Grey Markets During Covid-19

1. Grey Markets During Covid-19 The ongoing COVID-19 pandemic has been influencing almost every aspect of global manufacturing, supply chains, and trade. The disruption caused by this pandemic has created changes, with shortages and surpluses across various sectors of goods and services. Sudden changes in supply and demand create gaps and opportunities for grey marketing. As a result, the pandemic has seen legitimate dealers and vendors next to untrustworthy third-party brokers, opportunists, and even scammers. What are grey market goods? Grey marketing, also called parallel import, occurs when genuine trademarked products manufactured for distribution in a particular market are diverted to a different market through unauthorized distribution channels. Grey market goods are genuine products rather than counterfeits. The First Sale Doctrine, also called the Exhaustion Doctrine, states that a distributor has the right to resell a branded item in its original state. As a result, after a trademarked item has been sold in a sale authorized by the trademark owner, it is usually legal to resell it without the IP owner’s consent. This doctrine does not apply to the unauthorized resale of a trademarked product that is “materially different” from the original, as it may cause consumer confusion. Although usually not illegal, grey market goods do affect the legitimate brand and its authorized distributors. Want to eliminate Grey Marketing? Contact us for a Free Demo: Get a FREE Brand Check

2. How has the Coronavirus pandemic set the stage for grey marketing? Grey marketing is not new. It may be the result of different circumstances, but it mostly occurs due to price differentiation across international markets. Price differences are often maintained by the manufacturer by choice, but this may not be the case now. Due to COVID-19, numerous manufacturers around the world experience extreme and sudden fluctuations in demand. Price arbitrage is more common during the current pandemic due to factors such as supply, need, and level of anxiety. The pandemic has also resulted in slower production due to factories shutdowns. It has also exposed supply chain vulnerabilities that affect distributors and consumers, with gaps that grey market vendors exploit. Pandemic time has also seen a growth in e-commerce, and e-commerce facilitates grey marketing. Grey market sellers need both a product source and consumers. Due to its global nature, the online space gives easy access to both: foreign markets and customers. Marketplaces such as Amazon.com and Alibaba.com offer sellers inexpensive and direct access to consumers in territories of their choice, and so do social media platforms.

3. When anxious consumers turn to online shopping, it is a ripe opportunity for sellers to offer their counterfeit and grey market products right next to authorized sellers, often using panic and scarcity to drive prices and sales. In cases of authorized distributors who sell outside of the manufacturer’s territory or list of authorized dealers, such activity is much easier to hide from the manufacturer online. What are examples of grey marketing? The world has been experiencing temporary shortages in various product categories, from healthcare to household essentials and from sports to home office goods. Toilet paper sold out, and home appliances sellers still find it hard to meet the rising demand, as do sellers of numerous other products. Personal protective equipment (PPE), such as N95 face masks and gloves, is in high demand with countries and medical facilities struggling to maintain availability for medical teams. In addition, medical equipment and pharmaceuticals have also suffered shortages. In normal times, medical facilities buy from medical distributors, which manage all their needs. But now, they had to go outside their supply chains, as did nursing homes, jails, and other facilities. In times of anxiety and soaring demand, shortages create a space for grey marketing. Now, many appear to have entered the PPE trade to collect a commission or make a quick buck by exploiting price increases. Opportunists sell products for a higher price compared to the official distributor. Grey market sellers can even be authorized distributors tempted to make unusually high profits by selling out of their territory or by selling outside of the manufacturer’s list of authorized retailers and resellers. They sell to unauthorized sellers that purchase goods online and resell them online as they choose. In the short and long term, surpluses are the result of unexpected changes brought by the pandemic in categories such as men’s clothing, and luggage. Manufacturers or factories that produce trademarked goods for a brand may have too much stock and lower demand. They can look to sell the surplus stock to outside distributors. Also, distributors who are compelled by manufacturers and distribution agreements to purchase more than they can sell at this time may try to resell the goods to others. Otherwise, some retailers can have too much inventory and try to sell it to mitigate losses. Inventory can also be sold out of the territory and later imported

4. back to compete with new products by the same brand. The goods sold online globally can affect the brand, its sales, and its prices in the territory. What are the risks associated with grey market goods? Grey market goods can pose public health and safety risks. Grey market goods often do not comply with local laws and sold in a territory where they are not approved for use. When it comes to pharmaceuticals or PPE, such as face masks, consumers cannot verify that they have complied with regulations or guidelines regarding safe storage and handling. Improper handling and storage, shipping, or false expiration dates can all affect quality and safety. Dishonest grey market sellers may even sell lower quality or faulty protective equipment, and consumers should exercise caution, especially when buying from a third-party broker. How to report fraud and price gouging? Various governments, authorities, and organizations have been making efforts to stop misinformation aimed at growing sales, as well as hoarding, price-gouging, and profiteering during this time of emergency. In the U.S., numerous cases of inflated prices were reported. In response, there are federal and state prohibitions on charging exorbitant prices for PPE during the pandemic. Some Coronavirus-related products are prohibited from sale across major social media platforms. Facebook, for example, has temporarily prohibited ads the promote certain products that “have been associated with exploitative behavior”. Some of the products on the list are hand sanitizers, surface disinfecting wipes, and COVID-19 test kits. U.S. residents are encouraged to complain if they have encountered price gouging or other fraud, locally or at the National Center for Disaster Fraud. Other countries offer help as well, such as the UK.

5. How to protect my brand from grey market goods? Grey marketing poses a complex challenge. Due to the COVID-19 pandemic, the challenge is even greater. In addition to public health risks, grey marketing reduces overall sales and can damage brand reputation as well as create price erosion. Legal actions are costly and often prove to be of limited effect when combating grey marketing. Wiser Market has both the technology and the expertise to help you eliminate grey marketing activity. Wiser Market’s Parallel Import Control System (PICS) is a one-of-a-kind solution for eliminating parallel importing and grey marketing activity. PICS allows brand owners to identify leaks in distribution chains as well as products’ point-of-sale. This innovative system automatically detects parallel import sales, flagging them, and providing brand owners with information on rogue distributes who fall out of their sales policies.