Our View: Counterfeiting the Gray Market


Advisory firm KPMG recently conducted a detailed survey of executives from companies within a technology supply chain to find out how gray market trading was impacting them.  The report and its findings are applicable in many commercial supply chains; and so, we recommend you download it from KPMG.

For the survey, KPMG defined “gray market” as

…an alternative channel through which branded products are diverted from authorized sales channels into the hands of dealers, brokers or the open market. Gray market vendors may be unauthorized to sell those items, or may not have permission to offer products in a specific country or region.

Diversion is a contract violation between you and your customers, but counterfeiting is also part of the gray market.  The survey found that “…the vast majority of original equipment manufacturers (OEM) executives say they have seen an increase in gray market activity since 2008.”  The gray market is growing in most supply chains as globalization and competition intensifies, bringing with it higher costs and damage to brand reputations.

Discovering the pervasiveness of diversion is not an easy task.  Many companies have resorted to field inspectors, physically traveling their markets to first-hand look for improprieties.  Other brands have resorted to channel or market specific packaging, where the actual package itself is a visual indicator of whether (or not) the product is in the proper destination.  In the now mainstream Internet economy, brands need to monitor external e-retailers for the presence of not just counterfeit but channel diverted products.  All these methods are at a significant cost to brands.

Justifying the cost of diversion monitoring and anti-counterfeiting technologies can be difficult because of the traditional high cost per unit of product.  This is why Systech’s UniSecure™ fingerprinting technology is so revolutionary in the brand protection/anti-counterfeiting space.

Diversion detection and mitigation is all about visibility.  UniSecure provides instant recognition of whether or not a product in market is where it should be.  Did the product end up in the right geography?  Which distributor did the unit enter the market through?  Now you can actually enforce your contracts with confidence based on accurate monitoring of where your products end up.

Full Article: "Gray markets: an evolving concern"