Heading into the holiday season, consumers across the world will be scouring e-commerce marketplaces for a great deal on the hottest brands of clothing, electronics, jewellery, and more.
As highlighted in previous GreyScout blogs, the risk of purchasing counterfeit goods is always present when shopping online. However, consumers should have another risk on their radars when doing their holiday shopping this season: parallel imports.
When it comes to the issue of parallel imports, the problem is not the legitimacy of the products themselves, but rather with the seller. Picture this: you are browsing the web for a deal on that new luxury watch you’ve had your eye on and find a seemingly legitimate website or marketplace seller offering a great deal of 30% off the retail price. If it sounds too good to be true, it just might be a parallel import.
Parallel Imports Explained
A parallel import is the sale of a product outside of its brand’s authorised distribution channels. As an example, Adidas may release a particular line of trainers for sale and distribution strictly within the EU. Since name-brand trainers are a hot commodity in the resale market, a reseller in the United States looking to fill the market demand for the latest hot trainer in their market may find that they can increase their profit margin by purchasing them in the EU for resale at home at an inflated price.
A great example of parallel importing can be found in a story reported by The Guardian. To circumvent sanctions imposed on Russia by brand names such as Apple and Zara, resellers have been purchasing the goods authorised for sale in nearby Kazakhstan for resale in Russia. By meeting the massive demand for these products, the reseller was able to sell the goods at a significant markup.
Is this legal? Explaining the exhaustion of IP rights
The legality of parallel imports often falls under the auspices of one of two concepts: national exhaustion and international exhaustion.
Let’s say that Nike has just released the latest hot sneaker as part of their Air Jordan line in the United States. Under national exhaustion, Nike would need to release the sneaker in its native United States, which follows national exhaustion laws, before anyone in the UK or EU can, either via an authorised retailer, or the resale market. However, should Nike release the sneaker in Argentina, South Africa, India, or China, which have all adopted international exhaustion, Nike would have forfeited its right to control the distribution in the United States by releasing the product in another country.
The perils of parallel imports
When it comes to parallel imports, the only winner of the transaction, in most cases, is the reseller. On the consumer’s end, there is not much benefit to purchasing a parallel import outside of the brand’s authorised sale territory.
While sometimes, parallel goods can be offered to consumers at a discounted price, the risks often mitigate the savings. Take for example the parallel import sale of goods such as electronics, toys, watches, and other products that may need repairs or maintenance down the line.
With these types of products, there are many technical intricacies and it’s not unlikely that things can go wrong with the product due to a manufacturer’s defect. Luckily, when purchased via an authorised retailer, a faulty product is often covered by the manufacturer’s extended warranty. However, when purchased as a parallel import, regardless of whether its sale falls under national or international exhaustion, a consumer would be hard-pressed to receive any type of coverage or protection. When assessing whether there’s risk involved with purchasing a parallel import, ask yourself: would you want to buy a $2,000 laptop with a voided warranty?
The Bottom Line
In the world of e-commerce, building a strong reputation for delivering stellar customer service to consumers is critical to success. As an e-commerce brand, having your products fall outside of your authorised distribution channels and into the hands of parallel import resellers can have negative consequences on how customers across the world perceive your brand. This is where e-commerce brand protection and monitoring tools come into play. Understanding the local
By monitoring online global marketplaces like Amazon, eBay and Google Shopping brand protection software like GreyScout can alert e-commerce business owners and brands of these types of activities that are detrimental to their brand protection success.
