2166: How To Address the Grey Market by Antonella Pisani of Eyeful Media on Protecting Your Brand

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[00:00:54] This is Optimal Work Daily. How to address the gray market by Antonella Pisani of eyefulmedia.com. You work hard to promote and protect your brand. The last thing you want is an unauthorized reseller bringing it down. If you are a brand and don't know about the gray market, you don't want to miss this info. We'll answer the questions, what is the gray market? And what are gray market goods?

[00:01:22] And explain how to protect your business from the gray market. What is the gray market? The gray market is a legal, yet unethical, trade involving products being sold by unauthorized resellers or through unauthorized distribution channels. It's described as a gray market because it's somewhat less problematic than the black market, which is typically illegal, but still causes no shortage of problems for the legitimate businesses whose products are being traded. This is more than a passing concern.

[00:01:52] Gray market sales cost companies significant amounts of money. More than a decade ago, gray market sales were estimated to cost brands as much as $63 billion in the U.S. alone. As e-commerce continues to grow exponentially, this market will likely grow alongside it. But brands rightfully expect their products to be sold through authorized channels, with all of the appropriate checks and support provided. So gray market sales can be extremely concerning.

[00:02:19] These sellers might offer products at unsustainable prices, dilute your brand name, or cause customer service headaches for brands and marketing channels, among other negative consequences. It's no wonder, then, that brands often seek out ways to stop them or prevent them from starting in the first place. What are gray market goods? Nearly any sort of product can find its way into the gray market, but some of the most common include pharmaceuticals and medical devices,

[00:02:45] electronics, cars, software, shoes, and watches. Here are a few examples of gray market goods and the problems they may cause. 1. Electronics meant for the Japanese market, but imported to the U.S. and sold there. These may have instructions or warranty information in Japanese, and may not even have U.S.-compatible power cords. 2. High-end watches sold in bulk by jewelry dealers to clear out inventory.

[00:03:14] These may be sold at deep discounts on the gray market, causing pricing problems for authorized dealers. And 3. Cars moved across borders and sold in countries other than their origin. These vehicles may not be in compliance with local laws and regulations relating to safety or emissions. Gray market distribution. The question, then, is where these products are sold, and how they make their way out of legitimate distribution channels and into the gray market in the first place.

[00:03:43] Years ago, you would typically find gray market goods sold to unsuspecting buyers in large cities. You'd have to physically go to a store or kiosk to purchase these goods, so many people would probably never have access to such channels. Today, the internet has changed all of this. Legitimate websites like Amazon, eBay, and even Walmart.com offer marketplaces for third parties to sell goods through their platforms.

[00:04:07] Most sellers on these sites are legitimate and are simply looking for a way to get their goods in front of consumers. But there is a subset of sellers who are selling gray market goods, as well as fraudulent knockoffs. How do gray market goods wind up on these sites instead of being sold through their normal authorized channels? In a typical authorized distribution model, a manufacturer sells products to a distributor, who then sells to an authorized retailer, who sells to the consumer.

[00:04:33] Goods taken out of this system at any point wind up on the gray market. This can happen because distributors have too much of a given product and choose to offload it online or through another means. It can happen because retailers are looking to turn over their inventory, so they liquidate goods that aren't selling. No matter the reason, these goods are now being sold outside of legitimate channels, and that can cause no end of trouble for the brands affected. How do gray market goods impact brands?

[00:05:03] The negative repercussions of the gray market can be detrimental to nearly any brand. Here are just a few of the ways these sales can harm brands. Since these goods are often sold at discounts, it can become difficult for legitimate retailers to sell the same products at or near MSRP. These sellers typically don't offer the same level of customer service as authorized retailers. Customer service problems that crop up from the gray market can give a brand a bad reputation, even though they had no control over these third-party sales.

