Grey-market goods are not generally illegal. Instead, they are sold outside normal distribution channels by companies which may have no relationship with the producer of the goods. Frequently this form of parallel import occurs when the price of an item is significantly higher in one country than another. This situation commonly occurs with cigarettes and with electronic equipment such as cameras. Entrepreneurs buy the product where it is available cheaply, often at retail but sometimes at wholesale, and import it legally to the target market. They then sell it at a price high enough to provide a profit but under the normal market price.
To clarify how our salon products get into the wrong hands, take the following example. A salon with a professional only contract will order professional products and after six months, they are approached by a grey market agent who in many cases may represent a distributor who sells to mass retailers. These distributors may carry a variety of goods such as DVDs, cigarettes, fragrances and other items they can mark up to make a profit. These agents purchase excess inventory from a small salon at a cost that allows everyone to make a profit. This scenario is a breach of contract and as the business becomes profitable to the diverter and the salon owner, things can sometimes become shady. In an attempt to try to cover their tracks, so they cannot be traced through our product codes, they may change the packaging and/or formula and as we have proven, the mark up becomes greater for the consumer. Products can be diluted, counterfeited or full of bacteria. Because mass retailers make a profit on these goods, the temptation is high to resell. By taking control of our distribution process, one of our objectives is to be able to monitor and track these sales to salons and to ensure that salons are only ordering for their legitimate businesses.
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11 comments:
Give me a break!! You are trying to tell me that these products are all diverted by salon owners, or "shady people" getting their hands on these products. I may be dumb but I am not stupid! Have you looked at the most recent copy of Modern Salon? Matrix is #1 in diversion... MILLIONS and MILLIONS of dollars worth??? Come on now, matrix is in EVERY target, rite aid, wallgreens, Marshalls, TJMaxx basicaly everyone that is a retailer has Matrix products in it. They even have holiday boxes that your company makes, they have new products in there that we as salon owners don't have. Your diversion campaign is nothing but a joke to tell us salon owners that you are "doing everything you can" to help fight it, but in fact you are who is letting this happen.
I read an article about Quality King and Matrix/L'Oreal and in there Matrix/L'Oreal admitted to diverting their own products? All I can say to fellow salon owners is buy products that are NOT diverted to up hold the intergity of our industry. We are loosing money hand over fist because of diversion! I hope in the future you do more than post a blog and make up flyers to combat diversion.
David,
First let me say that I have been a salon owner for 17 years, and a customer of most L'Oreal brands for that time. Unlike the stereotypical salon owner, I have an MBA and an undergraduate degree from the Wharton School. I have been in the industry for 25 years. I am steamed when I read about all the efforts to eliminate diversion, after years of the excessive greed and betrayal at both the manufacturer and distributor levels. There is way too much product in the marketplace to place the burden on "collectors" going from salon to salon to gather merchandise. Walgreen's CVS,Publix, etc. are not putting product on their shelves unless they can get a steady flow in significant quantities. You guys opened the barn doors, and some inside people made a lot of money!
I used to sell a lot of product because people would walk in just to buy professional products. Now we sell what we recommend. Your warnings to consumers have little impact. They will buy where it is most convenient. As far as quality, it is rare a customer will return a product, even if they don't like it. If products are adulterated, it's more a trademark concern than a diversion issue. Your efforts need to be directed at developing new and better brands with controlled distribution, now that your "professional only" image has been tarnished.
Another disturbing issue is the sale of professional salon products thru beauty supply stores. Why should "any licensed professional" be able to buy hair color, etc. in a beauty supply store? This allows them to do people at home taking business out of the salons. This encourages "licensed" hairstylists to do side business instead of working in a salon. Beauty distributor stores should only sell professional hair color lines to salons, not to individuals. It will stop the growth of "kitchen" salons, and force more hairstylists back into the salons. This loss of a $50 service sale is a lot more damaging to the success of salons than the loss of a retail sale. If these people want to work at home, let them use the consumer products that are available at the drug store.
And finally, why is Redken promoting ULTA on its website???? ULTA is one step above a "phantom salon." And why are they any better than me in my market? You guys are just unbelievable.
I understand that Diversion is a problem, and i do agree that not all of the problem comes from salons, and i do agree that some of it does. (To Slkind) You are right to say that sometimes it is parts of the chain that are higher than salons that cause the bulk of the damage, but whatever happened in the past, (i.e. quality king: the judge threw the case out because both side were deemed as bad as eachother) we need to do something now. I am pleased that David has stood up to something about it, he doesn't like it, and remember even if L'Oreal Diverted, it may not come from him. He can still choose to stand to stop it.
You are right, also, a blog is not enough.I have been working close with an organisation to stop diversion also, and i know first hand how some people feel very strongly on the issue, and others don't really care. There are people like us who are effected now, but some people need to 'catch up' to our level of understanding in this issue, and the video and blogs are a great way to do this.
