WHAT IS THE GREY MARKET?

Even though the phrase ‘black market’ brings a clear picture of some dealings that are unauthorized and prohibited by law, there is a thin but prominent line between black and grey. So let’s clear the confusion…

Grey market deals with ‘legal’ commodities, sold through ‘legal’ channels of distribution, only that it is not authorized or known by the original manufacturer. In other words, it’s not illegal but still unofficial! Also known as the parallel market, this phenomenon gives birth to a ‘parallel’ distribution channel that creates two different prices for the same product in the market.

This phenomenon gives birth to a ‘parallel’ distribution channel that creates two different prices for the same product in the market.

A NEW EPIDEMIC OR AN OLD DISEASE?

When luxury brands started internationalization in the 1970s, manufacturing stayed in Europe, to bestow the desired quality and image but the pricing increased to incorporate freight and duties in the emerging markets such as Asia. Products like fragrances were sold in large quantities to regional distributors and resold later at wholesale to compensate for disappointing sales. In the 1980s, this trend moved on to bags and apparels when the excess seasonal collections were sold in countries where the brand was usually unavailable.

Taking advantage of this price difference and the rising desire in the emerging markets, the basic B2C channel got distorted to a B2C2C channel.

HOW IS THE GREY SMOKE HARMFUL TO LUXURY BRANDS?

Luxury brands thrive on the air of exclusivity and rarity, which is now polluted by the grey market that makes available anything you want, anytime you want. Hence the brands that are more visible and accessible in the parallel market face the imminent risk of brand devaluation.

Direct loss of revenue takes place as the strong grey market in the emerging markets overshadows all the investments done for the expansion of distribution in these areas and snatches the profits expected by high price differences.

Moreover, in an effort to fight back, top luxury brands are taking different steps. Nevertheless, this often comes at a cost, though it’s a critical step towards preserving long-term brand equity.

Luxury brands thrive on the air of exclusivity and rarity, which is now polluted by the grey market that makes available anything you want, anytime you want.

TECHNOLOGY TO THE RESCUE…

All this rapid expansion of grey market can be clearly attributed to the digitalization of the market but the very same can bring an antidote to the problem.

The use of Artificial Intelligence and Data Analytics to acutely identify the outflow of products to the grey market through specific distribution channels is proving out to be an efficient monitoring tool.

Today, when the online market is a significant contributor for the luxury brands the key is to be in control of your online distribution channels, which is offered by Data&Data. Being an intelligence technology company, Data&Data offers solution for monitoring the digital grey market across different channel types, such as: standard e-commerce sites, online marketplaces, and social media. Leveraging Big Data and Artificial Intelligence technology, we screen millions of online sources every week to have a robust database and are always on the go to make sure the solutions provided are a step ahead of the ever-changing challenges grey market has to offer.

The use of Artificial Intelligence and Data Analytics to acutely identify the outflow of products to the grey market through specific distribution channels is proving out to be an efficient monitoring tool.