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~Practicology ~

Unauthorised online marketplace sellers can damage a brand’s reputation. Consumer
brands are adopting selective distribution systems within the EU to crack down on this, in
order to protect both their brand and valuable retail partners who do deliver an excellent
online experience.

oor product imagery, incorrect product must not make alterations to products, labels or product
descriptions and negative customer ratings codes.
Pand reviews are just three of the ways that a
brand’s reputation can be damaged by unauthorised • Marketing criteria: For example, sellers must adhere to
online sellers. At the same time, good retail partners brand guidelines. This is particularly important to control
who do provide an excellent customer experience, the quality of branded product content and marketing on
can feel frustrated by the fact that their investment marketplaces such as Amazon.
in the brand is not producing the desired payback. • Channels to market criteria: For example, setting a mini-
mum standard for the appearance of a store or website
As online sales have grown, particularly sales on market- and the customer experience provided.
places such as Amazon which has many third-party sellers • Customer service criteria: For example, achieving a low
operating, brands have become unhappy over a perceived number of customer complaints, allowing for customer re-
lack of control about who can sell their products online in views and having a process in place to escalate complaints
the EU. about products to the brand where appropriate.
• Logistics criteria: For example, the seller must prove they
It is legal for a brand to control how its products are sold have the appropriate warehousing, shipping and handling
online (and offline), through what is called a Selective rules. This could include inspecting a certain percentage
Distribution System. This allows a brand to set justifiable of products to check for defects and/or conducting weight
qualitative (and in some cases quantitative) criteria that EU integrating checks in the warehouse. Product-specific
sellers are required to meet if they want to be authorised to quality controls can also be applied and audited (such as
sell the brand’s products. cooled storage or guaranteed next-day delivery).

Authorised sellers can sell to end customers and each other, The exact design of the SDS will depend on the brand’s
but must not sell to unauthorised sellers. Legal action can positioning and products, its market share within the EU
be taken against unauthorised sellers who continue to sell and current distribution structure.
the brand’s products within the EU.
As marketplaces such as Amazon recruit more third-party
Selective Distribution Systems (SDS) have traditionally sellers, and take a bigger slice of total online sales, the issues
been considered relevant only to larger brands, particularly associated with unauthorised sellers badly representing
those selling luxury or specialist technical products. How- brands will become more acute. We expect to see many more
ever, as online retail channels have developed, it has become sellers adopt Selective Distribution Systems in response. ••
appropriate to tackle the challenges faced by a wider variety
of brands.

Selection Criteria
Qualitative criteria are those that do no not directly limit
the number of sellers and are easier to justify, as they often
directly relate to the experience that the end customer
receives when purchasing the product.

Once the criteria for an SDS have been set and existing
sellers have been given appropriate time to become compli-
ant then the brand can vet its sellers and take action against
those who are not meeting the standards. For more information on how brands can implement a Selective Distribution
System, please see our report on the topic at:
Examples of qualitative selection criteria include: www.practicology.com/selective-2019.
• Product and labelling criteria: For example, the seller

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