Understanding Vendor Funding
Setting the right discounts is a delicate balance. Ensuring the right value where your business profits and customers are happy with the deal too is a tricky line to walk. That’s where understanding vendor funding (VF) is important.
What’s Vendor Funding and Category Funding?
Vendor funding, in essence, is when the brand allocates a discount amount on a certain product.
Category Funding, on the other hand, is when the platform that your brand sells on, adds a discount to the product without consulting the brand.
For example, an apparel business may allow only a 15% discount (vendor funding) on their item, but the platform, let’s say, Myntra, could tag on another 25% (category funding) making it a complete 40% discount.
Image Source: Store Hippo
This could be bad when the item is a bestseller and the brand doesn’t want the platform, in this case, Myntra, to give a large discount. Tracking category funding is important in such cases for businesses to understand what the lost profits and percentages of deep discounts on products are.
Why Category Funding is More Important than Vendor Funding?
With online marketplaces constantly adjusting prices, tracking Category Funding has become more critical than vendor funding. Businesses need to know what products are discounted and at what price.
Here’s why:
- Maintaining Price Parity – Consistency across multiple platforms prevents price wars and maintains brand perception.
- Monitoring Marketplace Discounts – Some retailers offer deeper discounts beyond agreed terms, which can affect brand profitability.
- Optimizing Sales Strategies – Analyzing discount trends helps brands refine promotional efforts and stock management.
- Protecting Brand Value – Over-discounting leads to market saturation and devalues the brand’s positioning.
- Loss of Revenue – Consistent discounts mean more losses on prices, and when items are bestsellers, it is unnecessary.
Tracking Category and Vendor Funding: Tools & Strategies for Ecommerce Brands
Compliance is important to build trust. For bigger brands with several products on marketplaces, discounts need to be understood and approved.
Here’s how you can do it with a few tools –
1. Leverage Digital Shelf Analytics
Digital shelf analytics with a product like 42Signals provide a real-time view of pricing, discount patterns, and stock availability. Brands can identify price violations and unauthorized promotions instantly.
It can also integrate with existing in-house tools and promotions to understand vendor funding mishaps and combine all the data together.
2. Use Automated Product Tracking Tools
Manual monitoring isn’t sustainable. Automated tracking tools with a product help brands keep tabs on their products’ pricing trends and alert them to deviations. Take 42Signals for example, with our Telegram alerts feature, you can be instantly notified when prices go low and on the platform, it changes.
3. Monitor Vendor Funding Discounts on a Daily Basis
Prices in ecommerce can change by the hour. Brands have to track and understand vendor funding and category funding-related discounts to analyze if top-selling products are accidentally added here, and if the discounts run over than the profit limits.
If such situations arise, then corrective action can be taken based on pre-agreed thresholds.
5. Set Custom Alerts for Violations
Custom alerts notify brands of unauthorized price drops. This enables quick corrective action to maintain pricing integrity. Getting notified of price changes and platform-related alerts means understanding and proactively being on top of all changes.
Image Source: 42Signals LinkedIn
How Category Funding Affects Your Brand’s Profitability More than Vendor Funding?
Category Funding plays a crucial role in shaping ecommerce pricing strategies for the simple reason that it happens without the brand’s control.
Here’s how it affects your business:
- Price Parity & Market Competitiveness – Consistent pricing across marketplaces strengthens brand positioning and prevents price erosion.
- Profitability & Discount Control – Tracking VF ensures that extra discounts from retailers do not impact brand profit margins.
- Brand Perception & Value Retention – Excessive discounting conditions customers to expect markdowns, potentially harming brand equity.
- Competitive Edge – Insights from VF tracking allow brands to anticipate competitor pricing moves and adjust their strategies proactively.
Best Practices for Category Funding Control & Success
- Communicate, communicate: When certain pricing instances or steep discounts are noticed, communicate with the platform immediately to rectify the situation.
- Regular audit: A precursor to the first point, conduct routine audits to catch and address pricing violations before they become a pattern.
- Adjust based on performance: Continuously refine category funding strategies based on sales trends, demand, and market conditions.
Looking at the above points, let’s explore how the situation may unfold for a brand on multiple marketplaces.
Category Funding Mishaps: Key Implications & Real-World Example
Sleek Pants is an online and offline brand that sells on multiple platforms like Myntra, Flipkart, and Amazon. Their number one bestselling pants currently is the Korean black pants that fit a variety of women.
After a few months of selling on Myntra, the brand noticed that their bestseller product, the Korean black pants, was going on sale multiple times a month. While the agreed-upon price for discounts was a maximum of 10%, the platform was discounting it at 25% at regular intervals.
This strategy cuts Sleek Pants’ profits. Without the discounts, the brand would sell well anyway, as a bestseller item, and adding discounts undercuts revenue.
Conclusion
Tracking vendor funding and category funding is becoming increasingly crucial for ecommerce brands on several marketplaces.
Tools like 42Signals help brands understand where their money is coming from and what challenges they have to battle.
What we do –
- Help businesses track pricing across platforms
- Share data on heavily discounted items and the platforms discounting them
- Allow brands to learn quickly about any price changes and seller violations
Ready to See it in Action?
Submit your requirements and we’ll discuss what we can do to make your operations smoother on platforms like Amazon, Flipkart, Swiggy Instamart, Zepto, and Blinkit.
Read Other Articles
If you’re curious to know more about price violation tracking, MAP policies, competitor pricing details, or quick commerce data scraping, here are some of our other articles that can help you.
MAP Violations: How it Affects Brands and Everything You Need to Stop Them
What is a MAP Policy and Why Should Brands Care?
42Signals Competitor Insights: How We Help ECommerce Brands Understand Competition
Track Swiggy’s Instamart Data for Product Insights
How 42Signals Helps Online Businesses by Scraping Products on Quick Commerce India Platforms
