Be honest; when was the last time you bought something new on eBay or Amazon at an amazing bargain price? If you did, there is a good chance that the product you bought was diverted merchandise. Diversion is big business today, with annual sales in the US alone reaching into the tens of billions of dollars, and it has become an industry-wide dilemma for professional skincare sellers for a number of years. It has not become an issue for mass-market brands largely because their products are intended to be sold in discounters, drugstores and warehouse chains. However, for professional products, haircare as well as skincare and beauty, it presents a huge issue.
Diversion refers to merchandise that has somehow shifted away from the intended distribution channel. One of the ways it works is when a seller orders discounted products, fails to sell them all, and then sells off the surplus to a third party without the manufacturer’s consent. This practice is illegal when it involves fraud. For example, a diverter orders merchandise ostensibly for sale in a foreign country and loads it onto a cargo ship. The ship sets sail, then turns around and docks in the US, where the goods are then resold.
In some cases, manufacturers may be complicit in the process when they knowingly sell merchandise to diverters in order to hit sales targets, or to unload outdated products that will become obsolete when the new formulation is launched.
Zero tolerance policy
While selling professional skincare brands online appears to have exploded over the past decade, we are seeing a backlash from leading companies who are committed to controlling how and where their products are dispensed.
ZO® Skin Health is one company that takes the issue of diversion very seriously. As a developer of medical grade skincare available exclusively through contracted physicians, they have adapted a zero tolerance policy on unauthorised sales.
‘We are taking a very hard line against these opportunistic diverters and third party Internet pirates in their veiled criminal activities, no matter who they are,’ says Jim Headley, CEO and President of ZO Skin Health, Inc. ‘Our top concern is the huge risk this illegal conduct poses to consumers and to our physician customers.’ Headley has made this position clear by filing suits against online retailers on unauthorised Internet sales. ‘We are fiercely committed to protecting our reputation for high quality products. We will take legal action against theses ‘brand jackers’ to protect the consumer, the physician, and the brand,’ he says.
However, tracking black market dealers is an expensive, time-consuming and often difficult process that not every brand or marketer has the bandwidth for. ‘ZO Skin Health, Inc. has put many mechanisms into place to control diversion of its products, and will relentlessly pursue violators of this policy,’ Headley explains.
The growing worldwide problem of product diversion has heightened the need for skincare marketers to protect their brand philosophy and positioning to ensure that their customers and patients are getting the highest level of quality and safety from their products.