How To Clean Up Digital Marketplaces of Gray Market Sellers

Though not quite as epic a battle as Liam Neeson’s “The Grey” (man versus wilderness and wolf), the gray market presents an arduous challenge for brands already trying to eke their way through the competition on the digital frontier.

For brands that want to thrive — not merely survive —  explore this post to gain an understanding of what is a gray market or black market. Then, learn how to arm yourself with the right allies (and resolve) to rid the market of these not illegal, but detrimental actors — even if it means making some tough decisions.

What Is a Gray Market?

The term “gray market sellers” refers to sellers who sell products legally, but, outside of the brand's permission or control. Just about any item can be sold on the gray market, especially high-demand items.

Gray-market items can include:

• Cars
• Electronics or appliances
• Software
• Apparel
• Health and beauty products
• Pharmaceuticals

But how do these products get to the gray market? 

How Products Are Sold on the Gray Market

Manufacturers or brands ship their products to distributors or authorized retailers. The excess products that aren’t bought can then be sold to gray market sellers, essentially dealers, in often highly different geographic or social markets. Dealers can choose how they want to sell the products.

Gray market dealers often sell on social media and big marketplaces like Amazon and eBay. They can harm relationships with distributors, damage product reputation, and put your brand at risk in a manner that’s difficult (if not impossible) to bounce back from. 

What Is a Gray Market vs. Black Market?

The gray market refers to legally branded products being sold outside of the brand's permission or control. The products are legal, and the sales are technically legal though they present other issues for the brand.

The black market refers to the illegal sale of stolen or counterfeit goods. The goods themselves might be legally branded but were acquired for sale illegally. Or the goods might also be fake or fraudulent and made with unverifiable, inconsistent, and even dangerous materials. 

How the Gray Market Puts Your Brand at Risk

Although the products sold on the gray market are legitimate — not defective, fake, or counterfeit — they can still do significant damage to your brand image.

Gray market sellers offer products outside of the jurisdiction of the brand, often in an entirely different geographic market, which presents a host of issues and risks related to relationships and overall performance.

Damages Relationships in Your Distribution Network  

Gray market sellers create headaches for everyone involved — it’s simply a matter of when. Though gray market sellers might seem tempting to distributors and retailers looking to offload products, consumers will likely be turned off by the seedy selling practices.

Two-fold, your authorized distributors and retailers (especially those that aren’t involving themselves with gray market sellers) will likely get tired of competing with questionable tactics. It’s not out of the question that if you fail to remove your product from gray market sellers, your authorized partners may cut ties.

Damages Price Maintenance

Gray market sellers can damage the average selling price (ASP) of products in your brand’s primary region, as well as others.

Even if there’s a minimum advertised price (MAP) policy in place for authorized sellers, gray market sellers operate by little to no rules other than “sell, sell, sell,” so there’s hardly any motivation for them to keep the price at any specific point.

Consumers will quickly become wise to gray market price-gouging selling tactics. They’ll likely abandon a higher-priced option from your authorized retailers in favor of a gray market dealer — or abandon your brand entirely.

Damages Your Reputation With Consumers

Due to the nature of the digital shelf, consumers no longer need to know which seedy alleyway to go down to find a brick-and-mortar gray market seller. Rather, it’s a matter of searching for an item they want, if not just finding it by chance online.

Consumers also love deals. And what do gray market sellers so often offer? A seemingly crazy-good deal on a product that looks entirely indistinguishable from the product on a higher-priced authorized dealer. (Hint: because it probably is the same product.)

However, the consumer may also be turned off by the much lower price or the appearance of the all-important product detail page (PDP). They might find the discount jarring, and think that there’s something wrong with the product, or worse, your brand. 

The product content that your brand spent ages consolidating, crafting, and refining across different authorized channels will go to waste.

Consumers will likely find spelling and grammar mistakes, misinformation, or false claims in gray market product pages.

If a consumer does choose to purchase that product, however, they may receive it in poor condition due to shipping standards not being up to code, with instructions written in a different language, or with an invalid warranty.

And because the item didn’t come from a retailer that can offer an effective resolution — or even a refund, at the very least — the customer will likely hunt down your brand directly. And even if you’re able to appease them for a time, there’s no guarantee that hard-fought brand trust won’t disintegrate.

Worse yet, they may also choose to leave a scathing review of their experience. Though the presence of negative reviews can actually help a brand’s reputation, according to PowerReviews, LinkedIn reports that 94% of consumers say that a negative review makes them less likely to buy from a business.  

What Brands Can Do To Clean Up Digital Marketplaces of Gray Market Sellers

Ridding the gray market of your products doesn’t limit your brand’s reach — quite the contrary. Once you cut through the chaos of unauthorized dealers and associated consequences, the easier it will be for your brand to later expand to other global markets — here’s how to accomplish that. 

Stand Firm Against Unauthorized Dealers

Having a strong policy with your distributors against selling to gray market dealers is a crucial step in saving your brand from the throes of the gray market. Using a monitoring service can also find your products where they shouldn’t be and help you take necessary action against unauthorized sellers.

Educate and Empower Consumers To Choose Authorized Dealers

Rather than hoping consumers will choose to order your products from your direct-to-consumer (DTC) site or other authorized channel, make it a point to call out gray market sellers and the risks involved. It may not entirely sway all consumers from the gray market, but it will inform and remind those ready to listen. It will also show that your brand values transparency and consumer safety. 

Benefits of Eradicating Gray Market Sellers

The small benefit of offloading excess product to a gray market seller is quickly outweighed by the potential consequences of lost sales and a tanked reputation. Though eradicating gray market sellers from your brands’ stratosphere may feel like a losing game, the benefits are substantial.

Brand Consistency and Predictability

Teams across your organization — marketing, legal, product, and so on — likely work tirelessly throughout the year to get your brand’s presence “just right” for each and every channel.

Removing the power of gray market sellers to tarnish your reputation gives control back to your brand on how you’re received across the digital shelf to not only current distributors, retailers, and customers, but also prospective ones.

Greater Consumer Trust

Consumers across the globe increasingly value high-quality products and high-quality product content. Even if consumers trust your brand enough to order your products from a gray market seller, all bets are off regarding the condition they receive it in or the service they receive with it.

After all, gray market products put the onus and sometimes costly responsibility on the consumer, especially in the case of vehicles needing to be modified to meet regional safety requirements.

Only selling your products via authorized dealers will ensure that if anything goes wrong (and less is likely to), qualified professionals are on the case. 

Freedom To Focus on Growth

No gray market interference means that the sales numbers you’re receiving are only coming from authorized channels properly equipped to deal with other unfortunate, but sometimes unavoidable, issues like recalls.

Your brand should then have nearly complete oversight of how, when, and where you’re appearing across the digital shelf, especially if you use a product experience management (PXM) solution. And the better you appear (and sell) across existing channels, the more likely it is you can expand to new channels and markets responsibly.

Step Away From the Gray

By taking a strong stance against unauthorized dealers, affirming your relationships with your distribution network, and showing consumers that you’re indeed their best ally, your brand will live on with health, wealth, and prosperity in the digital and physical wilderness — tough as it can be.