The Gray Market isn’t about counterfeit. The Gray Market is about a different kind of damage that hurts brands and consumers of those brands. Billions of dollars of authentic goods end up in marketplaces where they don’t belong, sold by people who shouldn’t be selling them.
I got it, but I didn’t fully understand it until I talked to a senior executive at one of the top ten consumer goods companies in the world. Here’s what he said:
Suppose you manage a product. Perhaps it’s a category leader. After investing (perhaps millions) to create a product, package it, market it and distribute it to your channel, it shows up on Amazon. It’s listed below your cost of goods sold (COGS), a strong indicator of dishonest marketplace pricing. The product may not even belong in that market. Perhaps it’s a special holiday version that appeared on Amazon two weeks before launch. Perhaps it should only be sold in another country like Canada or Mexico.
Improper treatment of your product in the delivery chain might impact more than a consumer’s brand experience and might risk that consumer’s health or safety. Negative customer reviews may start to show up:
“The chocolate showed up melted and chalky.”
“Pieces were missing.”
“The product had expired.”
Let me be clear. I believe in the free market. When I talk about pricing, I’m not talking about healthy competition in the marketplace. I’m talking about pricing so low that you know someone is cheating.
The problem is no one knows your COGS. When a low price shows up in the marketplace, retailers assume you aren’t playing fair with them.
Non-Amazon retail partners are upset, asking why you offered preferred pricing to their competitors. They want to stop selling your product. Even Amazon is angry, saying it needs a lower COGS or they can’t compete.
Your sales team is frustrated because they are losing commissions.
The brand compliance leader (typically within the legal department) tells you there is nothing that can be done because the product is “authentic.”
Maybe it is authentic and maybe it isn’t. It’s certainly NOT authentically the brand experience you intended for your consumer.
What are the options?
Appeal to Amazon? Sure. Good luck with that. Amazon will assume you are complaining about distributor agreements.
Drop price across the board? Unsustainable.
Ride it out? Inevitable defeat.
Buy inventory? Costly and incentivizes illegitimate sellers to keep at it.
Quasi-counterfeit strategy? Test buys, subpoenas, cease & desist letters, perhaps litigation = expensive, slow and nearly impossible to scale.
The key: illegitimate sellers’ fear
The gray market can feel like an insurmountable obstacle to tackle and overcome. Illicit sellers are not afraid of legal remedies. They know lawsuits take time and are expensive for your company, or they might mistakenly think they are protected by the first sale doctrine. However, illegitimate sellers are afraid of losing their selling rights on Amazon.
Therein lies the solution. Effective use of two elements returns the power to you.
1) An illegitimate seller’s fear of losing Amazon rights
2) Amazon’s policies and infrastructure
The Gray Falkon has developed a methodology that gets rid of rogue sellers on Amazon that is effective, economical and scalable. Typically, we remove at least 50% of illegitimate sellers in the first two weeks. Over the following several weeks, it gets even better. Our most successful customer has a new baseline of rogue sellers that is 81% lower than it was before.
Free offer: 6 steps to master
Right now we are offering up six steps we take to have this kind of impact. If you implement those steps effectively, you will win too. Download our FREE eBook for this guide to success.
About the Author
About Trajan Trajan Bayly, CEO of Gray Falkon, is an award-winning innovator across multiple industries, including e-commerce, technology, health, and finance. As a 20-year business veteran and recognized expert in market strategy, innovation, and artificial intelligence (AI) technology, Trajan’s leadership experience spans a wide spectrum, from startup technology companies to large, global organizations like Ernst & Young and General Electric.