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How does the Reddit gray market impact businesses
Gray Market
3 mins

How does the Reddit gray market impact businesses

Table of Contents:

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    While Reddit may not have the best reputation in some circles, it is mostly made up of online communities that communicate particular topics peacefully and enjoy each other’s company. However, like most social media platforms, if you know where to look, you’ll find groups that either operate in a legal gray area or plainly break the law.

    Reddit’s “gray market” refers to a group of related sub-forums where users may barter for anything from other keys to gift cards to cash.

    What is the Reddit gray market? 

    The gray market is the sale of commodities or items through a legal distribution channel that was not intended by the original maker.

    Specifically, this is a market where items and goods are sold outside of the approved distribution channels of the original producer. It is possible to refer to the gray market as selling and importing items from dealers who are not authorized by the manufacturer, but the selling activity is not unlawful.

    Here’s how the Reddit gray market works.

    Typically, this is how the Reddit gray market operates:

    1. Bartering ammunition is acquired by traders. Free games bundled with gaming hardware, leftover game keys, or Microsoft Office licenses, are all products that are very popular on the gray market. If these gray market sellers want to use real-world shipping operations, they could also use these Reddit pages to trade physical gear.

    2. Gray market sellers look for people who are willing to trade things with them. You can imagine the kinds of bargains that may be made after both sides take the deal to a private chat because then all rules are off and there is no limit to what can be traded. 

    3. Once a deal is made or a sale is finalized some customers may find out too late they’ve been scammed and worse yet, those customers may hold your brand accountable for them falling victim to said scam.

    This is why the gray market not only impacts your revenue because these sales are occurring outside of your approved distribution channels but also your brand’s reputation. Often gray market products are from rejected shipments or were lost in your supply chain.

    How does the gray market affect business?

    We must realize that the gray market has a negative impact on the business of manufacturers, industries, and the economy as a whole. 

    Here are a few examples:

    1. Affects your revenue

    The products offered on the gray market are often listed at a lesser price than the Minimum Advertised Price (MAP) set by your brand. These prices are determined by the brand based on its revenue and profit projections within a set period of time. A company’s revenue and profitability generally suffer as a result of the gray market.

    2. Reputation of your brand

    The company’s warranty will not apply to products sold on the gray market. It’s possible that the brand’s reputation will be damaged if the products offered on the gray market are faulty or have a problem with their quality.

    3. Multiple prices on the market

    Gray marketing confuses the consumer since the items are sold at different prices. As a result, authorized merchants charge a premium price for authentic goods, while gray marketers provide the same goods at a lesser price. As a result, different platforms end up charging different prices for the same item.

    What industries are vulnerable to the Reddit gray market?

    The developing gray market on Reddit poses a specific threat to the video game industry. Most big new releases in the video game industry cost at least $60 USD. For many recreational players, it might be a big investment to constantly stay up to date with the latest games. The fact that some players choose to purchase their games through the “gray market”, rather than the official distribution channels, has become a major issue for many video game-related businesses.

    Gamers may buy activation keys for newer games, as well as older ones, on the gray market. These are sold at a discount, making them more appealing to those who are struggling to afford the high price point of their favorite video game series.

    What measures must companies take to avoid the gray market?

    Legal enforcement of trademark regulations is only achievable if the trademark owner has the necessary data to follow and trace the supply chain to identify and prosecute unlawful participants in the supply chain. Set expectations for compliance in the distributor network by establishing a channel policy on a strategic level. The use of unique serial numbers can be used by brands to incentivize particular channels.

    Brands must also put in place systems that allow them to monitor more of their supply chain. Knowing where your products are at each step of the supply chain, from producer to distributor to warehouses to ultimate retailer, is a key component of supply chain visibility. Each time the product leaves the factory, it needs to be activated by the maker. Technology integration is essential if this is going to be a quick and efficient procedure.

    Many brands may be unaware that their products are being sold for less than their MAP price on the Reddit gray market. These gray market unauthorized merchants h can eventually hurt a brand’s revenue and impact the brand’s customer loyalty. Fortunately, however, brands are able to automatically monitor the internet and shut down gray market sellers who are committing any price breaches using Red Point’s MAP violation software.

    What’s Next

    Brands, producers, and authorized merchants lose money as a result of gray market items and counterfeits. There are unlicensed sellers that gouge and heavily reduce companies’ margins and sales, resulting in dissatisfied retail partners and confused customers.

    Consumers are sometimes fooled into purchasing near-identical counterfeit goods in place of a genuine one at a much cheaper price because of their intrinsic need for competitive pricing. Sales and profits, as well as retail partnerships, can be impacted by these unlawful channels and sellers—and this can lead to customer discontent.

    See how you can monitor unauthorized sellers on Reddit with Red Point’s MAP violation software.

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