Price erosion refers to the tendency of product prices to decline over time as markets mature, competition increases, or products become commoditized. In consumer goods, price erosion accelerates when multiple brands offer similar products or when discount-oriented competitors enter a market.
The ecommerce environment accelerates price erosion through increased price transparency—consumers can instantly compare prices across dozens of retailers. This puts downward pressure on prices as brands compete for visibility in a market where the lowest price is often just a click away.
DTC brands combat price erosion through product differentiation, brand building, and controlled distribution. By selling exclusively through their own channels, they avoid direct price comparison with competitors. Strong brand equity also supports pricing power—consumers will pay more for brands they trust and identify with.