The gray market is a menace that afflicts brands and products across many industries. The fact that unsavory operators are able to replicate many of the overt security features used by brands makes the threat all the more potent.
Take the case of fake drugs, for example. According to a World Economic Forum 2011 report, such drugs have an annual impact of a whopping $200 billion on the genuine drugs industry. At the same time the loss accruing to that industry from illegal diversion of drugs is most likely many times that figure.
It is imperative that drug manufacturers devise a better labelling system to call out any manner of counterfeited and diverted drugs. Apart from serialization and robust track and trace measures, brands need to look at cutting edge covert and overt and brand protection technologies to bolster their defenses against both counterfeiting and product diversion.
These systems and technology should work in concert so as to achieve both prevention and detection of either type of malpractice. Furthermore, these should also enable prosecution of the offenders.
It is important to bear in mind that counterfeiters and those who divert products are growing increasingly sophisticated in their use of technology to circumvent any security measures that have been put in place by brand owners and manufacturers.
This is why security measures undertaken by companies and businesses should be several steps ahead of what such criminals might think of.
For example, the use of covert taggant technology that makes use of invisible markers is highly effective in the case of pharmaceutical products, where mere overt security features deployed on the packaging may not be as effective.
Symptoms of Illegal Product Diversion
Products that are sold outside an authorized supply chain are known as diverted products. The end consumer may not even realize that they are buying diverted products which might not be safe to use (e.g. factory rejects).
Another problem with these diverted goods is that they could be expired goods or comprise a weaker formulation (in the case of pharmaceutical goods) and may not be worth the lower price that they sell for.
For consumers, here are things to look out for to avoid buying diverted products:
- Check Out the Manufacturer’s Website
Most creditable manufacturers would have a page on their website that explains their diversion policy in detail and also provides the necessary information about their authorised sellers. - Check Out for Overlapping Bar Code Stickers
If you find overlapping bar code stickers on products like salon bottles, you can be doubtful and raise your concerns of possible product diversion. A slightly damaged or old-looking bottle could also be indicative of the same thing.
Most manufacturers recognize the fact that product diversion is unethical and try to legally stop it. For manufacturers, here are things to consider or watch out for:
- Better Understanding of Your Customers/Buyers
Manufacturers need to be wary of attractive offers being made from buyers of their products, representing unconventional sales channels. Food products for example should, in the natural course, be purchased for sales through supermarkets and stores.
For example, if the buyers plan to sell their products in the Carribean region, resorts, cruise ships and other unfamiliar avenues, manufacturers need to carry out their due diligence about the offer and buyer. - Being Certain of the Facts
Diverters will often try to make the deal too sweet or too convenient to be true. The manufacturers should be sure of what the intended destination of the products being bought is.
They should have a fair idea about the channels of distribution and the kind of price markup structure put in place. It would also be a good idea to ask them for a roster of products that one could refer to.
Case in Point: Apple Sues Recycling Centre for Product Diversion
A recent case of an extremely large manufacturer confronting the product diversion menace is Apple suing a Canadian recycling company, GEEP Canada, for reselling 117,000 of its devices that were meant to be recycled.
Apple alleges that GEEP Canada resold one out of every five of the half a million iPhones, iPads and Apple watches that had been given to it for recycling. The lawsuit demands $23 million as compensation for damages deriving from lost profits from gray-markets sales and injury to Apple’s brand image and trademarks. Apple also wants GEEP to return funds received as a result of sales of the misappropriated devices from November 2015 to December 2017.
An Apple spokesperson alluding to the fact that the gadgets deemed fit for ‘recycling’ may not be safe for buyers to use.
On the other hand, GEEP denied the wrongdoing, claiming the alleged theft was carried out by rogue employees who have left the company.
The above case highlights the fact that the lure of diverting goods for a profit is quite powerful and can have a bearing even for top companies.
With so much at stake, both in terms of the financial standing of a business as well as the health and well-being of the consumer, it is imperative that manufacturers and other stakeholders take the right kind of steps to deal with the menace of product diversion.
Using MatriX-Mark™ Taggants Against Product Diversion
One of the most effective ways of fighting against product diversion is the use of taggant technology.
The taggants comprise special invisible markers that provide the products with their individual distinct “signatures” which aid in their being tracked and traced throughout the supply chain with the help of proprietary detection systems.
This means the integrity of the products in question are secured right from the stage of production and distribution to the end of their life and even during the retrieval and recycling process if applicable.
MatriX-Mark™ Taggants can be used in very low concentrations, as detection is possible even down to 10 ppm, in the case of clear and natural colored polymers. By using taggants, a practically endless number of elemental signatures can be generated for varied plastic or polymer types.
Learn more about MatriX-Mark™ taggants here:
https://www.nanomatrixsecure.com/matrix-mark-tm-covert-forensic/