Maximus1000 - 5:26 am on Dec 2, 2010 (gmt 0)
I also see this in my market as well. Most people in my market have to adhere to MAP policies (minimum advertised pricing), however every so often a unauthorized seller begins selling at a steep discount. They run advertisements on Google in competition with us, and start to take up all of the clicks and conversions, leaving little for the rest of us who are following the rules set forth by the competition. However after a period of time most of these sites disappear, probably because they didnt realize that there are so many other costs besides the cost of their good being sold.
I received some bad advice when I first started out from my PPC manager that I should discount, and its ok because thats the way to drive sales and make an effective PPC campaign. Well I did that for a few months and then I found out that most of my manufacturers had MAP policies. Also the PPC manager was not managing my account that well, so I fired him, raised my prices to the MSRP, and ever since then have been MORE profitable believe it or not. And another thing, I actually retained clients better than when I was discounting! My PPC costs did go up quite a bit, but eventually with repeat customers that started to make up for that.
I think that sometimes people get in over their heads or get desperate, and decide to start doing crazy discounts just to move inventory that has been laying on their shelves. I wish someone would tell them NOT to do this because in the long run they will just eventually loose more money and go out of business.