AC: Yes, but the whole point is that they claim they are not competing, that they have segmented the market by placing these outlets well away from town centres.

"Ralph Lauren has close to 125 factory outlets."

Historically, outlets are positioned 30 or 40 miles from conurbations and suburbs – although, as cities grow, that is becoming progressively harder.

RTM: And almost every big US clothing brand has embraced the concept, haven’t they?

AC: Yes, and in huge numbers. Ralph Lauren has close to 125 outlets, Jones New York has 150 and a lot of others have thirty or so.

They view it as a huge, new market which they simply can not reach otherwise. To minimize any negative impact on the designer’s brand equity, some designers also open their own flagship stores in major downtown shopping venues.

Ralph Lauren has done just this in both Chicago and New York. In a recent interview, Ralph Lauren claimed that these flagship stores were an important way of building the brand. He explicitly stated that he had no intention of making a profit from them, but saw them simply as a way to create brand equity.

"Avoid action such as voiding warranty which will hurt the consumer."

There is always a balance to be struck between capitalizing on the brand’s fame – perhaps through outlet stores to increase sales and expand the target market – and preserving the overall brand equity – perhaps through supporting high-end flagship stores.

RTM: So what steps can manufacturers take to avoid grey imports?

AC: Perhaps the first thing to ask is ‘Is this really a problem for us?’ It can be a benefit. Take a close look at who is buying grey product. Is it a more price sensitive market which you wouldn’t be reaching otherwise?  Most suppliers do not segment their market properly.

If it is a problem, there are various strategies you can adopt. Examine pricing discrepancies. Are they really justified?  Perhaps you need to revise your assumptions here.  For example, the book trade still prices Singapore as though it were third world, which is manifestly not the case!

Look at product differentiation. Can you make the products different enough to make them less attractive and obviously different from the fully priced product?

Look at legal options. But avoid action such as voiding warranty which will hurt the consumer. If all else fails, consider a buy in scheme to get rid of grey inventory.