Online vs offline grey markets

 

Grey markets, as you probably already know, sell authentic products over unauthorized channels. This could mean several things: authorized sellers offering your products on marketplaces not approved by your brand, or unauthorized vendors selling them through both approved and unapproved channels.

 

Find out the differences between grey and black markets!

 

Grey markets can form both offline and online, creating various enforcement challenges for brands. Depending on their scope and reach, both versions can cause significant risks to brands and consumers alike.

 

 

Online grey markets

Grey markets can appear on online marketplaces, on individual webshops, on social media, and in cross-border e-Commerce. In general, grey market products are sold at a lower price than your MAP (Minimum Advertised Price) and may be available in regions where they’re not authorized for sale.

 

Online grey markets tend to have a much wider reach than their offline counterparts, thanks to the global availability of e-Commerce. The internet also lowers the barrier to entry for fraudulent sellers and enables harmful practices like arbitrage.

 

The origin of grey market products can vary greatly. For example, grey markets can arise when a manufacturer decides to offload their surplus production, or via parallel imports when a seller purchases products in a region with a lower price limit and offers them for sale in another where the price is higher. Similarly, a stolen batch of products or a leak in your distribution network can also create grey markets.

 

While grey markets are damaging both online and offline, several issues are rather more characteristic of online grey markets. Due to the advantages provided by the internet, online grey market listings can appear much faster and, as mentioned above, have a much wider reach than offline listings. Moreover, they are much more flexible, meaning that they can shift platforms to avoid detection or evade takedown efforts.

 

In many instances, online seller accounts can’t be directly linked to flesh-and-blood vendors, which makes enforcement that much harder. Also, many platforms don’t offer any proactive measures against grey market sellers, making reactive measures our only weapon against these listings.

 

Related topics

Grey markets on online marketplaces

 

What is Jomashop

 

Dismantling Grey Markets

 

 

Offline grey markets

The internet and e-Commerce didn’t invent the grey market phenomenon; they merely facilitated its spread and widened its reach. In fact, offline grey markets are much older and have deeper traditions than their online counterparts.

 

Just like in the case of counterfeit goods, there are physical markets where grey market products find their way in larger quantities. Their origins are similar to those outlined in the previous chapter: they could’ve been diverted from a transport, stolen from a warehouse, gotten lost via a weakly controlled distribution network, or been freely given by manufacturers and/or distributors who for some reason find themselves with excess inventory.

 

Offline grey markets are much harder to detect than their online siblings. There are no software tools that can crawl physical markets and get results within seconds. Uncovering physical grey markets requires a combination of thorough online and in-person investigation, which is hindered by the fragmented nature of these markets, untraceable cash transactions, and no central visibility.

 

However, these characteristics also make it more difficult for offline grey market sellers to rebound after a raid. As these markets rely on established relationships between sellers, marketplaces, and distributors, one busted seller or a sealed market can hinder the entire operation until they find a replacement.

 

 

Aerial view of a physical marketplace with stalls selling different products

 

 

Similarities between online and offline grey markets

Despite their differences in scope and opportunities, online and offline grey markets share a lot of similar features.

 

The origin of the products for sale, for example, is often very similar, if not downright the same. Stolen, misdirected, and surplus products are sold by manufacturers, unauthorized sellers, or even authorized vendors selling your products outside of the agreed marketplaces.

 

Another common feature is the lower price. From the customers’ point of view, the lower price is the most appealing characteristic that draws them to grey market offers; therefore, it makes absolute sense for grey market sellers to go below the agreed minimum price. This, however, is detrimental to your carefully constructed pricing structure and undermines your authorized distributors.

 

The discounted prices create unfair competition for authorized sellers, and you find yourself in a position where you’ll have to defend your pricing decisions to your distribution network. Should the issue persist, it could significantly erode trust amongst your authorized sellers and may even cost you a valued partnership.

 

Moreover, the inconsistent discounts could also stir confusion amongst your consumers. Most of them are probably not familiar with the identities of your authorized sellers, which could lead to further trouble when they accidentally purchase a grey market product that doesn’t meet their region’s requirements, nor does it come with the expected warranties.

