The History of Gray Marketing Continues
Gray marketing is an issue in any industry and it’s place in snowboarding in the last few years has been progressively getting bigger. As more companies over produced while raising minimums, shops in many areas who were forced to over buy started dumping the product elsewhere. The classic example was Burton boards and bindings ending up at Cost Co. a few years ago and how they spent hundreds of thousands of dollars to pull the product from the store. After that fiasco Clark Gundlach did an interview with Transworld Business about the whole situation and Burtons stance on gray marketing. Fast forward to early 2011 and while Burton has the founder Jake Burton Carpenter back at the helm, gray marketing still persists to the point they had to release an official statement.
Here’s the official release courtesy of Boardistan.
BURLINGTON, VT (February 11, 2011) Burton Snowboards recently terminated dealer agreements with several US shops suspected of re-selling products through unauthorized channels. This move reflects Burton’s ongoing efforts to protect and support its global network of specialty retailers by aggressively combating gray marketing.
“I’ve said it many times, and I’ll say it again – I have absolutely no tolerance for gray marketing,” said Jake Burton, Founder and CEO of Burton Snowboards. “I don’t get why a snowboard shop in one part of the world has a right to shit on a local shop in another part of the world for short-term gains. I often think of it in the context of a Japanese dealer shipping product back to Walmart in the US. We want to build a global network of specialty retailers that cares about the sport, the brand, the product and each other. So we’re not afraid to end relationships with dealers that gray market anywhere in the world.”
Cutting off suspected dealers is just a part of Burton’s latest efforts to hammer home the message that gray marketing will not be tolerated. A few months ago in mid-season, Burton took unprecedented action by cancelling millions of dollars in US orders that were most likely intended for the gray market in Japan. In addition to tightly monitoring orders and inventory, Burton is closely tracking product that ends up in the gray market and tracing it back to the source.
For the sake of all its retail partners around the world, Burton’s goal is to ultimately eliminate gray market activity. The company will continue to do whatever it takes to protect the long-term health of its global specialty dealer network.
Now the interesting thing about this press release is that in a time when Burton is trying to save face with it’s “core” retailers it does nothing to label who it was that broke the buying agreements. While if we look back to just last season Burton had no problem pointing fingers at Sierra Snowboards when they broke these same agreements. In the late 90’s this was still an issue and fingers were pointed, case in point the article Power and Risk: Who calls the shots in the rapidly changing snowboard ordering process? In this article we see where history starts repeating itself.
Gundlach says Burton has to take gray marketing very seriously: “We can trace our product from unauthorized shops back to our dealers. If we think there’s a problem, we ask the retailer for documentation on those sales. If the dealer cannot support the authenticity of the sale with documentation, we’re forced to terminate that dealership. Every dealer signs a contract that clearly prohibits the trans-shipping of product.”
Gundlach says he realizes that company strength comes with brand strength, “but I don’t want people to think that we’re this big controlling smokestack in the industry-because we’re not. We care about the sport and our dealers, and care about the product the consumer is riding.
Anyone notice the same lip service now served up over the last 13 years? Why is it with a problem that has spanned two decades it hasn’t been resolved? If you do a bit of research you can find tons of gray market Burton products. Sites like eBay are not the only culprit as the Asian market has started thriving this seems to be the place where all brands are now fighting the gray market. Sites like Alibaba.com have allowed these markets to dump product. A search of Burton on there yields hundreds of results yet Burton is not alone brands like K2, Ride, and Mervin also appear.
With Asia being the biggest emerging market as China establishes a middle class larger than the population of the United States this is going to continue. Manufacturers need to establish a better understanding of buying agreements amongst their retailers as well as product inventory control in this wild west gold rush market. If the industry is going to expand to a market that is turning into a world super power we as a collective whole need to establish not only rules and guidelines, but our cultural beliefs in terms of supporting the local shops and markets. By not naming names of who has broken agreements it allows for history to keep repeating itself as other manufacturers slip in to the void left by ones that have been burnt. We’re not as big of an industry as we would like to believe and if the companies don’t start talking to each other to help strengthen it we are going to become weaker and smaller.