[00:05:33] And it is not uncommon for gray market sellers to make unrealistic promises or hype up quote-unquote new products that may actually be several generations old. When this happens, consumers who don't understand the situation will be unhappy with their purchases, which often leads to negative reviews and poor word of mouth. How to protect your business from the gray market? There are some very large online sellers of gray market goods who do a good job with fulfillment and customer service.

[00:06:02] These sites can be even more problematic for brands because they bring higher seller ratings and can be very enticing for buyers trying to save money. The truth is, going after gray market sellers often feels a lot like playing whack-a-mole. No matter how many cease and desist letters you send, no matter how many lawsuits you file, these ill actors will persist, often by simply registering a new seller name and carrying on uninterrupted. Instead, you must find ways to keep your products out of the reach of the gray market as a whole.

[00:06:33] You can also attack the problem from the opposite end by educating consumers to the risks surrounding purchasing products through unauthorized channels. To keep your goods out of the gray market, consider a buyback program for excess stock at any level of your distribution. You'll then want to partner with an online reseller who can liquidate your goods in a responsible manner, using authorized marketing language and providing appropriate support. Offer consumers high-end service benefits that unauthorized resellers simply can't match.

[00:07:01] And finally, limit the sale of your products to a select group of resellers who agree to abide by the terms and conditions you set forth. As an example, one of our clients was facing such a problem. Peacock Alley, a manufacturer and seller of fine bedding and linens, sells their goods wholesale and also, historically, through discount channels. This led to a number of unauthorized listings on various online marketplaces, including Amazon and Walmart.com.

[00:07:29] As Peacock Alley's e-commerce business grew, it became difficult to claim their A-sins on Amazon because gray market sellers had already staked claims to popular SKUs. This made it difficult for Peacock Alley to control the end consumer's experience with their product outside of Peacock Alley's own website. Without the ability to manage its Amazon listings, Peacock Alley was left with limited control over the product imagery, descriptions, and product titles.

[00:07:56] Eyeful Media referred Peacock Alley to a law firm, Voris e-control, a division of Voris Sater, Seymour, and Pease LLP, to assist in addressing the gray market. With the help of Voris, Peacock Alley put new reseller agreements and IMAP policies in place that would allow them to enforce against unauthorized gray market sellers. In addition, we helped them to broaden their direct-to-consumer sales channels, which also helped to combat the problem.

[00:08:28] You just listened to the post titled, How to Address the Gray Market, by Antonella Pisani of eyefulmedia.com. Best thing that's ever happened to you financially. Go. Easy. Sold my car on Carvana. Amazing offer. Really? I hit 200 on the scratcher. Did the scratcher come to your house and hand you a check? No. How many scratchers did you hit to get that? I hit a button on Carvana.com once. Okay, that's fair. It's like the lottery, except you always win.

[00:08:57] Not like the lottery at all, actually. Exactly. Inexplicably good. Offers worth bragging about. Sell your car today on Carvana. Pickup fees may apply.

[00:09:33] Thank you to Antonella, who brings more than 24 years of digital experience with a focus on e-commerce leadership and digital marketing. Prior to starting Eiffel, she held VP and SVP roles at companies including Pro Flowers, Guitar Center, JCPenney, and Fossil. Antonella is an avid traveler and photographer, with a particular passion for visiting places off the beaten path, including Antarctica, Easter Island, Bhutan, and the Arctic.

[00:09:59] She's fluent in Spanish, Portuguese, and she knows enough French and Italian to get by with locals. She's based in Dallas, Texas right now and is a member of the North Texas Food Bank Advisory Council and a member of the Dwell with Dignity Board of Directors. And I would urge you to check out more great content from Antonella at eyefulmedia.com. That's eyefulmedia.com. Lots of great advice there. And again, thanks to Antonella for letting us share her work.

[00:10:28] But that should do it for today. I thank you so much for being a subscriber to the show. It really means a lot to us. And if you get a chance, go ahead and share the info about the show and where to find it with family and friends. So, hope you enjoyed today's post, and I will see you back here tomorrow, where your optimal life awaits.