Every business strives to maximize its profits and attract and retain customers’ attention for as long as possible. In order to achieve these goals, entrepreneurs use dozens of different methods.
What is dumping in simple terms, its main goals and objectives
The word “dumping” comes from the English word “dumping”. This is the practice of selling products at a price lower than their actual market value or internal cost. This method of selling is used to seize influence. And simply gain an advantage among all competitors.
There are differences between a natural decline in market price and unfair dumping. The price may not decline very quickly in the process of organic growth and business development. For example, a company was able to optimize and automate internal processes, implement technologies, and find cheaper suppliers elsewhere. It implements changes gradually.
What is dumping for?
Dumping – selling goods at a reduced price – is considered a common practice in business. Some companies are forced to resort to it for a number of reasons. They are related to:
- With the solution of external problems – the desire to influence the market and competitors.
- With work on internal tasks – the desire to get out of the crisis, especially with a lack of economic resources.
Our buy bulk sms service marketers update daily. An easy way to collect bulk sms service for your marketing list is to run a quiz buy bulk sms service for your website visitors. They can be done directly on the website used for your business. We provide you active bulk sms service listings for better working results.
In the second case, this approach is the best option for maintaining the company’s trading activity if it has problems with financial flows. In general, dumping as a strategy for selling competitive goods and services is usually used for:
- elimination of competitors;
- increasing sales volume or gaining market share, whether new or existing;
- attracting new consumers and increasing their loyalty;
- brand promotion in a specific niche;
- increasing financial flow;
- urgent sale of illiquid products, stale goods – sporadic dumping.
Types of dumping
There are different types of dumping. Let’s consider what kind of artificial price reduction exists.
Social dumping
Social dumping is a fairly common phenomenon. It is associated with the violation of labor norms and standards in order to reduce the cost of production. Companies can use cheaper labor, not comply with labor protection rules and minimum social standards in order to reduce costs and offer very low prices. For example, wage dumping or environmental dumping, which we will discuss later.
Price dumping
This type of dumping is associated with international trade and the foreign market. In price dumping, foreign customers pay less for the company’s goods or services than buyers in the business’s home market. However, retail prices cannot fall below the cost of production. This strategy is common and exists in export markets.
Price dumping
Similar to price dumping, but here the price of similar goods or services falls below the market level or cost price. It is considered the most aggressive and widespread type of unfair dumping. It is used to quickly attract consumers and increase market share.
Methods of dumping competitors
Let’s consider how dumping works and what are the most common ways of implementing it.
Let’s imagine that a young entrepreneur decided to produce a new product – fashionable embroidered T-shirts under his own brand. At first, he ordered ready-made clothes from suppliers, did the embroidery in a local studio and sold the finished T-shirt. The batches were small.
1. Dumping using a financial cushion. An entrepreneur can temporarily set prices below the cost price of the product and operate at a loss to force another company to leave the niche.
The competitor lowers prices using his savings. The loss is covered from previously set aside reserves or, for example, from the proceeds from the sale of property. In our case, the businessman sold the retail space and switched to online work.
What to do if you need to reduce prices sharply
So, dumping is a complex and risky strategy that requires careful planning, preparation and understanding of the market. Here is what you should take care of before implementing a dumping strategy.
Why you shouldn’t dump and how to protect yourself from competitor aggression
Many people find dumping an attractive strategy for quickly conquering a market, audience, or ousting competitors. However, it carries a number of risks that can significantly affect even a small business. The results of dumping can be ambiguous. Let’s consider why you or your partners should not resort to this strategy.
1. Not all customers are guided by the lowest price. So, you can lose the loyalty of many regular customers and at the same time not have time to win the trust of new ones.
2. There is a risk of bankruptcy. Dumping is almost always associated with either loss of funds or a decrease in reputation due to the sale of low-quality goods or poor service.
Options for protection against dumping
But what to do if dumping is specifically against you 25+ best wordpress business themes or, for example, an aggressive competitor has appeared in the niche. A company that makes life difficult for all market participants can lure away most of the buyers.
1. It’s worth the wait
The simplest and most common way to combat dumping is to wait. This is relevant if we are talking about unfair and aggressive dumping, when a competitor reduces the price below cost.
2. Sit down at the negotiating table
Dumping by competitors is dangerous. When it comes to preserving the company, any measures can be considered. Even, for example, initiating negotiations with a competitor. Try to find common solutions, agree on mutually beneficial cooperation without using aggressive approaches.
3. Focus on the quality and value of your product
In many cases, companies can focus on increasing the value of their products or services. For example, they can focus on improving the quality of materials, expanding the range, and providing unique benefits to consumers using the product. Quality of service plays a big role.
4. Violation of the law
The state also takes measures against dumping competitors. Companies must be aware of their rights and must know how to fence themselves off from unfair competition. In some cases, it makes sense to go to court to protect your interests.
5. Invest in branding and marketing
A strong brand, advertising, and a loyal customer base phone database will provide reliable protection against dumping. The likelihood of dumping will decrease, since consumers who value your brand for quality or other parameters will be less likely to switch to competitors simply because of lower prices.
Combating dumping at the legislative level
In Russia, dumping should be regulated by the following main Federal Laws and special measures:
Let’s sum it up
Dumping is a method of competitive struggle that is considered controversial. It should not be used in stable markets by honest and conscientious companies. The main problem is that it requires a conscious and balanced approach, as it hides many risks and negative consequences not only for the business itself, but also for the market as a whole.
