Gray markets refer to distribution channels in which original products are sold, often by authorized distributors, but unapproved by the manufacturer or brand owner. In other cases, unauthorized sellers are distributing goods within official trading channels. In any case an illegal trade is taking place, one which the official manufacturer has not authorized.
Monitoring product sales within gray markets may seem like a daunting task, as the digital world continues to expand. Yet, visibility and control of your sales channels is paramount for building a successful brand reputation online.
Do you know where your products are being promoted and sold online?
What are gray market channels?
A gray market channel can be any unauthorized distribution channel which facilitates the sale of original products online. This includes well-known marketplaces such as Amazon, eBay, AliExpress, or Wish, or other websites which are unapproved by the brand owner.
Gray markets also relate to the territory in which a product is sold. For example, a reseller may have permission to trade online in the U.S. but not in Japan. These digital channels or markets may be unknown to brand owners, often in countries where the official brand is not trading, this can make the monitoring of gray markets overwhelming for brand owners.
On one hand authorized distributors trade in markets without having previously obtained the brand owner’s permission. On the other hand, unauthorized dealers trade with branded products online in official markets. Whichever the case, this constantly changing market further complicates the task of monitoring products online – authorized distributors selling in unauthorized market, unauthorized distributors selling in authorized markets or unauthorized distributors selling in unauthorized markets.
What are gray market products and how do they differ from counterfeits?
The sale of products in gray markets has risen significantly due to the globalization of the world economy. Literally anything can be sold online, including raw materials, items of clothing, electrical goods, beauty products, even vehicles or vehicle parts.
They differ from fake products or counterfeit items in the sense that those are products, manufactured by the official brand owner, but sold without their knowledge. These products are usually available for reduced prices, often as a result of overproduction or surplus stock. In other cases, the price reduction may be due to a manufacturer’s volume discount pricing, outsourced production facilities in other territories where labor and manufacturing costs are lower, or as a result of fluctuations in international exchange rates.
Counterfeit products on the other hand are designed to look and feel like official items which infringe intellectual property such as brand name, logo, shapes, colors, and design. Counterfeit products are not produced by the official brand, often made of lower-quality materials, although they are intended to appear as if they were original. Due to sophisticated scams online, consumers are often unable to differentiate between an official item, a gray market product, and fake or counterfeit goods.
Is the sale of goods in gray markets legal, and how are supplier – distributor relationships impacted?
Once a brand owner distributes their products online, there is little control over where the goods are resold online, which is a concern when we consider how gray market sales damage the connection between brand owners and distributors, putting the reputation of the original brand´s products at risk.
Control is lost in terms of the price in which the brand owner’s products are sold for, in what quantity, the quality of service, or what condition the product is when the client receives the item. This is of great concern when we consider that the product is clearly marked with the official brand name leaving their reputation at stake.
Supply chain integrity should be a key objective in the business strategy of today’s brands, and they must be able to trust their commercial partners. However, new, and underserved markets will appeal to distributors looking to increase sales and revenue streams. For this reason, a monitoring strategy can help brand owners control their entire supply chain, especially when working with multiple resellers – a crucial factor when their brand has a national, international, or global appeal.
Why do gray market products appeal to consumers?
Consumers see the official brand name, product images, and descriptions promoting the item for a reduced price, and this attracts online shoppers. These low prices are achieved by selling items which were made in countries with lower production costs, by buying in bulk and selling individually, or by buying end-of-line stock for knockdown prices.
Many consumers do not pay attention to whether a seller is authorized, especially when tempting discounts are on offer. However, purchasing goods which were made in other countries where safety standards are low, or where less stringent labelling requirements are in place can put the consumers at risk.
For this reason, brand owners must take steps towards educating consumers in relation to where they can find their certified products through authorized resellers, and in which channels the legitimate products are available. This can be achieved through an authorized distributors list containing direct links to their official websites, or through sales and advertising campaigns aimed at raising awareness of trusted sources.
How can I monitor and control gray markets?
Monitoring various channels is a time consuming and complex process to manage alone, largely due to the growth of e-commerce and the globalized online economy.
Our Smart Brand Protection Gray Markets service monitors and detects goods which are sold outside of the authorized distribution channels. Our service supports those brand owners who have a distribution model with contractual sales restrictions.
We monitor more than 25 of the most popular online marketplaces worldwide, searching for potential infringements. Our technological platform, combined with our team of cybersecurity analysts process huge amounts of data searching for:
- Product names and descriptions
- Suspicious price differences
- Keywords related to the official product or brand
Our clients receive monthly reports which include all the infringements we have detected. The data is also available to download from our user-friendly platform.
Our Customer Support team is available 24/7 to support our clients, solving any issues which may arise during the monitoring service in a timely manner.