The gray market effect on brand reputation

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  • 1. The Gray Market Effect on Brand ReputationParallel markets or the gray market as this is generally referred to, is defined as “the trade ofany commodity through distribution channels which, while legal, are unofficial, unauthorized, orunintended by the original manufacturer”. Though this has been present in the business world,recent years have seen it become ubiquitous. Irrespective of the type of products from mundane tolife saving, all are available through the gray market. With globalization having paved way for theenterprises to spread their business far and wide, the parallel markets to have gained a large foothold.While the authorized markets are already affected by the decline and flow with the changes inexchange rate, price differentials, and changing supply conditions, these are also challenged by theparallel imports. Though the gray market products are genuine, the sale of these products through thewrong channels creates havoc for the enterprises and their struggle to get hold of adequate data forremedial actions.The inflow of grey market products adversely affects the manufacturers in a number of ways: ● By damaging the trademark and brand reputation - Goods and services that command a premium price if offered by the gray markets at discounts will lead to the brands losing their customers, revenue and their brand image. ● Straining the manufacturer and dealer relationship – The gray markets threaten the dealer markets and this has an adverse effect on the business relationships ● The gray market goods though manufactured genuinely may not be compatible with the markets where they are sold, leading to legal liabilities for the brand owners. ● Parallel imports also disrupt the marketing strategies of the brand owners.Even though enterprises have taken strategic actions and governments have placed stringentcompliance regulations to counter the importation of goods by unauthorized dealers, this alone is notenough.
  • 2. Like the counterfeited goods, the grey market products also affect the brand reputation of thecompany. More than often enterprise lose significant market share in their inability to find effectivesolutions to protect their brand reputation. It is thus imperative that top management realize theimpact on short and long term revenue goals and take adequate steps towards effective brandmanagement. Leading service providers have developed enterprise risk management solutions thatcan help enterprises protect their brand reputation. The use of enterprise brand intelligence helps toshorten the process of finding gray market product sales. Further by prioritizing and identifying theviolator enterprises can take effective actions against perpetrators who damage the brand reputation.Read More About: Counterfeiting