In this ever-growing world of online communication and shopping, it’s little wonder why many industries are experiencing . The term refers to the sourcing of genuine products from overseas markets at a lower price and selling them for less than the authorised sale price of said product in Australia by someone other than the brand owner. This is known as a grey market. The products are not an imitation because they’re manufactured with the consent of the overseas brand owner and the practise isn’t illegal, however parallel importing is a growing phenomenon, driven by the strong Australian dollar and consumers’ desire for cheap products.
Most recently, the term cropped up in the media when Court time worth it for L’Oréal in Europe for the sale of counterfeit goods and parallel imports – L’Oréal-branded products not intended for the EU market. The court ruled in L’Oréal’s favour, with judges stating that it was the right of national courts to order companies such as eBay to take measures intended not only to bring to an end infringements of intellectual property rights, but also to prevent further infringements of that kind”.
What is the current legislation?
Current legislation in Australia doesn’t restrict instances of parallel importing. The Copyright Act 1968 originally prohibited parallel imports except for personal use, however this act was amened with the Copyright Amendment (Parallel Importation) 2002, to allow for parallel imports. Today, the Trade Marks Act and the Copyright Act provide only limited and uncertain protection against parallel imports. In repealing the restrictions on parallel importing, the government argues that the quality of products should be protected by health and safety regulations, and the practice encourages competition in the sourcing and distribution of goods.
How are brands affected by parallel importing?
With products being sourced from places other than the official distributor, parallel importing opens consumers up to , which reflects poorly on the brand. Jonathan Pritchard of Jonathan Pritchard International, the official Australian distributor of Guinot says the phenomenon has impacted on the marketplace considerably. We have had negative feedback with people experiencing a bad product purchase, loss of money, copy product, damaged product, old and outdated product,” he explains.
What does it mean for retailers?
According to Kate Morris of online retailer Adore Beauty, while they don’t partake in any parallel importing, the business does feel the need to compete with overseas grey-market retailers. Consumers unfortunately tend to see only the cheaper price, and don’t often understand that there is a difference in the source of the product.”
When asked how Adore Beauty does compete with those grey-market retailers, Morris admits it’s very difficult and something they struggle with every day. We set ourselves apart from many of those sites by providing much more of a service in allowing customers to choose products they need, and helping them know what suits them and how to use the products they buy. We have a make-up artist and beauty editor on site, to provide customers with the assistance and service that many of those other online retailers lack.”
What does it mean for consumers?
As a salon-only brand, Guinot is dependant on the expert service and advice of the salons in which the products are stocked. If consumers source Guinot elsewhere, they lose the expert advice and service that’s necessary in delivering the quality associated with the product. The consumer inevitably suffers,” says Pritchard.
Mike Leyland, Living Nature’s general manager of sales, Australia and New Zealand, agrees. Often consumers can buy products at lower prices short-term, but can lose the manufacturer’s guarantee in their home country, and are exposed to counterfeit goods and other types of internet fraud.”
Morris says consumers absolutely need to be aware of parallel importing, particularly when they’re buying online. Parallel import products offer no guarantees – there’s no way of knowing how old the stock is, how it’s been stored, where it’s come from, or even if it’s authentic. And there’s very limited recourse if you have a problem with it, such as a reaction,” she explains.
How does it affect the cosmetics market?
I think it’s already a bigger problem than anyone realises,” says Morris. [There was] $9.5 billion spent online in 2010 and of the money send on cosmetics online, only 12 per cent was spent in Australia. As long as cosmetics continue to be cheaper overseas, it’s only going to get worse.”
Morris believes that Australia is experiencing the start of a massive shift in consumer behaviour that will lead to structural changes in the retail cosmetics market. Australian consumers are realising en masse that they are being asked to pay much higher prices than consumers in other countries; they will no longer tolerate it,” she says.
What are brands doing to minimise parallel importing?
Leyland explains that Living Nature endeavours to manage their global pricing and service model to match the value added by each type of retailer to the price they pay. This is a big challenge due to the currency fluctuations,” he says. In addition to this, we try and protect our trademarks globally, which is another big challenge when resources are limited.”
Pritchard explains that Guinot aims to battle parallel imports by spreading the word on how poisonous and toxic this market is: We want to open clients’ eyes to the fact that parallel importing and internet sales are stealing livelihoods.” Furthermore, the company has placed class action against some of those parties selling via parallels. We are ensuring this continues through the courts until there is worldwide legislation that halts this abomination that is destroying so much of our industry and many others,” he says.
Morris says that the best thing brands can do is try and achieve global pricing parity, explaining that as long as there’s a cheaper alternative for customers, that’s where they’ll go. The only way to solve it is to remove the price incentive by bringing Australian RRPs into line with other markets.”