Dumping: goals, types, consequences

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We hear about dumping almost every day. The fight for the buyer is becoming so serious that competitors are ready to drive each other out of the market by any means. Let's figure out why dumping is used and how it affects all trade participants.

Dumping is an aggressive strategy for gaining a share of the domestic or foreign market by significantly reducing the price of a product. After the result is achieved, the cost of the product returns to its previous level.

Dumping

Dumping and its main goals
Dumping is not officially prohibited, but it is considered unfair competition that can drive local companies out of the market and bankrupt them. It is difficult to control, so countries use anti-dumping measures: quotas, tariff duties, embargoes, voluntary export restrictions.

Why do companies need price dumping?

Conquering a niche. Dumping is the only way to armenia email lis quickly occupy a new market and attract customers with a cheaper product or service.
Displacing other market participants. By sharply reducing prices for similar goods, the company destroys competitors. After receiving the lion's share of the market, prices increase, and the company dictates pricing policy in the region.
Attracting loyal customers. Good quality goods plus low price can significantly increase the company's customer base by attracting wholesale companies and large retail chains. In this case, the company makes a profit solely due to increased sales volume.
Liquidation of warehouse balances. This concerns illiquid assets, goods with a short shelf life, seasonal goods. The sale of such products brings practically no profit, but allows to cover the costs of their production (purchase), and also reduces the costs of servicing goods in warehouses.
In addition, companies often dump prices during periods of economic crisis in order to stay afloat until better times.

Dumping and its main objectives
It is a mistake to consider any sharp reduction in cost as dumping. The price of a product can change naturally: cheaper raw materials, optimization of production processes, changes in recipes/technology.
Main types of dumping
Sporadic (random). Aimed at liquidating excess stock, such as seasonal goods or products with a short shelf life. Manufacturers use sales seasons and promotions to get rid of unsold products and profit from high demand for goods at low prices.
Predatory (intentional). The main goal is to gain access to the market and eliminate serious competition. On the foreign market, products are sold at prices lower than on the domestic market. Sales are often at a loss, supported by a powerful advertising campaign. After using such a strategy, the company becomes a monopolist on the market.
Reverse. Most often, this type of dumping is used to force foreign businesses out of the market. The product is sold on the domestic market at prices lower than on the foreign market.
Constant. Consistently selling in one market at lower prices than in another. For example, a company may use reduced prices abroad, but sell in the domestic market at full price, thereby covering costs.
Positive consequences of dumping policy
Dumping may seem like an unacceptable strategy, but it does have a number of positive effects:

Buyers benefit from lower prices, which allows them to save and distribute the family budget for other needs.
Strategy forces companies to approach the product in an innovative way: to look for new production methods, to develop a marketing strategy, to reduce costs, to use other ways to differentiate their product and occupy a niche.
Dumping leads to an increase in the company's income, the creation of jobs, an increase in employee salaries and budget contributions.
Positive consequences of dumping policy