Blogs and social networks instead of printed newspapers, online retailing platforms and search engines instead of radio or television: The Internet has opened up numerous opportunities for online retailers. Branding is being increasingly performed through new channels.
At the same time, brand misuse and unauthorised sales channels have increasingly emerged over several years. Retailers and manufacturers are concerned about the development of grey markets and dumping prices. They simultaneously fear a loss of their brand image.
We show you how to strengthen your pricing policy and protect your brand at the same time.
Openness of sales channels: An advantage or a disadvantage?
Online retail is growing rapidly. Parallel to a seemingly unclear number of online shops, more than 1,000 price comparison portals have emerged, the Biz Report website has found. These create a higher price transparency for the customer, on the one hand, but at the same time also increase pricing pressure on online retailers. With this transparency, the Internet contains not only advantages, but also some disadvantages. Openness and anonymity facilitate the counterfeiting of brands, as well as sales through unauthorised distribution channels.
Without formal monitoring on the Internet, online retailers are increasingly losing control of their brands. The result is that grey markets will grow even further.
Unauthorised channels lead to grey markets
A grey market is an unauthorised sales channel through which branded products are marketed at low prices by often uncertified retailers. Authentic original goods enter retail here without the knowledge of the brand owner and are sold for 50 to 90 percent below the retail price.
These are mostly re-imports, surplus goods or refurbished products.
Usually these are the authentic products of the brand owner. If there is a counterfeiting of goods, one speaks here of piracy. The grey market often serves as a “gateway” for fraudsters to offer counterfeit goods alongside grey market goods.
The cosmetics sector, which is heavily affected by grey market retail, has already tested various approaches in practice. Hidden encodings, for example, make product counterfeiting more difficult. Some companies also form their own brand protection departments, which then monitor the fraud trade. These measures have led to a reduction in the grey market share from fifteen down to five percent.
The sale of counterfeit or unauthorised goods is becoming an ever growing problem for retailers. It not only destroys the value chain between industry and retailers, but also between customers themselves.
Negative impacts on online retailers and their customers
According to a study by MarkMonitor, some 23 percent of online shoppers have already noted unintentionally buying a counterfeit product online. The most frequently affected categories are the fashion, perfume and electronics sectors. The appeal from customers goes out to the retailers and manufacturers, with 85 percent thinking brand owners should do even more to protect their brands.
Brand manufacturers should be listening here, because the consequences of the grey market are drastic. Manufacturers not only lose the trust of customers, but also have to expect a decline in their brand image.
The development of a brand requires years of marketing investments, which at worst will not pay off, including a severe loss in reputation. The image of a brand represents the foundation for a successful pricing strategy.
If the products are sold at prices below their own production costs, manufacturers and online retailers are at risk of losing income and achieving lower margins.
The solution lies in channel monitoring on the Internet
Use the blackbee channel monitoring module. Keep control of your sales channels and monitor them daily. With a minimal amount of daily time expended, you can safeguard your pricing image and increase your sales and margin at the same time.
Grey market: How you can proceed preventatively and actively
The rapid growth in eCommerce and an increasing complexity require a clear monitoring strategy. Use intelligent technologies like blackbee channel monitoring. Observe your market and analyse the price developments of your products across different channels.
Do you need further information on channel monitoring in eCommerce? Contact us now – we look forward to your message.