Grey market diverting is a massive multi-billion dollar problem for manufacturers in the United States. Grey market diverting is defined as products that are sold to a customer and then intentionally resold to markets, channels, retail customers or unauthorized dealers other than originally intended.
In addition to the negative financial impact to brands and shareholders, grey market diverting creates consumer safety and health concerns from extended shipping/handling and exposure to counterfeit products. Grey market diverters have been caught mixing counterfeit items in shipments with legitimate first quality products. In addition, manufacturer warranties and customer support may not be available on grey market diverted products. This is a concern for retailers as well, as consumers expect them to merchandise authentic products.
As more consumers shop online, new risks have emerged. The sale of stolen, diverted, or counterfeit products is growing rapidly on global eCommerce marketplace platforms and shows no sign of slowing down. Due to advances in technology, it’s becoming more difficult to identify stolen or counterfeit products on these platforms.
Grey market diverters have a deep understanding of manufacturing processes, logistical systems and retailer promotional funding programs. They manipulate weaknesses in these systems and programs to buy and resale products without manufacturers noticing the problem.
The risks to consumers, the erosion of manufacturer and retailer credibility, and impact to the bottom line creates an urgent need to develop a grey market anti-diverting strategy and execute it immediately.
To combat this growing challenge, Simpactful has developed a proven 5 step anti-diversion program which has already saved clients millions of dollars in sales and profits. Phil Morris, Senior Consultant, explains, “A very high percentage of manufacturers don’t even know they have a grey market diverting problem. They are placing their consumers at risk and delivering lower returns to their shareholders”. Morris has the experience to develop and deploy a custom grey market anti-diverting program and then train the organization to reduce the risk to this growing problem.
Grey market diverters are legitimate competitors to manufacturers because they sell original products from manufacturers and have generous policies by guaranteeing lower list pricing with FOB shipping, generous return policies, and protection against product dating issues. However, the risks are that they can blend counterfeit, off quality, stolen products with genuine manufacturer made products.
CHANGE THE NUMBERS…Take for example a large global CPG company with a $700 million grey market diverting problem in the United States. The root cause of their diverting problem was driven primarily from away-from-home distributor, ship handlers, and export customers. This created major problems as customers could buy products often 8%-15% lower on marketplace platforms. By establishing a custom grey market anti-diverting program, the company was able to return $190 million in sales and $51 million in profit over 3 years.
Here is an overview of the 5 Step Grey Market Anti-Diversion Program:
- Detailed assessment of all current direct buying customers of U.S. retail products
- Create needed Systems and tracking Tools
- Develop a custom Grey Market Anti-Diversion Program & establish a specific program to build on current strengths and gaps to avoid diversion
- Deploy and train the organization
- Implement new customer assessment to avoid diversion risk
The financial benefits of a properly designed anti diverting program are clear for organizations needing to return sales and profit to improve shareholder value. When successfully executed, organizations will be able increase consumer protection, enable their teams to make better business decisions, and further prevent future sources of diversion and discourage fraud.
The U.S. Grey Market Anti-Diversion Program was designed to remove the complexities and constraints retailers and manufacturers face in today’s retail. Phil Morris and the Simpactful team stand ready to quickly drive client success.
To learn more, contact the Simpactful team today at firstname.lastname@example.org or 925-234-6394.
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Meet Simpactful - a CPG/Retail consultancy firm built for today’s challenges, with a team of experienced leaders from both CPG and Retail firms.
Our experience spans functions - Sales, Marketing, Consumer Research, Human Resources, Product Supply - and all retail channels including eCommerce, Food, Drug, Mass, Club, Dollar, C Stores, and more.