With online sales representing over 20% of sales in most physical good categories and the ability to buy unauthorized goods from anywhere in the world, the gray market is more present than ever. However, brands are not monitoring their online goods, allowing for any good to be available for sale on the internet, including marketplaces.
As important as their name is to them, brands are still reacting to the gray market instead of putting in place protection systems and processes. To protect themselves against these gray markets, I’ve outlined in my recent report, “Protecting Your Brand On The Rogue Web,” how brands must:
- Take charge of governance issues. Brands are either turning a blind eye to gray markets or lacking the necessary controls. Instead, apply specific rules to sellers and marketplaces around pricing and distribution, such as how Nike has done with Amazon, or prohibit sales at specific online sites.
- Protect their distribution. By implementing policies such as the minimum advertised price (MAP) policy and IP protection policies, brands can scan and monitor unauthorized sellers more effectively. Levi’s goes even further by certifying certain items as “authorized vintage” and selling those items exclusively in its stores.
- Use brand websites as educational tools. In the past three months, 33% of US online adults shopping in a physical store looked up product information when they researched products or services on their mobile phone. Brands must educate shoppers on the benefits of purchasing legitimate products, informing customers of the risks associated with buying unauthorized merchandise; Nikon and Canada Goose do just that.
With more direct-to-consumer sales and stricter pricing enforcement, brands will realize that they in fact have the upper hand. I foresee brands increasingly working only with select, cooperative retail partners and that tariffs may actually be a good thing for some brands. Additionally, there is a movement to overturn Section 230 of the Communications Decency Act of 1996, a law passed by Congress that gave marketplaces the latitude to grow with little oversight. If overturned, the very marketplaces that gray market sellers exploit will finally be forced to police illegitimate merchandise.
Interested in other ways you can improve your online sales? Check out my report, “Six Things Brands Must Do Online To Improve Sales.”