subject: Counter Gray Market Sales With Enterprise Risk Management Solutions [print this page] Today gray marketing and counterfeiting are two of the greatest headaches faced by legitimate manufacturers and distributors. Though many consider gray marketing and counterfeiting as one and the same, the fact of the matter is these two are entirely different in concept. Therefore lets first understand the basic difference between the two before delving further into the topic.
Wikipedia defines a gray market as the trade of a commodity through distribution channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer.
While counterfeiting is, the process of fraudulently manufacturing, altering, or distributing a product that is of lesser value than the genuine product.
Simply put, gray marketing is the sale of legitimate and original goods or products that find their way into the gray market when a manufacturers authorized channel releases the products to unauthorized dealers who then sell them at high discounts. Hence, gray market goods are in no way counterfeits but they can be older products, which have been dumped because newer models are available.
Though gray market goods are legal goods, they are as damaging and costly as counterfeits to a manufacturer. Not only manufacturers, it affects customers as well as distributors. Lets see how:
* Customers
The gray market goods have no factory warranty and the customers who buy it do not get any customer support from the legitimate importer. Moreover, the customer would not get any software and firmware updates. The customer does not get any service, as the specialized parts are available only from the importer or the original manufacturer. Hence, the sales of these gray market products have a negative impact on customers who are expecting the original manufacturers warranty.
* Distributors
The entire gray market sales process takes sales away from new products and affects distributor loyalty.
* Manufacturers
Gray market products create disruptions with the distributors especially the ones who are keeping their agreements in the channel. If they believe that there is unfair competition from a growing gray market, they will drop the particular manufacturer from their list.
Instead of considering gray market activity as the cost of doing business as most of them do, enterprises need to invest in good enterprise risk management solutions to proactively recapture lost revenues, market share and brand reputation. This can be achieved by tightening value chains. The SaaS-based software has a proprietary search capability that can help the manufacturers find where and at what price their products are being sold globally. Not only that, it tracks the distributors who are responsible for unloading these products on the gray market. Thus, armed with this data, enterprises can take action against the violators and thereby stop the erosion caused by gray market products.
