Counterfeit products and well-funded knockoffs get a lot of attention, but what do you do when you’re competing against your own products offered at a discount by sellers who acquired them through legal means? In this blog post, we’ll discuss the problems caused by grey markets and effective actions brands can take to fight back.
What Are Grey Market Sellers?
Grey market sellers are those who acquire products legally, either through bulk orders or discounted inventory, then sell them without the brand’s permission, often at lower-than-market prices that undercut legitimate sellers. Any brand or product could find themselves competing with grey market sellers, but the most common grey market products are cameras, watches, cars, and pharmaceuticals.
Unauthorized sellers are one of the most persistent challenges of online retail. Grey markets are particularly challenging as they tend to erode relationships with both distributors and customers. Legitimate distributors become frustrated by pricing instability, and customers lose trust in illegitimate sellers who do not honor product warranties or provide customer service.
Is the Grey Market Legal?
Technically, yes, so long as the products are acquired through legitimate means. This is exactly what makes grey market sellers such a problem: they operate without breaking the rules, and Amazon will not act against them. In fact, some Amazon best practices can be an incentive for grey market sellers to operate.
Strict pricing policies force authorized sellers to comply with a standardized pricing umbrella. Gray sellers operate under this umbrella, undercutting every other authorized seller and attracting new buyers and loyal customers alike. These sellers have much lower overhead costs and can survive on the smaller margins, so unless a brand takes action against them, it’s unlikely they’ll stop on their own.
The Real Problem with Grey Markets
In our blog post on protecting against unauthorized sellers, we discussed how the pricing disparities caused by grey and black market sellers can affect the buy box. This is an obvious issue, but it’s not the real problem with grey market sellers. Since many customers do not (or cannot) differentiate between authorized and unauthorized sellers, the grey market can erode a brand’s reputation, costing even more in the long run.
Brands are often forced to choose between providing service and support to customers who did not purchase their products through proper channels or risk losing hard-earned brand trust and loyalty. A few rogue sellers flooding the market with discounted products can quickly tarnish relationships with distributors, frustrate a brand’s customer service department, and alienate consumers.
And remember: Amazon does not take action against grey market sellers, so brands must be proactive to protect their interests.
Steps for Protecting Your Brand
What can brands do to protect against grey market sellers? The first step is to get informed. Learn how big the problem is in your category and which products are most susceptible. Most Amazon agencies, including Kaspien, use software to actively monitor for pricing violations and identify rogue sellers. This data is then used to take action against these sellers and maintain control over the channel.
Here are additional steps brands should take to keep unauthorized sellers at bay:
- Appy for Amazon Brand Registry
- Register all Intellectual Property
- Enroll in Amazon Transparency
- Create Distributor and Seller Agreements
- Differentiate your brand’s packaging
- Actively monitor your brand, sellers, and distributors
- Avoid huge discounts on bulk orders and inventory liquidation
Many of these steps must be in place to take any action against unauthorized sellers. It’s also very important to set clear boundaries and expectations with distributors and create a strong, recognizable brand identity to help customers easily recognize when they are purchasing from a reputable distributor. We’ve also written an eBook on Brand Protection, which you can download for free.
Like it or not, the grey market is alive and thriving. Beyond disrupting pricing policies and buy box suppression, the real danger of the grey market is eroding brand integrity. Kaspien uses brand protection software to actively monitor for and take action against unauthorized sellers and protect our partners from grey sellers. Visit our site to learn more about the services we offer.
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