Parallel imports of status goods: A strategic analysis of aesthetic design

Abstract

Parallel imports of gray products across markets are a worldwide concern for manufacturers. Extant research has focused on parallel imports of regular goods that do not provide status value. In this paper, we investigate parallel imports of conspicuously consumed status goods. We consider a manufacturer who directly sells a status product to consumers in two markets that value the product differently and a gray marketer that can import the product across markets. Our analysis shows that, though parallel imports decrease a manufacturer's profit from selling regular goods, it can increase their profit from selling status goods. Furthermore, the manufacturer decides whether to use the same or different aesthetic design for products across markets. With the same design, the gray and manufacturer‐authorized products look identical, while different designs make them distinguishable, which affects their status value. We find that parallel imports benefit the manufacturer in a broader range of situations under the different‐design strategy, whereas the same‐design strategy increases the gray marketer's profit. When the two markets are sufficiently similar, the manufacturer uses the same design to induce parallel imports. When the two markets are sufficiently different, the manufacturer uses different designs to either deter parallel imports or improve their profit while competing with the gray marketer.

Parallel Import: Theory, Practice and Specifics in the Context of Sanctions Restrictions

“…Термин «параллельный импорт» подчеркивает тот факт, что товары без разрешения владельца торговой марки на ввоз создают параллельный канал поставки, конкурирующий с официальным (Skoko, Krivokapic-Skoko, 2005).…”

“…В то время как параллельный импорт чаще всего наносит ущерб производителям обычных товаров, диаметрально противоположным образом дело обстоит со статусными товарами, приобретение которых связано не только с высоким качеством, но и с тем, что они сигнализируют о принадлежности потребителей к определенной социальной группе (Li et al, 2022). Психологический эффект, связанный с осознанием покупателями того, что они могут позволить себе оригинальный статусный продукт, приводит к положительному расширению авторизированных продаж даже при повышении на них цен.…”

Impacts of gray market selling on the supply chain under product upgrade and pricing flexibility decisions

“…Gray market-an unauthorized arrangement functioning parallel to the authorized distribution channel-features an unauthorized intermediary (gray marketer) who trades authentic branded products produced by the manufacturer (Li et al, 2022;Smith & Shulman, 2022;Srivastava & Mateen, 2020). A gray market dealer can sell genuine branded products of any focal manufacturer (or brand).…”

“…A manufacturer can adopt differential pricing schemes based on either geography or consumer's willingness to pay. Notorious gray marketers through parallel imports can source a product from the market with a lower price and place it for resale in another market that sells the same product at a higher price, however, at a price relatively lower than that of the authorized channel (Ahmadi et al, 2017; Altug & Sahin, 2019; Li et al, 2022). The case of Nestle's Perugina (NP) chocolate could explain parallel imports whereby gray marketers imported NP chocolates from Venezuela and subsequently diverted them to Puerto Rico at lower prices without Nestle's authorization (Societe des Produits Nestle, S.A. v. Casa Helvetia, 1992).…”