Notes for owners · Channel and customer growth
How to stop dealers discounting below the agreed price
Why dealers undercut the agreed price and what a manufacturer can do about it: find the source, fix the scheme that causes it, and apply consequences you can actually enforce.
The GullySales team · Updated 17 Oct 2026 · 6 min read
On this page
- Diagnosis one: your scheme pays the dealer to do it
- Diagnosis two: one dealer started it and the rest followed
- Diagnosis three: the buyer shows an online price
- About fixing the resale price
- Writing the ladder of consequences
- An invented example: a plastic-furniture maker in Vapi
- When to let it go
- This week
A dealer in one town is selling your product below the price you agreed, and the other dealers have started to complain, or to copy. Your instinct is to ring the dealer and shout. That may not work, because dealers discount for reasons, and the reason decides the fix. Three are common: your own scheme pays the dealer to move volume, another dealer started it, or the buyer is holding up an online price. Find which is true before you say a word.
Diagnosis one: your scheme pays the dealer to do it
Look at your last two schemes the way a dealer reads them. A slab where the last units pay disproportionately more invites dumping, because a dealer can sell a few units at nearly cost to reach the slab and still gain. A cash discount that can be passed on invites price cutting.
The test is the dealer's purchase pattern. Compare the dealer's quarter-end purchases with sell-out. A spike before a slab date, followed by cheap sales in the same weeks, points at the scheme and not at the dealer's character.
If this is the cause, change the scheme before you discipline anyone. Pay the extra margin on sell-out, shown by the dealer's own invoices to customers, not on what was bought. Spread the slab over a longer period. The last days then stop being decisive. Tying part of the reward to a price band can be treated as fixing resale price, so use it only after your lawyer has agreed the wording. Our note on creating dealer incentives without damaging margins goes deeper into scheme design.
Diagnosis two: one dealer started it and the rest followed
Here the pattern is local. One dealer wanted cash, dropped the price, and the neighbours matched it to keep their customers. Slab dates do not explain it.
Find the first mover with evidence, not rumour. Have someone buy a unit or ask for a quotation as a customer, and keep the dated bill or message. Trace the unit through a batch or serial number, if you keep one, to the dealer who bought it. If you cannot trace it, say so in your notes and accuse nobody. A wrong accusation costs you a dealer.
The response here is to talk to the first mover and to the group. Ask the first mover what was needed, and look at whether stock or payments are under strain. Then tell the neighbours what you are doing, so they do not feel they must keep matching.
Diagnosis three: the buyer shows an online price
Check online listings and local group chats for photographs of your product with a price. If a buyer shows the dealer a lower listing and the dealer matches it to close, the real source is whoever listed it. It might be a marketplace seller who bought from another state, or your own listing priced under the dealer's.
If your own listing is the cause, fix it first. A manufacturer who sells online below its dealers has taught them to discount. For listings you do not control, the dealer needs a reason a buyer will accept to pay more: delivery, fitting, a warranty handled locally. Give the dealer that in a sentence that can be said at the counter.
About fixing the resale price
Go slowly here. Telling a dealer the minimum price at which to resell is treated as a problem under competition law in many places, and the rules differ and change. Ask your own lawyer what you may say. What you control is your side of the bargain: the schemes you run, what you pay for, which promotions you support and whether you keep supplying the dealer. A recommended price printed on a list is different from a price enforced on a dealer. Ask before using either.
Writing the ladder of consequences
Whatever the cause, give every dealer the same written ladder when the new scheme starts. A workable one has four steps, and your lawyer should agree the conditions behind steps two and three.
- After the first evidenced case, the sales head phones the dealer with the dated evidence, and you keep notes.
- If a second case follows in the next period, a letter restates the scheme terms and says what it does to this period's reward.
- A third case: the reward is withheld.
- If it continues, you review the dealer's terms with your lawyer's advice before any change to supply.
The ladder works only if step one happens quickly and equally. If your biggest dealer is excused, the rest read it as permission.
An invented example: a plastic-furniture maker in Vapi
Take an invented maker of moulded plastic chairs and tables in Vapi with about thirty dealers across western Maharashtra. At the end of each quarter it ran a slab: extra margin on every set above a quantity. Two dealers in Sangli began selling chairs close to cost during the last fortnight of each quarter, and Satara dealers complained.
The owner phoned both and warned them. It changed nothing, because the slab paid them more than the discount cost. A scheme problem had been treated as a character problem.
So the scheme was fixed. Extra margin moved to chairs sold to customers, shown by the dealer's own invoice with the customer's number. The slab period lengthened. The owner gave the ladder to every dealer with the new scheme. Quarter-end dumping dropped in Sangli, though not to zero. One dealer still tested the limit, got the step one call with the dated bill in hand, and complied. The owner lost a little goodwill with a dealer who liked the old slab. That is the price of the change, and the figures in this story are illustrative.
When to let it go
If the price cut answers a local rival and the dealer still sells your brand in good volume, discipline may cost you the shelf. If the product is a commodity and price is the only way to compare it, accept thin margins and compete on supply and service. And do not chase a single discounted sale. Chase a pattern.
This week
Look at your last scheme for the slab or condition that rewards dumping. For each town where you have heard of cuts, collect one dated piece of evidence. Write the four steps and decide who sends the first. The territory side of the same problem is in preventing channel conflict. Channel governance and conflict management is the service that helps with the rules and the ladder, and the rest of our sales work sits under sales. To start, tell us what you need.
