores, we do not sell through catalog channels, we do not sell to Internet-only retailers, and we do not sell to third-party websites. There are a lot of places we won’t go, and the results speak for themselves. And the thing is, we managed to do this in a lousy economy.”