Challenges of online retailers

The biggest culprits cited, and perhaps the hardest to control, are eBay and Amazon, but that is just the beginning. There are hundreds if not thousands of smaller players whose primary business is selling skincare and cosmetics products online at steep discounts. They often use aggressive online marketing tactics, including Facebook ads, Google ads, banners, coupons, and more. And it’s not just professional skincare that is taking the hit. Luxury beauty products from global players such as Estée Lauder, La Prairie, Sisley, and others have trickled down to discounted sites.

Amazon recently launched its own Luxury Beauty store, a premium beauty e-commerce site that offers editorial content under the Shop by Trend and Editor’s Picks links on the home page, as well as a Complete the Look/Regimen feature and a New & Noteworthy section. As part of the mega‑retailer’s ongoing efforts to showcase luxury beauty brands, unauthorised third-party sellers of brands featured on Luxury Beauty have been identified and removed.

According to Joel Schlessinger, MD, CEO of Lovelyskin.com, ‘Product diversion has always been a problem for some companies, but the newest challenge is their emergence on Amazon and eBay and the limited, if not zero, assistance these companies provide to deter this situation. Recent initiatives by Amazon clearly show that they are aware of this issue, but choose not to take stolen or diverted products off their site except if retailers ‘play ball’ with them by allowing Amazon to sell their products.’

He continues, ‘It is an interesting way of holding up retailers and forcing them to market on Amazon. The idea is to join us so we can help you to keep anyone but us from selling your product. Additionally, it remains clear that these shadowy diverters are being aided by not only Amazon, but Google and eBay as well, and no ‘provenance’ is being insisted on when selling on these sites or advertising with Google. This clearly doesn’t pass the ‘sniff test’ in many retailers’ minds who go through appropriate channels to purchase and sell their products, yet are competing against grey market products.’

Keeping the patient in the practice

A number of global brands have become vigilant about protecting the professional skincare model by initiating new programmes to ensure that their customers maintain their value position with patients.

According to Stuart Mohr, Senior Director of Marketing at Jan Marini Skin Research, ‘Product diversion through unauthorised Internet discount sites and the sale of expired or counterfeit products presents a significant challenge to the professional skincare industry. Products on the market vary widely in concentrations and quality, and very few have real clinical validation. For this reason, consumers look to professionals to recommend products that deliver real results. In-office consultations are integral to selecting the best products for individual needs. In most cases, professional products have higher key ingredient concentrations with higher costs to manufacture than mass retail luxury brands, yet cost less to end-consumers. Online diversion and discounting of professional products threatens to erode the value of these brands, creating a condition where lower quality, less concentrated, less proven, higher margin brands thrive. In this scenario, the consumer and the professional lose in the long-run.’

‘Along with many of our top-end peers, we take a very active role monitoring and shutting down suppliers of illicit online sales to ensure the long-term success and value offered by professional retail skincare,’ says Mohr.

Many professional-product manu-facturers have taken steps to stop diversion. They often have contracts with distributors that require the distributors to sell only to health professionals and no other person or business. Some may impose steep penalties for products diverted to other channels, and even damages for any instance of diversion that deviated from the contract.

Other companies are using tracking codes or RFIDs on each unit sold so they can track exactly who bought them. For example, to combat diversion, ZO Skin Health, Inc. uses special undetectable coding in their product packaging. In addition, ZO® does not permit online sales of its products on any website except its own, through the recently launched ZO® Physician Online Store Program. In order to purchase products as a first time user or to replenish products, the customer must select an authorised ZO® physician through their ZO® Physician Online Store. This model is another way of driving consumers and new patients to physicians that they would not normally get on their own.

‘Through ZO®’s continued pursuit of diverters of our products, we’ve figured out how most of it is happening and are using that information to eliminate it,’ says Headley.