STUDY PROBES THE GRAY MARKET'S MAKEUP SHOPPERS QUERIED IN HONG KONG

STUDY PROBES THE GRAY MARKET'S MAKEUP SHOPPERS QUERIED IN HONG KONG

A survey of 200 cosmetics users in Hong Kong, a place whose residents could take a gold medal at any shopping olympics, suggests some guidelines that marketers might follow to weaken the attraction of unauthorized dealers.

Imported goods sold by dealers that the manufacturer has not authorized are referred to as parallel imports. This "gray market" is not necessarily illegal - that depends on the specific contracts - but it can cut into profits.A gray market can arise for a variety of reasons. Price differentials between countries, loss of control of marketing channels, and product shortages are the most common ones identified in the survey.

Whatever the reason, "the simple fact is that ignoring the gray market will erode image, trademarks and profits," the survey said.

K.F. Lau and Balan Satchit, lecturers at Lingnan College's Department of Marketing and International Business, interviewed both appointed and unauthorized cosmetics sellers. They also polled 202 women between 20 and 40 - a mix of students, office workers and housewives.

While 60 percent of the consumers bought cosmetics over the counter at authorized stores, 32 percent patronized the gray market and the remaining 8 percent bought through friends or direct marketing.

Mr. Lau said the companies he interviewed asked for anonymity. However, cosmetics available in gray-market outlets include brands such as Christian

Dior, Max Factor and Orlane.

Among the consumers surveyed, 90 percent of those who bought brand-name cosmetics either over the counter or through direct marketing saw product availability as one of the most important considerations, followed by price and experience with a product.

Surprisingly, advertising and counter sales - even with personal contact - counted for little against these attractions.

While 47.5 percent of the respondents said they would never approach the gray market, 52.5 percent said they had done so or were open to this channel. Those who shunned gray marketers feared counterfeiting or perceived risks in frequenting unknown shops.

Some buyers felt they would lose face if they were known to buy gray-market products, while others were unaware of the gray market in the first place.

Those who were open to the gray market said department-store counters were sometimes out of stock or had too little shelf space to display less-popular items. They also complained that authorized vendors provide little service.

Many said they abhorred the "hard sell" of counter saleswomen and said store products were often overpriced, with promotional gifts of little practicality.

"Companies must examine pricing policies in different markets and attempt to maintain a differential," the researchers said.

An authorized vendor that prefers not to stress volume, but instead

concentrates on a well-to-do clientele, might charge a high price so that so only a small percentage of customers will be able to afford the product. Alternatively, it can alter ingredients or packaging to create price differences for different sectors of the market.

Otherwise, "the gray market is an efficient market response to vendors' unwise attempts to charge higher prices," the study said.

"While it is understood that vendors must support their products with advertising, consumers feel that sometimes a product is unreasonably costly and will search for a more economical equivalent," it added.

Taking gray marketers to court is generally an exercise in frustration, unless the authorized marketer has exclusive worldwide rights to distribute the product.

Investment in technology could help, the survey suggested: Inventory control could eliminate product shortages, and an information system should be employed to establish a customer database.

Bar coding, still in its infancy in Hong Kong, will help identify the sources of gray-market products, the report said.

The researchers said manufacturers must notify distributors before they sign a contract, warning them that agreements will be terminated if parallel products are traced to them.