Impact of Gray Markets on BrandsEvery enterprise being profit oriented focuses on building customer relationship and loyalty. Theproduct name and brand image are the vital factors in cementing good customer relationships. Theconcept of retaining the customers is obviously not new and is the basis of every successfulbusiness. However, the wide use of the Internet on one hand has created opportunities for growthof business and on the other hand has also made way to increase in malicious activities that candamage the brand reputation.Along with the copyright and patent thefts already existing in the business environment, thechanging technology landscape is also challenging todays enterprises by increasing gray marketsales. The online presence of enterprises has also made it easy for online fraudsters. The graymarket products are as damaging to the brands reputation as counterfeits. Defined by Wikipediaas “the trade of a commodity through distribution channels which, while legal, are unofficial,unauthorized, or unintended by the original manufacturer” the gray market products are a concernin the business environment.The products reach the grey market through the authorized channels and sold at discounted ratesas compared to the market price. Though these products are legitimate, they are either part of theolder production lots which has been returned due to the introduction of the new models in themarket. With the increasing demand for new products, the retailers tend to send back the oldermodels to the manufacturers. These older versions of the products enter the gray markets throughunauthorized dealers.Gray market sales also include cases wherein a product designed for a particular market isintroduced into another through an intermediary channel and at a lower price. Nevertheless, thereduced price tags on the grey market products affect the sales proceeds of the new products thatin turn can also have a negative impact on the distributor’s loyalty. By understanding the inabilityof the brand owners to control such sales proceeds, the gray marketers make use of fraudulentmethods to divert the product through complex distribution channels which leaves a grave impacton the distribution network invariably leading to a reduction in market share and brand equity.
Enterprises should therefore implement a robust enterprise risk management framework that willensure effective brand management. Leading service providers have developed innovativesolutions to help enterprises fight the gray market sales. Their SaaS based software helpsenterprises track the product price on a global level and track and shut down any fraudulentactivity.Read More About: Anti-Fraud, anti counterfeiting, brand monitoring