The challenge of grey market diversion is rapidly growing and can have serious impacts on your brand and organization. Grey market diversion occurs when genuine, non-counterfeited goods intended for legitimate distribution in one country or territory are diverted and sold in another without authorization. This results in significant dollars in revenue loss due to price point differences in different markets, disruption of legitimate sales channels, as well as significant reduction in overall brand equity and value perception.
Examples of Grey Market Diversion include the following.
- Products (Spirits, cosmetics, perfume, etc.) intended for duty free distribution diverted to retail channels and being sold at lesser prices undercutting the retail channel and market.
- Dealer network partners selling products on eCommerce and Social Media sites less than the manufactured suggested retail price (MSRP).
- Resellers shipping products from one country to another where the MSRP is higher and profiting from the price differences to the detriment of the local channel and overall revenue of the organization.
- Dealers entering into business agreements with non-authorized business entities in different markets.
The ability to meaningfully disrupt Grey Market Diversion comes down to awareness on a global scale – the ability to effectively monitor distribution channels and understand, in real-time, when and where grey market diversion is occurring. Strategies that rely on “one-off” inspections (e.g., buy back purchases) will have limited effectiveness.
At GPAS, we recommend a strategy based on the following best practices.
1. Unit level serialization
The utilization of unique identification on every product. Core to a successful identification strategy is that the deployed technology is both easily recognizable and easy to use which in turn generates widespread use and business intelligence data that can be put to work.
At GPAS, we are code agnostic meaning we can work with any type of serialization strategy and code technology (QR, Data Matrix, NFC, RFID, etc.). However, a serialized QR code has several key advantages.
- They are ubiquitous and therefore are easily recognizable – Consumers know immediately how to interact with them.
- They are easy to use. QR codes do not require a specialized app that must be downloaded. Consumers simply point their existing smartphone camera to read the QR code.
- They are extremely cost effective to add to packaging and labels in the print production process.
- They are unobtrusive to existing systems and technologies across the supply chain.
See our blog post, The Value of Serialized QR Codes, to better understand why an open and easy-to-use consumer methodology offers the best solution.
2. Comprehensive Track and Trace Program
Track and Trace involves the capturing and visibility of the movement of products from manufacturing through supply chains and into the consumer marketplace. It can be broken down into several key functional areas.
At GPAS, we are code agnostic meaning we can work with any type of serialization strategy and code technology (QR, Data Matrix, NFC, RFID, etc.). However, a serialized QR code has several key advantages.
Aggregation
Aggregation is the first step of a track and trace program. It involves the association of individual products to cases to pallets (and to containers is certain situations). In other words, many individual units/codes to master codes creating a child/parent relationship and supporting efficiencies for recording the shipping and receiving of products globally.
Chain of Custody Tracking & Traceability
Tracking builds from the serialization hierarchy created in the aggregation process and involves capturing and monitoring the movement of products in the supply chain(s) in real-time. It is critical to understand where products were shipped and received and to have this information tied to individual product level codes. Traceability involves the ability to quickly and easily understand the path products took to get to market.
See our blog post, Supply Chain Traceability, to better understand why traceability is important in the supply chain.
Meta-Data and Attributes
QR codes are like data “sponges” with the ability to absorb attribute or meta-data along their path and lifecycle – From information (batch #, lot #, expiry, Mfg. date, QC, etc.) associated in the manufacturing process to transportation data (shipment date, end destination(s), container #, etc.) captured in the supply chain. As well, every consumer engagement/scan in the market produces data such as geolocation, date & time stamp, product identity, etc.
The data associated with individual codes/products is critical to support the capturing of business intelligence and the running of analytics.
3. Robust Business Intelligence and Analytics
The final element in a Grey Market Diversion Strategy is the utilization of comprehensive analytics looking at consumer engagement data and analyzing it against meta-data associated in the manufacturing and shipping processes. Within GPAS, users have the ability to apply unlimited business intelligence rules (at a product/code level or much deeper on any associated attribute or meta-data element) resulting in real-time alerts in the form of dashboards and reports that can drive immediate action by the organization. GPAS takes advantage of every consumer engagement activity in the market to automate awareness and build a solid defense against Grey Market Diversion.
