Dumping
Dumping is a strategy where companies sell products and services below their cost to gain market share and weaken the competition — sometimes even to eliminate it entirely.
The term “dumping” comes from the verb “to dump,” meaning to offload or dispose of something, often in large quantities or abruptly. It’s often referred to as predatory pricing — selling goods below production cost to undercut competitors.
1. Types of dumping
There are different types of dumping, depending on the motivation behind it and where it comes from. Dumping can take the following forms:
Predatory dumping
This type aims to drive all competitors out of the market so the company can raise prices and earn high profits without any competition. It is the least ethical version of dumping.
Cyclical dumping
It is generally used during periods of recession, when unemployment increases, incomes drop, and therefore the purchase of goods and services is very low. It consists of lowering prices to minimize the loss of sales. Thus, the market price falls below the total average cost and, therefore, if those products are exported to another market at recession prices, then it would be considered cyclical dumping.
Seasonal dumping
Companies use this to sell seasonal surpluses in other markets and quickly clear out excess stock. As is the case with coats or swimwear, after their season ends.
Persistent dumping
This is the most dangerous type of dumping as it involves a continuous tendency to sell products at a higher price in the domestic market and cheaper in the international market, to remain competitive in foreign markets.