What is grey-market product and parallel importing?
As with any issue that crosses numerous national borders and legislations, grey-market product isn’t easy to define in a sentence. James Carroll, general manager of International Beauty Supplies, exclusive distributors of OPI nail care products in Australia explains: The grey market is always hard to evaluate because there is a mixture of counterfeit products and parallel imported products.”
According to Choice, parallel import products are shipped in from abroad without the permission of the local trademark or intellectual property owner. Essentially, they’re legitimate products that dodge standard distribution channels and, as a result, can arrive in our shopping basket for a fraction of the local recommended retail price,” write Choice. Surprisingly, parallel imports aren’t illegal in Australia. In 2011, the Productivity Commission’s retail inquiry found the arguments made by multinationals in defending price discrimination were not persuasive.
The other form of grey market that Carroll refers to is entirely fake product, packaged in either copycat packaging, or in real packaging that has been refilled with counterfeit product.
At the end of the day, grey-market product, whether it be real product that’s come through unauthorised distributors, or fake product entirely, poses huge risks to both the brand, the salons and spas that stock it, and consumers.
What are the costs?
For the consumer… The person who is ultimately disadvantaged from the grey market is the consumer; as they seek a cheaper alternative off the internet, they often in fact receive an inferior product,” says Carroll.
Unfortunately, many consumers are unaware that what they’re buying isn’t necessarily what it seems. I don’t think people want to buy fake products,” says Anne-Marie Cook, editor of Spa Australasia magazine. Consumers of course want a deal if they can get it but I think it’s a priority for them to have belief in the real brand.”
For the distributor… We’re a family business and we don’t have the resources to clean up grey-market product,” says Judi Seeley, Australian distributor of Sexy Hair. The costs are huge.” Seeley explains that as a distributor, you don’t only lose revenue but you also lose existing clients who feel that they’ve been ‘cheated’ by us because we’ve supposedly distributed a professional brand into a retail outlet, when that isn’t the case.”
For the brand… It makes our salons see the brand in a different light completely,” says Marie Enna-Cocciolone, CEO and founder of InSkin Cosmedics, the exclusive distributor of EmerginC and O Cosmedics. Especially for a salon-only brand that you don’t expect to see online to begin with, it is very damaging when you see it not only online but at heavily discounted prices.”
For the retailers… According to Alexis Green, communications manager for , We know that our authorised channels – David Jones, Myer, Mecca Maxima and selected pharmacies along with our e-commerce site Clinique.com.au are losing sales to the grey market, so there is a financial impact. More importantly grey market can be damaging to our brand equity as consumers think they are buying from a trusted source and the product is endorsed by Clinique – this is not the case.”
For the salons and spas… I know of spas and salons that have had people complain of bad reactions to products that have been bought online and turned out to be fake,” says Cook. It can not only be damaging for the client, but it damages the spa or salon’s reputation.”
Unfortunately, unknown to the consumer, the salons they turn to can’t always be trusted to use authentic product. Ellie Phillips, PR and marketing coordinator at , recommends consumers always check the credentials of the salon and ensure the products they’re using are being used as part of a system, rather than different brands all rolled into the one service.
One of the biggest challenges we face with CND Shellac is that ‘Shellac’ has become a very generic term, so people who are asking for Shellac could be getting any one of 20 different brands of gel polish, which is applied in a similar way to Shellac,” Phillips explains. If consumers want Shellac, they need to look for the CND logo, and if the CND logo isn’t on the bottle that the salon is using, then it’s not Shellac.”
What can brands do?
The reputation of grey-market product is such that many brands throw a blanket over online retailing and disregard it altogether, branding it unsafe. Cook argues that this approach isn’t any way to tackle grey-market product. It’s irresponsible not to have any products online because your clients can’t always get to a salon. I think what brands need to be doing is encouraging their stockists to sell responsibly online.”
Jenny Millar, business development manager, says they are doing just that. Our spa accounts sometimes have their own websites that they sell on, and we work with them in doing that. We believe it’s the service that gets the sales, and we drive that from in-house training, online training and support and business development.”
Clinique is proactively helping its consumers feel secure in shopping online with the introduction of its new Trustmark initiative. Launching on the brand’s Australian e-commerce site, the Clinique Trustmark is the consumer’s guarantee that they are shopping directly with Clinique or at an authorised Clinique retailer. We want our clients to know that they are buying from an authorised channel and all of our products are real and the 100 per cent guarantee we offer on satisfaction or your money back,” says Green.
In addition to customer service and brand reputation, InSkin Cosmedics places a lot of emphasis on education. We educate our salons, who can then educate consumers of the risks of buying online. I think there is a long way to go in educating the consumer on this though,” says Enna-Cocciolone.
CND is also focusing on consumer education via its official website CNDshop.com.au, where the brand lists basic tips for consumers in choosing a nail technician. The brand suggests questions the consumer can ask their technician, from, Can I see your certificates?” to Have you had product-specific training?”
Later in the year, we’re going to be rolling out Shellac-certified salons, which will be closely monitored to ensure that they’re using all the products in the system and purchasing them from the right avenues to basically guarantee consumers they’re getting what they think,” says Phillips.
