Magazine article Marketing

News Analysis: Far from Black and White

Magazine article Marketing

News Analysis: Far from Black and White

Article excerpt

Brands dismissing the grey market out of hand might come to regret it, writes Gemma Charles.

A row between high-street chemist Boots and premium haircare brand Paul Mitchell has cast the spotlight back on the murky world of so-called 'grey market' goods.

Boots has begun to sell Paul Mitchell products in its flagship stores, to the annoyance of the brand's distributor, Salon Success, which wants them stocked in select hairdressers only (Marketing, 18 February). Boots obtained the goods from an unnamed supplier, without permission from Salon Success, and the spat now appears to have reached deadlock.

At the heart of this and other grey-market rows is the struggle between the retailer and the brand over which calls the shots in terms of distribution.

Brand owners believe that a product's channel to market is intrinsically linked to its brand equity. It may be that they have also have signed an exclusivity deal with a certain chain, as is common with FMCG brands Whatever the reasons, there are a range of instances of retailers showing little sympathy with the brand owner's strategy.

The grey market is, indeed, opaque. Verdict Research consulting director Neil Saunders defines it as 'not illegal, but an unofficial channel through which goods are sold'. He says the concept covers anything from intermediaries to official buyers who find themselves with excess stock and offload it to another retailer.

'Buyers are very well-connected, and know where they can get certain goods while others are approached directly by people. It's all very ad hoc,' he adds.

To the uninitiated, the idea of wanting to limit a brand's distribution seems absurd. A few eyebrows were raised last year when Alan Clark, European managing director of SABMiller, revealed that the company was considering restricting sales of beer brand Peroni to maintain its integrity.

John Littleton, Miller Brands UK corporate services director, insists that the grey market presents a threat. 'It's very important that a brand like Peroni is presented in the best way in the right outlets,' he says. 'We work closely with our customers to develop value-adding activations and initiatives which protect the strong equity of all our brands.'

The grey market, inevitably, also occupies a grey area of the law. Predicting the outcome of a dispute based on past examples is therefore impossible, as each has to be taken on a case-by-case basis, argues Peter Lidgey, managing director of shopper marketing specialist OgilvyAction. …

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