Grey market impacts on brand revenue and brand equity can be grave, and nowhere are they felt more acutely than in the image-sensitive worlds of luxury and premium fashion.
A typical grey market transaction looks like this:
- An authorised distributor or retailer — call him the seller — orders more units than he expects to sell in his own market.
- He sells the excess stock to an authorised retailer in a different geographic market where the same product costs more to purchase from the brand, or
- He sells to an unauthorised retailer who wants to stock a hot brand but can’t obtain products in the brand’s official channels.
Christian Louboutin, famed French fashion shoe designer, discovered it had fallen victim to the grey market last year when online dealers in India were found selling discounted Louboutin products to customers in Europe and North America.
Louboutin won a rare legal injunction to stop the sales, Fashion Law reports, by convincing an Indian court that luxury goods “have an aura of luxury and prestige surrounding them differentiating them from other goods,”and therefore “even very small changes in storage, packaging, labeling, after sale services, ware-housing, etc., can affect the quality of the goods and consumer's belief in them.”
Laws and legal precedents vary dramatically from country to country, however - while the threat is virtually everywhere.