Goods can end up being marketed and sold by third parties in the wrong region. You need a comprehensive strategy to tackle these parallel imports to protect consumers and your wider distribution strategy.
In this Whiteboard Tutorial, we:
- Define ‘Parallel Imports’ and ‘Grey Goods’
- Highlight the risks posed to your brand by parallel imports
- Walk through how you can solve the issue using technology
- Finally, explain how proactively tackling parallel imports and grey markets can lead to growth opportunities for your business
An edited version of the Whiteboard transcript can be found below.
What are they?
Let’s start with defining the key terminology. Parallel Imports are genuine goods that have been made available on the market by the rights holder or with the rights holder’s consent, that have later been imported into another market without the rightsholder’s consent.
So, what are Grey Goods? “Parallel import” is the legal term for the issue while “Grey Goods”(or “Grey Market Goods”) is the common business term used to describe the actual products that are imported.
The Risks to Brands
Grey market goods can pose an array of risks to brand owners:
1. Loss of Revenue
The most obvious one might be the risk to revenue as parallel imports can impact competition and profitability.
If grey goods are priced below the recommended retail price in a specific territory, the grey goods will undermine the brand’s pricing strategy and compete with the official sales in that region. This will then reduce profitability and will have an impact on the overall “global” profitability of the brand.
2. Licensing Agreements Put at Risk
Revenue could also be at risk from a licensing or authorized seller perspective. A licensing agreement will only be valuable to licensees if the advantages associated with being authorized outweighs the size of the licensing fee. That balance is at risk if importers of grey goods are allowed to compete with the licensees without having to pay the licensing fee in that market.
3. Reputational Damage
There are also some reputational risks that come with the presence of grey goods, for example: potential poor service and support for consumers, warranties not applying as consumers are expecting them to, or incorrect packaging and product information for the market.
4. Consumer Harm
In some cases, grey goods can even pose a risk of actual harm to the consumer.
This can range from things like non-prescription drugs that do not come with instructions in the local language – if that happens, then there is a risk that the consumer uses it incorrectly and suffers a health risk as a result.
Another example would be products that need to be powered through an electrical cord – if the voltage restrictions are not correct for the territory where it’s being sold, the product might pose a serious safety risk.
Solving the problem
There are four key components to tackling parallel imports:
1. Establish Origin of Grey Goods
When it comes to solving the problem, you need to firstly understand the issue, starting with the origin of the goods.
You can use technological solutions to collect information. By scraping key seller information, you’ll be in a better position to gauge the scope of the issue, and Optical Character Recognition can be used to pick out valuable information from images.
There are also investigative measures that can be taken, like test purchases, open-source intelligence investigations and combining datasets to pinpoint the origin of the goods.
2. Determine Territories Affected and Size of Issue
Information should also be collected to determine which domains and online marketplaces that sellers are using, how many listings that have been posted, and what the stock levels are like. Don’t forget to also cover social media since some sellers will market themselves on social media even if the sale is completed elsewhere.
3. Optimize your Supply Chain
Once the scope and character of the issue has been determined it’s time to start considering remedies for it.
Firstly, look at how you can optimize the supply chain. The shorter a distribution chain is, the easier it is to control it, so therefore, there should be no unnecessary middlemen.
Check and reassess your contracts – you should clearly outline the rules that official distributors have to abide by (including clear geographical limits), and make sure that breaches of the terms are linked to damages.
The incentives to move goods can also be decreased by harmonizing prices – it might not be possible to completely harmonize, but the smaller the price difference is, the lower the incentive for parallel importers.
Finally, you might want to make your products traceable, for example through serial numbers or different packages in different regions.
4. Bear Down on Parallel Import Supply though Enforcement
Even if a brand has taken all necessary and appropriate measures in relation to their distribution channels, they might still have a grey goods market that needs tackling.
Enforcement based on parallel importation is indeed challenging and often time consuming. However, there are tools that brands can benefit from when trying to get grey goods listings offline:
- If the seller is using copyright protected images, a copyright claim can be made.
- If the products do not adhere to local regulations, the listing can be enforced based on a regulatory claim.
- And finally, there might be a platform policy that forbids parallel imported goods on the platform that can be used.
Tackling Parallel Imports can present a growth opportunity for your business.
If the data is telling you that there is a big grey market in a region where you do not currently have any official retailers, that is probably an opportunity for growth.
Another way of seizing opportunities for growth is to reach out to parallel importers and offer them a contract as an official retailer. Several Incopro customers have used this approach, turning unauthorized players into authorized agents.
In this Whiteboard Tutorial, we’ve defined ‘Parallel Imports’ and ‘Grey Goods’, highlighted the risks posed to your brand, and set out the tools to successfully tackle the issue. Finally, we highlighted how an effective strategy can provide an area of growth for your business.
Incopro harnesses technology and expertise to help leading brands retain control of their distribution networks and tackle parallel imports found on marketplaces, social media platforms, and websites.
Talk to one of our experts to find out more about how Incopro’s technology can help you collect identifying information on parallel importers and prioritize the threats that are most visible to your consumers.
Whiteboard Tutorial: Image Capabilities
Bad actors are adept at avoiding traditional detection techniques used by Brand Protection teams. You need to deploy image capabilities to discover the hidden listings and posts that are undermining your brand and putting consumers at risk.
In this Whiteboard Tutorial, we detail why image capabilities are critical for discovering high-risk infringements; explore the ‘Power of Three’ – Logo Detection, Similarity Matching, & OCR; and set out real-world examples of image capabilities being used to discover hidden bad actors.