Daily Insights

The Gray Market Problem

By: Katie Groody | Aug 23, 2019

Professional hair brands’ fragmented distribution strategy—with a broad network of authorized salon distributors—not only risks resale efforts, but increasingly poses a threat to brands’ paid strategies.

On average, gray market results* account for 53% of professional brands’ Google Shopping ads on branded terms—more than official retail partner and brand-owned shopping ads combined, according to Gartner L2’s Digital IQ Index: Hair Care & Color. Compounding the issue, gray market listings also command top-ranked positions: Unauthorized distributors outpace official retailers and brand sites on both total shopping ad results and share of the top three shopping ads listings against branded queries for professional brands. However, the gray market’s hold on branded terms varies across categories and keyword types. Gray market SEM is most prolific against styling, treatment and color terms, where a respective 71%, 69% and 67% of professional brands’ shopping ad results are listed by unauthorized retailers, compared to 50% of care terms.

Unsurprisingly, many brands that are most successful at reducing gray market listings include care-focused brands like Aveda and Ouidad, which respectively held a 78% and 72% official share of listings. In contrast, styling-focused Sebastian Professional is one of the least successful brands at controlling gray market listings, with only 33% of listings being official. Brands and official retail partners own a combined 57% of search results against brand names or brand names paired with generic product queries (e.g., “ouidad shampoo”). However, gray market listings account for the majority of lower-funnel, product-specific or collection names (e.g., “aveda invati”).

Salon and professional brands, especially brands without direct-to-consumer (DTC) commerce that cannot serve shopping ads, should surface the gray market issue with authorized online distributors to encourage retail partners to increase SEM activity against branded product-specific queries where the consumer is closer to the point of purchase.

*Unauthorized retailers include unofficial listings on Amazon, Walmart, Jet, eBay and other discount sellers.