What are gray market goods? We’ve all heard about the term “black market” which encompasses everything from shady illegal trades to counterfeit handbags. But what about gray market goods?
Gray market goods are genuine, authentic goods purchased & resold outside of the manufacturer’s intended distribution.
These are goods that are great for consumers because they are the real thing at better prices. If they are great for the consumer and Amazon is dedicated to customer satisfaction, what are all the issues with gray market products?
Gray market goods are not counterfeit – they are exactly the same as being sold anyplace else.
Gray market goods are the same products that are sold by authorized re-sellers and in brick and mortar stores.
Gray Market Goods Include:
- When authorized distributors sell outside of the manufacturers list of re-sellers and retailers.
- Items purchased on sales racks around the globe. In a case we handled, Walmart did not intend for retail arbitrage sellers to purchase dozens or hundreds of the goods from its clearance racks in its stores and resell them at higher prices on Amazon.com.
- When factories create too many units and there no market for them and they then sell them to outside distributors.
- When manufacturers or factory owners build goods for the rights owner and then make extra “runs” of the product to sell to whomever wants to purchase the goods.
- When manufacturers compel distributors to take more goods than they can resell within “accepted” channels and therefore compel distributors to resell the goods to others who then sell them on Amazon.com
Amazon Sellers & Grey Market Goods
Since its beginning, Amazon followed its Leadership Principal focusing on the consumer. Amazon gave consumers the best prices, experience and value, and Amazon became the most valuable brand in the world. However, Amazon has now added a brand-eccentric practice that seems to fly in the face of putting the customer first. Or, at least, the theory on how to provide the customer the greatest experience has changed a bit.
It used to be that great prices were what Amazon wanted to provide consumers. In fact, it is part of every seller’s Terms of Service that Amazon sellers cannot offer his/her product for less than what the product is selling for on Amazon. If you were caught selling your product for less on your own website, Amazon would suspend you.
Now, Amazon has added brands to its obsession. Amazon is sacrificing the number of sellers on the marketplace for more control over who sells which brand. Amazon is switching over to policing not only who sells which brand, but also how many will be on each listing. This flies in the face of consumer obsession.
How To Combat Gray Market Goods On Amazon
Gray market goods can rob you of customers and can drain your profits, but the truth is, Amazon doesn’t take MAP enforcement or manufacturer problems as seriously as they take counterfeits. What’s the best way to combat the problem once it’s begun? Make a test buy, and send Amazon proof that the test buy product differs in one of the following ways:
- Material differences
- Labeling/packaging
- Quality issues with the actual product
- Missing serial number
- Missing instructions
Build intellectual property into your products. While a grey market product is not counterfeit, you can add something to your product that other sellers cannot deliver. Some add-ons to your product that will be helpful when trying to rid your listing of other sellers include:
- Add a factory repair warranty…anyone can give money back.
- Add content to your product – this can create a copyright issue if someone else tries to deliver your content
- Add a subscription to a blog, website or newsletter
- Add a charitable donation that you match to each sale
Build Up Your Brand
Another way to push back against gray market goods is to improve or update your products and packaging on a more frequent cadence. It’s also important to ensure that your brand is prominent across your packaging and your listings. Consider “bundling” several different products in a way that makes them difficult to replicate.
How to Prevent Gray Market Goods on Amazon
If you aren’t currently experiencing an influx of gray market goods, you should still vigilantly protect your brand and listings.
Keep a Tight Distribution Chain
This sounds simple, but it involves more effort than simply emailing your manufacturer once every few weeks. It involves relationship building with both your manufacturer and your distributors. You should strive meet your manufacturers in person before any transactions are made and compensate them well. The same goes for your distributors. Check back in frequently and communicate often. A trust-filled relationship goes a long way in ensuring your products stay within your reach.
Don’t Over-Produce Products
It may be tempting to over-produce a product that has a high potential to sell on Amazon–or is already flying off the virtual shelves. However, when you over-produce your products, it’s easier to lose track of where your inventory is at all times, particularly if you have many distributors in both brick-and-mortar and online. This also becomes an issue if your product ends up going stale on sales, your distributors may be tempted to take matters into their own hands to get them moving.
Don’t Have Unrealistic Goals for Distributors
While this applies to your manufacturer as well, it’s especially important not to make unreasonable demands or have unrealistic goals for your distributors. As we noted before, if you parcel out mass quantities of your product and its sales go stale, your distributors may be tempted to either sell products at a cheaper rate or sell to other eager Amazon sellers who notice your success in an area.
Protect Your Rights Where Your Goods are Being Produced
If you are having your products manufactured in China, Thailand, Vietnam or India, the manufacturer is unlikely to care about anything a United States judge rules. But, if you can enforce your rights on their home turf, you may have better leverage to stop your manufacturers from producing your product for other sellers.
Maintain Your Records
This may not be the most fun part, but it’s invaluable if you’re sourcing your products from abroad. If you end up needing them, you shouldn’t have to hunt. Here are some records and receipts you will want to keep on hand from your manufacturing process:
- Documents from your design
- Receipt of your prototype or sample
- Payment and your final receipt of the goods
- Emails regarding your sourcing agent or inspection of the goods
- If you travel to the manufacturer, maintain your travel documents
And from your distributors:
- Authorization letters to your distributors
- Exclusive or Semi-Exclusive Distribution Agreements
- Invoices for distributors
- Screenshots of the distributors’ websites
- Google Earth pictures of your distributors’ warehouses
Your list of documents may be longer than this one – but don’t neglect this step or you may regret it later on.