Gray Market Goods

What Are Grey Market Goods?

Grey Market Goods

We’ve all heard of the black market–the term encompasses everything from seedy illegal trades to those questionable Gucci bags being sold on Manhattan side streets.

But What About The Black Market’s Less-Mentioned Gray Market Sibling?

Gray market goods are not technically illegal, but they can drive an Amazon seller out of business if they’re not dealt with quickly enough.

What can you do if you’re already seeing leaks in your supply chain?

First, you have to get a grasp on what gray market goods look like. Then, you need to put together a plan of action to tackle current gray market goods and prevent them from appearing in the future.

 

What Are Gray Market Goods?

Gray market goods are products sold without the trademark holder’s knowledge or consent.

Frequently, these products are sold from one country to another (think: imports from India to the US). And occasionally, these products end up in the hands of resellers who believe they’re from legitimate sources.

Here are some ways you can identify gray market goods out in the wild (according to the Better Business Bureau):

  • The merchandise may not come with a US manufacturer’s warranty
  • The instructions or warranty may be written in a foreign language
  • The price will probably be lower than the manufacturer’s suggested price
  • Ask the seller or the manufacturer’s authorized representative if the merchandise is from the gray market (merchandise intended for sale in the United States may be determined by registration number)
  • The merchandise may not be eligible for rebate
  • The specifications of the merchandise may not comply with US regulatory
  • Requirements

Let’s say you’re a trademark owner of a unique stainless steel travel dog food bowl.

You’ve worked out all the details with a manufacturer, and you just received your first shipment, which you plan to sell on Amazon.

Eventually, your brand takes off and you work via authorized distributors to get these bowls on shelves in big box retailers and specialty stores.

A few months later, you notice there are other sellers on your Amazon listing, offering your bowl at a lower price.

None of these sellers are authorized, so you assume they must be counterfeit. However, a test buy reveals they’re identical to your product–they’re just missing your warranty.

Clearly, there’s a leak somewhere in your supply chain, and that’s what makes this particular dog bowl most likely a gray-market good.

Gray market goods can undermine your customer trust, siphon away your hard-earned profits, and ultimately destroy your brand. And they can be even harder to combat on Amazon than actual counterfeit goods.

 

Amazon and Gray Market Goods

Amazon’s flags gray market goods as “inauthentic”.

Gray items are not considered counterfeits, but they are also not considered legitimate products.

When Amazon flags inauthentic items, it means they have reason to believe the product may been purchased from a source that is not authorized to sell it.

 

How To Combat Gray Market Goods On Amazon

Let’s say you attempt to reach out to Amazon to boot those inauthentic gray market dog bowls, which you’ve already flagged.

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.

So 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 an intellectual property right 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.  Wusthuf cutlery employs this strategy very successfully
  • 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

Another way to combat the issue? Build a better brand.

 

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.

Here are a few keys to preventing gray market or “inauthentic” goods on Amazon (or elsewhere in your distribution):

 

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 bricks-and-mortar and online. This also becomes an issue because 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 even longer than this one–but don’t neglect this step or you may regret it later on.

Click to learn more about Maintaining a Valid International Supply Chain

 

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