Friday, September 7, 2012

Got the Grey Market and Counterfeits Blues? Don’t Give Up Hope

At this year’s NAPB, the topic of grey market and counterfeits commanded a lot of attention and discussion. As OEMs grow and expand their global operations they become ripe targets for grey/black market perpetrators. What’s bad about these sorts of parts? Lots. They are not “genuine”, but parade themselves as such and deceive customers. This destroys brand reputation and brand equity. Counterfeit parts are like phony $100 bills – counterfeit bills don’t work at ATMs and counterfeit parts don’t work on your car/truck/tractor. Grey Market parts might look okay, but they are likely to be superseded or meant for vehicles in other markets. We hosted a recent roundtable on this. Roundtable participants included domestic and import OEMs in both the auto and heavy equipment sectors, and the discussion focused on some of the countermeasures OEMs were putting to use.

For example:

  • OEMs revealed that dealers have become key partners in detecting grey/black market operations. OEMs educate dealers on how to identify black market parts and some OEMs even have a reward system for dealers that report grey/black market activities.
  • OEMs have also found success by partnering with customs officials and foreign governments. The more educated the officials are, the more likely they are to spot abnormal shipments, a win-win situation for both the officials and the OEMs. One domestic heavy equipment OEM has also started a government lobbying group to educate foreign governments about the importance of IP protection.
  • Another interesting method employed by one import OEM involves using a third-party webcrawler to search for violations online. This process has proven to be extremely successful for the OEM thus far, removing over $150M in grey/black market parts from the marketplace.
  • As a countermeasure on the dealer side, several OEMs reported tracking sales per UIO and/or utilizing RIM to spot unusual inventory movements (or lack thereof). Though determining if an inventory discrepancy is actually caused by grey/black market activity can prove to be difficult, these methods are a good starting point and may indicate a need for additional digging.
Though each OEM faces its own level of grey/black market activity, participants all agreed that the grey/black market was a growing problem and that industry collaboration on a global scale would be a critical step in reducing the market’s size and scope.

Bottom Line: If your company is worried about the proliferation of a grey/black market for your parts, here are five steps you can take:

  1. Educate your customers. Stop grey market and counterfeit at the point of purchase and installation.
  2. Partner with your dealers. Both your company’s and your dealer’s incentives should be aligned; dealers can be a powerful force out in the field.
  3. Educate customs officials. Catching the “bad guys” is their goal as much as yours.
  4. Do internet research. A huge chunk of illicit trade is done online. If your company doesn’t have the resources to do the research in-house, then invest in a third-party tool.
  5. Use your data. There is a reason your company tracks inventory. If something appears out of place, then do some digging.

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