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  • Writer's pictureArt Fletcher

The Cost of the Grey Market to Brand Equity: A Growing Danger with Marketplaces Sales Channels

Updated: Apr 15

In today's ever-expanding global marketplace, brand equity is a prized asset for any business. It encompasses the value, reputation, and recognition associated with a brand and often serves as a key driver of customer loyalty and trust. However, as the digital economy continues to evolve, a dangerous threat to brand equity is on the rise: the grey market. In this blog post, we will explore what the grey market is, its impact on brand equity, and why it is becoming increasingly perilous as marketplace sales channels grow.

Grey Market goods rob brand equity
Sales through desired channels drives Brand value and image.

Understanding the Grey Market

The term "grey market" refers to the sale of genuine branded products through unauthorized channels. These channels are typically not endorsed or controlled by the brand owner, and they can include unauthorized distributors, retailers, or even individual resellers. Grey market products may be sourced from various regions, often taking advantage of price differentials or favorable exchange rates, and then sold in markets where the brand owner has set different pricing or distribution strategies.

The Dangers of the Grey Market

1. Erosion of Brand Control

One of the primary dangers of the grey market is that it erodes a brand's control over its products and pricing. When products are sold through unauthorized channels, it becomes challenging for the brand to maintain consistency in pricing, quality control, and customer service. This can lead to confusion among consumers, ultimately damaging the brand's reputation.

2. Dilution of Brand Value

The grey market often results in pricing discrepancies between official and unofficial sales channels. As consumers become aware of these disparities, they may lose trust in the brand. The perception of overpricing or unequal access to products can tarnish the brand's image and dilute its overall value.

3. Customer Experience and Trust

Customers who purchase grey market products are more likely to have a negative experience due to a lack of warranty and support. These negative experiences can have a lasting impact on customer trust, making them less likely to make repeat purchases or recommend the brand to others.

4. Legal and Regulatory Challenges

Brand owners can face significant legal and regulatory challenges when dealing with the grey market. Pursuing legal action against unauthorized resellers can be time-consuming and costly, and the outcomes may not always be in the brand's favor. Additionally, some regions have lax intellectual property enforcement, making it difficult to combat grey market activities.

5. Global Reach

Marketplaces have a global reach, enabling grey market sellers to reach a broader audience. They can source products from one region and sell them in another, often exploiting pricing differences. This increased reach amplifies the risks to brand equity on a global scale.

6. Anonymity

Online marketplaces often provide a level of anonymity for sellers, making it difficult for brands to track and control grey market activities. This anonymity fosters an environment where unauthorized sellers can operate with little oversight.

7. Consumer Fatigue

The result of excessive exposure to products, leading to reduced interest and engagement with products or services.

8. Consumer Confusion

The sheer number of products and sellers on online marketplaces can lead to consumer confusion. Shoppers may unknowingly purchase grey market products, thinking they are buying from an authorized source, which can lead to negative experiences and a decline in trust.

How to tackle the problem

Grey market activity on marketplace sales channels can be a significant headache for both consumers and Brands. However, the good news is that there is a solution. With advancements in technology and an organized approach, many Brands have taken steps to combat this issue.

Enforcing sales policies
The Grey Market cannot be ignored. Identifying the source to the Grey Market is crucial to protecting brand value.

Here's a process to help you harness the power of tracking effectively:

1. Partner with Reliable Tracking Companies: Start by selecting a reputable tracking company that aligns with your distribution needs. Ensure they have a track record of accurate data collection.

2. Set Clear Objectives: Define what you want to achieve from the investment. Are you looking to enforce your MAP policy? Are you looking to clean up unauthorized listings? Some tracking companies have a lot of tools and resources for you to use, but change requires constant analysis of the data they provide.

3. Dive into the Data: Don't stop at just having data. Dive into it! This is where the real work begins and where we can help.

4. Actionable Insights: The magic happens when you extract actionable insights from the data. Using all of the data available to you to create action that you can be confident in is the key. Being able to do this quickly and in volume is the goal.

5. Implement Changes: It's not enough to identify problems; you must be willing to take action. Be ready to adapt and improve continuously.

Conclusion As marketplaces continue to grow and dominate the retail landscape, the grey market's threat to brand equity becomes increasingly perilous. Brands must remain vigilant in protecting their image, value, and customer trust by implementing strategies to combat grey market activities. These strategies must include monitoring online marketplaces, implementing strict distribution controls, and enforcing sales policies. By addressing the grey market challenge head-on, brands can safeguard their most valuable asset in the modern marketplace – their reputation.

Counter Diversion is a boutique SaaS company - we don't have marketing and we don't use high-pressure sales tactics. Our goal is to have solid, honest conversations about the issues at hand and then either recommend our service or another one that is a better fit for your needs. If you'd like to engage in that type of discussion, please schedule a free consultation.


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