Protection against dumping: how online shops can avoid losses

“Dumping is an economic strategy that appears attractive in the short term but ultimately leads to the destruction of the price balance and reduced profits for all market participants.”

— Michael Porter, professor at Harvard Business School

“Price wars rarely end with winners. In the long run, those who know how to manage pricing and maintain brand value come out on top.”

— Philip Kotler, marketing expert

Dumping has become a serious problem for many countries, including Ukraine. In recent years, retail chains have increasingly faced price wars, especially in the electronics and home appliances sector. This leads to lower margins and makes it impossible to work at the recommended retail price.

How can suppliers protect their goods from devaluation? What strategies allow online stores to operate without losses, even if competitors lower prices? This article examines the key aspects of combating dumping and the tools for maintaining stable sales.

Content List

What is dumping, and why is it dangerous?
Why do online stores engage in dumping?
How can suppliers protect themselves from dumping?
How can online stores protect profits if competitors are dumping?
Conclusion

What is dumping, and why is it dangerous?

Dumping is the systematic reduction of prices below the market level to attract customers or eliminate competitors. This phenomenon is common in segments such as home appliances, electronics, clothing, and even groceries. In a highly competitive environment, online stores often resort to lowering prices in the hope of increasing turnover.

However, in the long run, dumping leads to serious consequences. As a Boston Consulting Group study shows, companies that regularly reduce prices below market level lose an average of 15-20% of their margin in the first year (Source: BCG, “Smart Pricing in E-commerce”). This means that even if they manage to attract customers temporarily, the business later finds itself in a vulnerable position.

Consequences for suppliers

For suppliers, dumping is not just a drop in revenue but a strategic threat. When the price of a product falls below the established level, it leads to brand dilution. Consumers begin to perceive the product as less valuable, which reduces its appeal even after prices stabilize.

In addition, price reductions by dealers cause conflicts within the partner network. Some stores try to maintain their margin, while others lower prices to outdo competitors. As a result, all market participants suffer, and the supplier is faced with unstable demand and forced to look for ways to stabilize its pricing policy.

Consequences for online stores

For online stores, dumping often becomes a trap. Initially, lower prices do help increase sales, but then stores encounter problems:

A sharp drop in margin. Over time, the price becomes so low that it becomes impossible to operate profitably.
Losing customers. If customers get used to low prices, any increase will lead to a drop in demand.
Pressure from suppliers. Some brands limit their supplies to stores that consistently lower prices, resulting in loss of access to popular products.

According to a McKinsey & Company study, 43% of online stores lose competitive positions after dumping, as they cannot return to their previous price levels (Source: McKinsey, “Pricing Strategies in E-commerce”).

Why do online stores engage in dumping?

Attempt to attract more customers

Lowering prices seems like the simplest way to increase customer flow. Many stores consider this a marketing tool but do not take into account long-term consequences. Once the market becomes accustomed to a reduced price, it becomes impossible to revert to the previous level.
Competition on marketplaces

On marketplaces like Amazon, Hotline, or Rozetka, sellers often face situations where a competitor’s dumping offers create unequal conditions. If one seller lowers the price, the platform’s algorithms promote that seller’s product, forcing others either to join the price race or lose traffic.
Selling leftover merchandise

Dumping is often used to get rid of old collections or models. This can work for seasonal sales, but when price reduction becomes a permanent practice, the business loses its ability to generate stable profits.
Lack of a clear pricing policy from suppliers

If the supplier does not regulate prices within its distribution network, stores independently lower the cost, leading to market chaos and intensified competition within the segment.

How can suppliers protect themselves from dumping?

1. Price monitoring

Regular analysis of market prices helps suppliers quickly detect price reductions on goods and identify which partners violate the Recommended Retail Price (RRP).

Manual monitoring requires significant resources and time, so large brands and distributors use automated systems. They make it possible to:

Track price dynamics in real time on marketplaces and online stores.
Record pricing violations with screenshots and reports.
Compare prices among different sellers and identify dumping trends.

📌 You can read more about how automated screenshots help identify dumping and gather evidence of violations in this article.

Using automated tools gives suppliers a complete picture of the market situation and allows them to respond to price changes faster than competitors.

2. Regulating supply terms

One of the most effective ways to protect against dumping is to properly regulate the terms of working with partners.

To maintain stable prices, large brands implement a strict supply policy:

Limiting shipment volumes to partners who regularly lower prices below the recommended level.
A system of penalties or contract termination for those violating pricing policies.
Priority cooperation conditions for sellers adhering to RRPs (for example, access to exclusive collections, advertising support, and flexible payment terms).

This approach is successfully used by manufacturers of electronics, home appliances, and clothing to ensure stable prices for their goods. For example, Apple strictly controls prices for its products, allowing it to maintain high margins even under intense competition.

3. Using flexible pricing

Dumping often arises due to rigidly fixed prices that do not account for market fluctuations. Under such conditions, dynamic pricing becomes an effective tool:

Flexible price management depending on demand. During periods of high demand, the cost of goods can rise, and in the off-season, it can fall without harming profits.
Use of personalized discounts. For example, offering special terms for large clients or bonus programs for loyal partners.
Application of geographic pricing. Prices may vary depending on the region, level of competition, and the purchasing power of the audience.

According to Boston Consulting Group, companies that use dynamic pricing are on average 25% less likely to encounter dumping because they can quickly adapt their strategy (Source: BCG, “Smart Pricing in E-commerce”).

How can online stores protect profits if competitors are dumping?

1. Automatic monitoring of competitors’ prices

In a fiercely competitive environment, online stores must respond rapidly to price changes. However, doing this manually is nearly impossible, especially on major marketplaces where prices change by the minute.

Automated monitoring services enable you to:

Track prices in real time and compare them with competitors.
Analyze pricing trends and identify patterns.
Set up alerts for competitors’ price reductions to react quickly.

Using such solutions reduces the risk of being caught in a dumping spiral and allows for a more thoughtful pricing strategy.

2. Competing on more than just price

Price is an important factor, but not the only one influencing customer choice. In a dumping scenario, online stores can stand out through other advantages:

High-quality service. Fast delivery, convenient payment methods, and the option to return goods foster customer loyalty.
Additional services. Free equipment setup, furniture assembly, or warranty service increase the value of the offer.
Loyalty programs. Bonus systems, cashback, and discounts on future purchases help retain customers even at higher prices.

According to a McKinsey & Company study, 60% of customers are willing to pay more if the store offers better service (Source: McKinsey, “Customer Retention in Retail”).

3. Working with suppliers

Collaboration with manufacturers and distributors can help online stores minimize losses from dumping.

Some brands offer exclusive cooperation terms to partners who follow recommended pricing policies:

Access to new collections before competitors.
Additional discounts and bonuses for adhering to the pricing strategy.
Advertising support and promotion on marketplaces and social media.

This approach creates an incentive for online stores to stick to recommended prices and avoid participating in price wars.

Conclusion

Dumping may seem like a profitable strategy at first, but in the long term, it leads to business destruction and reduced profits. Suppliers who establish a clear pricing policy can protect their products from devaluation, and online stores can avoid price wars by focusing on other competitive advantages.

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