In today's e-commerce world, building and protecting a brand is no small challenge. Despite the significant time and effort brands invest in building their reputation, just a few unauthorized sellers on online channels can cause considerable damage. According to a KPMG study, over 60% of surveyed companies have witnessed an increase in grey market activities in recent years, and 90% have found their products on the grey market without their consent.
What Is the Grey Market?
The grey market refers to the sale of genuine products by unauthorized entities. This can lead to serious consequences for brands, official distributors, and consumers alike.
Impact of the Grey Market
1. Erosion of Brand Value
When products are widely sold by unauthorized parties, the exclusivity and value of the brand are significantly affected. For instance, Kanebo, a premium cosmetics manufacturer, faced the issue of their products being sold in retail chains in Germany through grey market imports. The presence of their premium products alongside mass-market items diminished the brand's value and made it difficult for consumers to discern the true value of the products.
2. Impact on Customer Experience
If customers receive substandard or inappropriate products from unauthorized sellers, they will have a negative perception of the brand. In the past, Red Bull encountered unauthorized imports into foreign markets. The company complained that the formula and ingredients of their drinks varied by country, making it impossible to sell universally. This could lead to inconsistent consumer experiences, affecting the brand's reputation.
3. Unfair Competition
Grey market sellers often sell at lower prices, making it difficult for authorized dealers to compete. According to a Financial Times report, Watches of Switzerland, an authorized dealer of a luxury watch brand, sold a top-tier rose gold automatic watch for £42,600. However, the same watch was sold on the grey market by a U.S. dealer, Watch My Diamonds, for just $34,850 (approximately £27,227). This price discrepancy creates unfair competition and impacts the profits of authorized dealers.
4. Legal and Product Safety Risks
Products on the grey market may not meet safety standards or legal regulations of the target market. For example, Philip Morris has previously prevented the unauthorized import of Marlboro cigarettes and other brands through the grey market because the cigarette packs lacked local language warnings, thus not complying with local laws. This posed not only legal risks for the company but also potential dangers for consumers due to the lack of critical warning information.
The Importance of Grey Market Surveillance
Grey market surveillance is a crucial strategy for protecting your brand. It helps with:
- Early detection of unauthorized sales activities.
- Maintaining control over pricing and distribution channels.
- Protecting relationships with authorized dealers.
Effective Grey Market Surveillance Strategies
To build an effective surveillance strategy, you need:
- Clearly defined monitoring objectives.
- Identification of channels to monitor (e.g., Shopee, Lazada, TikTok Shop).
- Utilizing appropriate tools and technology to track unauthorized sellers' activities.
- Establishing enforcement actions upon detecting violations.
- Regular data analysis to adjust strategies.
Conclusion
In the context of growing e-commerce, monitoring and managing the grey market is an essential task that cannot be overlooked. Lessons from major brands such as Kanebo, Red Bull, and Philip Morris demonstrate the severe impact of the grey market on brand value, customer experience, and legal standing.
Lameco is a leading company pioneering in the implementation of Grey Market Surveillance solutions for major brands in Vietnam. With our experience and advanced technology, we are committed to providing effective solutions to tackle the challenges posed by the grey market.
Contact Lameco today for consultation on Grey Market Management solutions tailored to your business. Together, we will build a robust brand protection strategy in the digital world, ensuring your brand's value is protected and sustainably developed.
If you find this article helpful, please subscribe with your email below to receive the latest news about the e-commerce market in the future.