In this episode of PriceSpider’s podcast, E-Commerce Connected, How Counterfeit, Gray Market and Unauthorized Asian Market Sellers Can Cause Disruption, our Global Sales Executive, Anthony Capozzoli, sat down with David G. Howell to discuss counterfeits, the gray market and unauthorized sellers in the Asian market.
(If you haven’t read the blog recap of our Tracking Down Unauthorized Sellers podcast, you may want to do that for background before continuing.)
Just as brand manufacturers don’t want unauthorized sellers distributing their products, counterfeits, the gray market or unauthorized and counterfeit sellers in the Asian market are problematic as well.
Counterfeit products are just what they sound like. This is a company that will make a “knock-off” version of a product but sells it under the brand name or advertised product name. These products are often lower in quality and don’t have the accompanying warranties and quality assurance that the real brand uses to make sure the product is of the highest quality for customers.
Gray markets sell the original product from the brand but are imported into countries without the consent of the brand and to be sold through unauthorized sellers. Gray market sellers can offer products at a lower price because they aren’t paying the brand their share of the profits. However, warranties or replacements, if needed, won’t come easily or at all because the brand isn’t there to back up its products.
Asian markets such as the Alibaba group of companies or TaoBao (also owned by Alibaba) will often sell both counterfeit and gray market products. You might wonder, why is that important? Think about how large Amazon is in North America: The Alibaba companies are two to three times as big globally. That means customers worldwide could be receiving counterfeit or gray market products. It’s something brands will want to investigate to protect their trademarks and reputation.
How do you know if you have a problem?
If a brand has good products, very often someone will try to take advantage of that. Look to social media and see how people are talking about the products. Look at reviews in the marketplaces where authorized dealers are selling and then check out those with no authorized sellers. Brands should take the time to research this and review the social media posts about their products, reviews and Asian marketplace searches and reviews. Look at the brand name and product names. Are there typos? Some companies will make mistakes on purpose to hide. Try large keywords and do a broad keyword search instead of searching by exact brand name or product name.
Brands might think that as long as these products don’t enter the U.S. market, they have nothing to worry about. However, they often do enter the U.S. market and once that happens it can become very problematic. Smaller brick and mortar companies might see a good deal online through international sites such as Asian marketplaces and jump at the opportunity to save some money and boost revenue. Whether they know the product is counterfeit or gray market and purchase in bad faith, or don’t realize what they are purchasing, these products are now in the authorized supply chain in the U.S. being sold as legitimate merchandise.
Co-mingling is another way for counterfeit products to enter the authorized supply chain. Take Amazon for example, which uses comingling to save space and keep all products in the same spot. What this means is that as sellers send their merchandise to Amazon’s fulfillment centers, it could be stored with other sellers’ merchandise too, if this is the option the seller selected. Amazon keeps track of the number of products sent to its warehouse and the number ordered and distributed through each seller, but all products are pooled together in one spot. Now imagine a seller contributing counterfeit products to this pool. It’s possible that counterfeit merchandise is now being distributed through authorized sellers that legitimately purchased from the brand. This can cause tremendous disruption for both the brand and the seller.
What should brands do to protect themselves?
Howell says the best way to stay on top of these issues is, “Putting the right foundation in place; active monitoring, research and enforcement” which will protect brands from this type of disruption.
Don’t ignore the signs! If a brand finds even one instance of a counterfeit, these instances can multiply exponentially. It doesn’t take much for these products to enter the U.S. marketplace and bleed into co-mingling with Amazon or being distributed by smaller authorized sellers. It can tarnish consumer confidence to have reviews of counterfeit products on brand pages.
Take the time to review global sites like the Alibaba group for products. Brands should monitor these or use a service to keep track of online activity. Research reviews in online marketplaces with authorized sellers, like Amazon, and look for signs that customers have received counterfeit products. Reviews that state broken parts, not coming with all necessary parts, missing warranties and other red flags should be investigated. Take action when unauthorized or counterfeit sellers are found. Don’t let them continue to operate because it’s only a few small instances. This could balloon into a larger and more wide-spread problem.
Howell also recommends submitting the proper documentation needed to protect the brand. This includes registering trademarks in all global markets where the product is being sold. The trademarks make it possible for brands to then enforce their policies and act against unauthorized and counterfeit sellers. Consider signing up for AliProtect in the Asian market. It can take time and can be challenging to submit all the proper documentation, but it’s necessary for securing the protection needed. This is a winnable battle — brands just need to be vigilant.
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