Let's get in touch
Let's coordinate a call. Request a personalized online demo.
Thank you very much, we have received your information and will try to contact you shortly.
Algo salió mal, intenta nuevamente por favor.
PULPOU BLOG
What are 'Gray' Markets and How Can They Damage Brand Value?
Although it is an old concept, with the widespread use of the internet and social media, it has gained greater prominence and its channels of contact with the final buyer have multiplied. Why it can be a threat to your company and how to 'defend' against it.
The gray market refers to the buying and selling of goods and services through distribution channels that are not authorized or permitted by the manufacturer or licensor. According to Economipedia, a website dedicated to economic and financial education, one of the most common commercial practices characterizing the gray market is when companies buy products (original) in countries where they are cheaper and then sell them in their own country to make a profit. This includes everything from cars and shoes to pharmaceuticals and software. The offerings in the gray market tend to expand.
Ana Gómez Sánchez, from the International Relations Department at Pons IP, a global industrial and intellectual property firm offering services in Spain, Europe, and Latin America, notes that new technologies are playing an important role in developing new consumption channels. These technologies allow brands to conquer new markets through the internet. Online stores and social media are driving consumption growth and enabling customers worldwide to access new products and brands that were out of reach ten years ago, with more information and greater purchasing possibilities.
On the other hand, Sánchez adds that while the concept of the gray market is not new, its use has increased in recent years thanks to the development of these web-based consumption spaces. She indicates that gray markets are not illegal because they sell authentic products, but they are not authorized by the manufacturer or the legitimate distributor in the markets where the final customer purchases them.
The Gray Market in Numbers
A study published by Forrester, an American market research company, details that online sales account for more than 20% in most physical goods categories, and the ability to buy unauthorized products from anywhere in the world. "The gray market is more present than ever, yet brands are not monitoring their products online, allowing any goods to be available for sale on the internet," states Sucharita Kodali, vice president of the company, in the report.
A publication by Stokoe Partnership Solicitors (United Kingdom), a company specializing in criminal defense and civil litigation, makes it clear that the gray market can pose a significant problem for brand owners, as consumers can benefit from significant discounts on genuine products purchased from unauthorized sellers. Moreover, the issues are not limited to price reduction but also to the potential loss of confidence in a brand when a product not covered by warranty faces performance issues. "Historically, the term has been used by owners to suggest that buying such products is illegal in some way, hoping to encourage customers to buy directly," they state.
In an era of globalized industry, adds Stokoe Partnership Solicitors, the ability to manufacture and transport goods efficiently to multiple countries is undoubtedly desirable. However, while there are obvious benefits for consumers in being able to buy products at reduced prices, there are also inherent risks as gray market products can mix with counterfeit products, meaning buyers cannot always be sure of what they are purchasing.
"There are also significant safety issues to consider. While we may share the same tastes in products from other countries, we cannot share the same approach regarding safety standards or labeling requirements. As such, law enforcement agencies have increasingly scrutinized the 'Gray Market'," they explain.
How to Detect and React
Sucharita Kodali adds that brands are still "reacting" to the gray market rather than establishing protection systems and processes. Therefore, she provides some advice on how brands should act to ensure their image is not damaged or affected:
Firstly, address governance issues: Kodali believes that brands are turning a blind eye to gray markets or lack necessary controls. She recommends implementing specific rules for sellers and markets regarding prices and distribution, as Nike did with Amazon, for example. Or even prohibiting sales on specific online sites.
Secondly, protect your distribution: by implementing policies such as 'Minimum Advertised Price (MAP)' and 'IP Protection', brands can more effectively scan and monitor unauthorized sellers.
Thirdly, use branded websites as educational tools: a significant percentage of online American adults who shop in a physical store look up product information of interest on their mobile phones. Brands should educate buyers about the benefits of purchasing legitimate items, informing customers about the risks associated with buying unauthorized goods. An example of this is Nikon and Canada Goose.
Examples to Watch Closely
One of the most common cases is Nikon cameras, which are intended for Japan but are resold in the United States, and the instructions may be in the original language. Then there are cases of Swiss watches on Jomashop.com, which are sold by distributors needing to 'clear' their inventory. There are also cars sold in other countries where they likely do not meet emission or safety standards. Finally, examples like eBay and Amazon, where new products are sold at significantly discounted prices.
Let's get in touch
Follow us on Social Media
info@pulpou.com
(1) & (2) All product, logos and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.