Each year in the United States, a whopping $7 billion to $10 billion worth of goods are sold illegally and without authorization from manufacturers.
For custom packaging companies, the grey market can cause more than just the blues. This unauthorized way of doing business can damage reputations, result in lost revenue and lead to mistrust among consumers.
Packaging companies must take steps to protect themselves from the dangers of the grey market.
How The Grey Market Works
The grey market refers to the unauthorized distribution and sale of genuine products through channels outside of the manufacturer's approved distribution network. This can occur in a number of ways:
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Parallel imports: This occurs when a product is legally purchased in one country and then imported and sold in another country without the manufacturer's authorization.
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Diversion: An example of diversion is when a product is intended for sale in one market but is instead sold in another market without the manufacturer's authorization.
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Counterfeit products: When fake or imitation products are made and sold as the genuine product, consumers are fooled into thinking they are getting the real deal. Instead, they are counterfeit products that are often of lower quality.
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Overproduction: This occurs when a manufacturer produces more of a product than intended and sells the excess to unauthorized resellers.
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Online marketplaces: The rise of online marketplaces like Amazon, eBay, and Alibaba has made it easier for unauthorized resellers to sell grey market products to consumers.
The grey market can be difficult to control because it operates outside of the manufacturer's approved distribution network. This makes it difficult for manufacturers to track and monitor the distribution and sale of their products.
Additionally, grey market products may not be covered by the manufacturer's warranty or quality control standards, which can lead to customer dissatisfaction and further harm to the company's reputation.
The Role Of Packaging In The Grey Market
As one of the final stops before products hit the market, packaging companies are often tasked with handling both the
packaging materials and the products themselves. If either the packaging or products suddenly can no longer go to market for one reason or another, packaging companies are often responsible for making sure these items do not fall into the wrong hands.
Some common reasons why your team may need to dispose of products include:
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Overproduction: Companies may produce more products than they can sell. As a result, this excess production may result in the need to dispose of the excess inventory that is sitting in packaging warehouses.
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Quality control issues: If packaging companies discover that a batch of products does not meet their client’s quality standards, they may need to dispose of those products to prevent them from reaching consumers.
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Changes in design or packaging: Brand packaging companies may need to dispose of packaging that is being phased out and replaced with new designs.
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Product recalls: Product recalls may come in the 11th hour right as products are about to hit store shelves. Packaging companies may need to dispose of products that have been recalled by the manufacturer due to safety or health concerns.
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Expiration dates: Packaging companies may discover some products have exceeded their expiration dates, and may need to dispose of these products safely.
Even if unscrupulous characters never get their hands on the products themselves, they can use discarded packaging to make counterfeit goods inside look legitimate.
Even a small amount of packaging can be used as a template to create larger, counterfeited amounts. Counterfeiters often use packaging that is similar to the authentic product, but not identical. This can make it difficult for consumers to differentiate between the genuine product and the counterfeit product.
Particularly custom packaging companies can create special packaging materials, like holograms, watermarks or UV-sensitive inks, that are difficult to replicate. They can also use unique packaging designs, such as custom shapes or sizes, that are not easily reproduced by counterfeiters.
However, if this custom packaging falls into the wrong hands, customers can have even a greater amount of difficulty distinguishing real products from fake products.
The Dangers For Custom Packaging Companies
The grey market poses serious concerns for consumers and the companies that manufacture the products that customers are buying. However, custom packaging companies should be concerned as well about the fallout from a grey market breach.
Every type of packaging may be at risk, since the companies you package for often place their logos on several pieces, including:
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Corrugated boxes or custom packaging boxes
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Other packaging solutions that offer custom packaging design
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Custom mailer boxes
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Tissue paper
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Larger custom boxes that hold many products
If these branded packaging materials find their way onto the grey market because your company didn’t properly dispose of them, the consequences could be dire. Your custom packaging company could experience:
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Revenue loss from losing the trust of clients
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Reputation damage that can be difficult to overcome
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Legal risks if it’s determined your workers were negligent and their actions led to the harm of consumers or a client’s reputation
Without proper disposal for packaging companies, it's not hard for these branded packing materials to find their way onto the grey market. But there is one action you can take to help prevent it: Work with a certified product disposal company.
Certified Product Disposal For Custom Packaging Companies
Certified product disposal companies are one of the best ways to ensure that all packaging and products destined for destruction are destroyed and do not end up in the wrong hands. Disposal companies should provide you with authentication that gives you and the brands you serve confidence that the items you dispose of are safe.
A certified disposal company has a strict chain of custody and a plan in place tailored to your needs. A company representative should present you with:
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A written plan for your order
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Photographic or video evidence
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Paperwork and permits
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Certificate of destruction
Certified product disposal companies should also offer excellent customer service and have real-time, 24/7 surveillance in their disposal yards so that any perpetrators found near the products can be dealt with before they can interfere with the items destined for disposal.
How To Find A Disposal Company
Finding the right certified product disposal company begins with some investigating. When researching a secure product destruction company, make sure the business:
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Is certified, licensed and bonded
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Offers a detailed and transparent plan
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Provides evidence of certified product destruction
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Offers assistance with manifest forms required for disposal
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Gives you a Certificate of Destruction form
As a custom packaging company, you also have unique needs, which is why it’s important to work with a disposal company that will create a detailed plan tailored to your needs. Depending on the products that you package, you may require special considerations, including hazardous waste disposal.
Packaging plays a crucial role in protecting products from the grey market. By working with an experienced certified product disposal company, you can help to ensure that your client’s products are only sold through authorized channels and not on the grey market.
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