 

Discover the specific problems grey markets create across various industries!

 

 

Consequences for consumers and brands

There are certain perks consumers quite reasonably expect when buying original branded products. Depending on the nature and the price of the product, these include a warranty period, customer service, and region-specific product features at the least. However, when buying a grey market product, these expectations are usually unmet.

 

Warranties only apply when the seller is an authorized vendor. In some cases, even basic customer service needs the details of the purchase, and when those don’t meet the required criteria (e.g., a sale from an authorized seller), customers may find themselves without any help from customer service.

 

Moreover, since grey market products often originate from other regions, several operating and safety requirements may not fit the conditions of the buyer’s location. These can cause various issues ranging from slightly annoying, like a differently shaped plug, to downright dangerous, e.g., a different dose of active ingredients in prescription medication.

 

 

An illustration of differently shaped electric plugs

 

 

As explained above, grey markets cause a clear loss of revenue and margin erosion for brands. In addition, you can expect conflict with your authorized sellers, who will be understandably upset to be competing with unfairly priced versions of your own products.

 

Altogether, these issues lead to a general loss of control over your pricing, distribution network, brand positioning and image, which can be devastating if left unchecked.

 

 

Grey market solutions for brands

Luckily, there are several measures brands can take to protect themselves from the dangers of grey markets.

 

The first step you need to take is to tighten your control over your distribution network. Create clear territory regulations and issue penalties for non-compliance with your terms. Regularly check in with your distributors to ensure that they’re adhering to your contract.

 

Tightened control can’t be exercised without the careful monitoring of your distribution networks. You need to know how your products get from A to B to detect any anomalies and learn whether there are leaks in your distribution network.

 

In addition, take the time to educate your consumers about the dangers of grey markets. It’s also immensely helpful to publish a list of authorized distributors on your website so that your customers know exactly who they should be purchasing from to ensure access to all related services.

 

 

Online brand protection measures against grey markets

The best way to detect infringing offers online (both counterfeit and grey market) is via continuous online monitoring. For instance, globaleyez offers marketplace, social media, image, domain, and app monitoring to quickly detect any kind of infringing content, e.g., product listings, social media posts, single webshops, etc.

 

Find out how to build an effective online brand protection program!

 

In case of infringing product listings, we usually recommend a test purchase to learn more about the origins of the product and the identity of its seller. This step is crucial to determining if we’re dealing with fake or grey market products.

 

Once we establish that the content in question is infringing on your IP rights, globaleyez will enforce your rights and ensure its swift removal from the internet. Thanks to our extensive network of partners in the industry, including marketplaces, payment providers, domain registries and registrars, as well as major social media platforms, our takedown efforts are fast and effective.

 

 

Offline measures against grey markets

Due to the lack of centralized search options, offline markets are somewhat harder to check for grey market products. For brands, it’s probably easiest to start on the other side, i.e., to monitor your sales channels and inventory.

 

Similarly, keeping an eye on your logistics and warehousing processes ensures that any lost or stolen products quickly raise red flags in your internal system.

 

Nevertheless, classic brand protection measures like test purchases also work in offline markets. Over the course of an offline test purchase, globaleyez provides a comprehensive report complete with undercover shopping and a thorough investigation of the entire physical sales environment.

 

 

Omnichannel measures against grey markets

Even if they’re purchased online, physical products still generate 75% of all e-Commerce revenue. Therefore, in case you sell physical products, your best approach to comprehensive brand protection is a combination of offline and online measures.

 

It is for this exact reason that globaleyez and KURZ SCRIBOS launched the Online-to-Offline, or O2O program, where the data provided by physical product markings enhances standard online monitoring measures, and vice versa.

 

Learn more about the comprehensive O2O brand protection program!

 

 

Conclusion

Grey markets cause serious problems for brands, including loss of revenue and trust amongst both consumers and business partners. Don’t let grey markets destroy your brand!

 

Contact us and let’s create a tailor-made anti-grey market solution for your brand.