Are You Purchasing From Unauthorized Sources?

Innovation Are You Purchasing From Unauthorized Sources? David Vasko Forbes Councils Member Forbes Technology Council COUNCIL POST Expertise from Forbes Councils members, operated under license. Opinions expressed are those of the author. | Membership (fee-based) Aug 4, 2022, 09:45am EDT | Share to Facebook Share to Twitter Share to Linkedin Dave Vasko is the senior director of advanced technology at Rockwell Automation .

getty If product price and availability seem too good to be true, think twice before buying. For some, it’s hard to beat the allure of gray market prices and availability. Here’s why relying on questionable sources can hurt your company’s reputation and put your operations at risk.

The purchasing of products from unauthorized resellers and counterfeiters has increased due to recent supply chain interruptions. The inability to source electronic products has made it lucrative for these resellers to sell old, used and counterfeit products that are advertised as “new. ” This problem is not unique to one company or industry.

According to the Alliance for Gray Market and Counterfeit Abatement (AGMA), the U. S. Chamber of Commerce estimates that billions of dollars worth of tech products are being fraudulently acquired and/or sold on the gray market each year.

The proliferation of gray market and counterfeit products introduces significant risk to a company’s operation, reputation and the safety of employees and consumers because these products always are inferior to a genuine product purchased from an authorized source, even though the product might look and feel authentic. MORE FOR YOU Google Issues Warning For 2 Billion Chrome Users Forget The MacBook Pro, Apple Has Bigger Plans Google Discounts Pixel 6, Nest & Pixel Buds In Limited-Time Sale Event Lack Of Product Availability Drives Gray Market Purchases As little as two years ago, the gray market was primarily driven by price—getting more for less to keep costs as low as possible and meet project estimates. Today, companies face tremendous pressure to keep projects on track to keep up with their customer demand, and supply chain challenges are making it harder to acquire parts where lead time is now a significant contributing factor.

Sometimes buyers lack awareness of the risks associated with purchasing from unauthorized resellers and the essential benefits that only come when purchasing from an authorized source. In other cases, unauthorized resellers benefit from the limited options for sourcing obsolete products that are no longer manufactured. Unauthorized resellers have made false and misleading statements claiming to be authorized and providing a manufacturer’s warranty.

To reduce gray market risks, several large tech companies, including Rockwell Automation, are working with AGMA to develop ways to make it difficult, undesirable and unprofitable to threaten intellectual property. AGMA explains that one enabling factor for counterfeit warranty and financial fraud is more people are shopping online than in the past. The Organization for Economic Cooperation reported that the increase in counterfeits traded internationally rose from $200 billion in 2005 to $509 billion in 2016—a 254% increase.

Mitigating counterfeit, reducing the gray market and helping prevent fraud can help reduce these types of instances. Saving Time And Money? Think Again Supply chain challenges and the inability to get parts are driving people to seek alternate sources of supply on the internet. Unfortunately, we see many deceptive practices online from unauthorized resellers, including false claims of having items “in stock” or with aggressive lead times.

What risks are you willing to take? When you weigh the risks of increasing long-term support costs, intellectual property infringement, non-compliance with applicable regulations and, worse, safety concerns or opening industrial facilities to potential security threats, there are no savings. We have seen that when a customer realizes that the product they just purchased is gray market and/or counterfeit, the customer is worse off because they have lost any anticipated cost or lead-time savings. How can you address this threat? Start with the following: Keep your supply chain as short and transparent as possible.

Be skeptical of companies claiming to be “authorized. ” Always validate your source independently. Mandate that suppliers use authorized sources.

Avoid buying products from online peer-to-peer marketplaces. Help protect your industrial facilities and your customers by securing your supply chain to avoid these risks. Be particularly wary of the deceptive practices of unauthorized resellers.

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