If we are going to change this industry back how it was, a professional industry for professionals, then we need EVERYONE on board. One small step for hairdressers..... can become a Giant Leap for our industry.
Spread the word simply, get everyone on board, and we'll fight the bullsh.. later!
Stand next to one man who cares enough to something about it, and stop challenging him. He's not L'oreal, he's David Craggs......and he works for them.
Wam, your naivete is refreshing. And it would be great if everyone cared as much as you.
David is L'Oreal. And L'Oreal is a great marketing company. This issue is one that sounds good. Just like politics it makes people feel good to hear promises they know they don't have to deliver.
But it will not effect what happens in your salon. We use to sell a lot of Biolage in my salons, but now Biolage is pretty much dead because people see it all over the place. We use Redken and recommend it so we sell it, even though it's available next door at Albertson's.
The issue is about integrity and greed. I don't know whether David was with L'Oreal or any other manufacturer during the past 10 years, but there was complicity at the highest levels to make sales numbers, and some people made some significant money during this time to the long term detriment of all of us.
I still say that our industry is damaged more by hairstylists working out of their homes, (without salon licenses), and being able to buy professional product lines at distributor stores. That's what needs to be controlled by manufacturers and distributors. These stores should only sell to people with salon licenses!!!! If these people knew they couldn't work at home, there would be more stylists available to work in salons. The stylist shortage would be alleviated.
Service is our business. We can't sell retail if we aren't providing service.
Thank you for your comments but I think we have to remember that diversion is a serious brand equity issue for L’Oreal. And we would NEVER support a practice that damages our brands.
We are ultimately talking about a consumer demand that unauthorized retailers are trying to meet in a way that has negative implications for our cherished consumers.
Uncertain product-inflated prices-disadvantaging stylists are strong reasons why people should not buy from unauthorized outlets and spreading that message to our consumers is my purpose for this blog.
has anyone asked the big box stores where they are purchasing these products from? and maybe if you were so serious you would pursue legal action or go and spend the time and $$ and buy them out of your professional products
I heave seen so many negative changes since Matrix sold to Bristle/M/S. And then to Loreal Corp. Loreal is a company that makes its millions selling to the public. I was a Matrix educator for several years,and retailed ONLY Matrix products. Now I retail only products not found in every store in town. I have spoken with reatailers and even seen invoices with Loreal/Quality Kings name on them. I have a small 2 chair salon and I alone purchase $ 2000.00 per month,(my cost, $4000.00 retail)money Matrix used to makefrom me.
Please save face and admit to us all and stop the charade!! TOO much product is being diverted to have it be a sly stylist or gone bad distributor!!! As SLKIND and others have said...our integrity is at stake here..not yours, but ours as the PROFESSIONAL, the STYLIST, as we deal directly with the public.
I don't believe this is going to happen overnight because money hungry companies such as L'Oreal are putting those products there. They aren't small operations like salons that have gone out of business. L'Oreals products are on every shelf in almost every store, including Pureology and Kerastase, once considered very exclusive. They are now being sold on Target.com. You need to keep your shareholders happy and therefore; you're going to put these products where they shouldn't be, pissing off salon owners and laughing all the way to the bank. Don't promise anything that you can't deliver on. You know damn well how these products are showing up. You are putting them there. The numbers are just too large, just like your pockets. You may think hairdressers are stupid, but we are not.
I was shopping at Target and as I was about to stock up on Redken All Soft, I ran into my hairdresser in the checkout line. (She lives across the street from my old place in Brooklyn, as it turns out..) She tsk-tsk'ed me about not buying my products from her and I replied, "I'm cheap."
She then let me know that the distributor isn't authorized to sell to Target, so even though I trust Target, and even though I trust Redken, it's kind of like that guy selling laced toothpaste that looked like "Crest" -- product quality can't be guaranteed.
I found this post by Googling. Is this grey market stuff connected to what she was talking about?
I may be cheap but it's only because I hate getting ripped off.
What is Redken doing to prevent Target from distributing its products? How is Target getting away with it?
I know some stylists commenting in this forum are frustrated as they continue to find unauthorized products on these retailers' shelves and websites. Per dovehair's comment, Quality King can mock up their invoices to to look any way they want to legitimize their business. L'Oreal does not supply products to this diverter or to their customers. L'Oreal PPD is investing a huge amount of time and money to protect our mutual integrity and to ensure that our clients are purchasing guaranteed products and to create awareness with our consumers about the risks of purchasing outside a salon. I urge you to communicate these risks to your client and you can do it with the full knowledge there is absolutely no complicity from L'Oreal.
Anittah,
Redken can't legally prevent any retailer from selling their brand. They can enforce their commercial contract with distributors or salons that resell the products to unauthorized stockists. Today, we code our products in a way that allows us to identify the source and then we cut off the source.
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