How to track resale and the grey market

To receive the Vogue Business newsletter, sign up here. For any luxury brand, working out where your products are being resold and tracking the mysteries of the grey market are among the toughest of challenges. That’s where French startup Data&Data comes in. The big data and AI platform that tracks grey market and resale activity across online marketplaces and social media is reporting strong growth. Brands see its data as helpful for informing both production and marketing strategies. A 2019 alumnus of LVMH’s Maison des Startups, Data&Data runs bespoke tracking and dashboards for over 30 brands, including Cartier and Audemars Piguet, and 11 mostly undisclosed brands across LVMH’s own luxury portfolio, including Bulgari. The client base also includes 70 per cent of Swiss watch brands, a dominant position in the sector that helped propel the brand to profitability in 2018. More recently, 2020 was a difficult year with sales growth slowing as brands paused spending. Revenue climbed 40 per cent year-on-year, compared to 120 per cent sales growth the year earlier, but the company weathered the storm, retaining 98 per cent of clients and growing sales by 140 per cent this year. After winning the 2021 LVMH Innovation Award for Data and Intelligence, the company is now targeting 100 per cent combined annual growth rate every year for the next five years. “We love how we can get actionable data and insights to help with our distribution strategies as well as enhance and preserve our brand experience in our stores,” said Michael David, LVMH chief omnichannel officer at the 2021 Innovation Awards ceremony. The software also monitors competitors, so brands can track metrics including grey market transactions, pricing and competitor store openings. Resolving clients’ pain points Data&Data originally launched as a data consultancy firm in 2012, tracking counterfeits, based on founder Zouheir Guedri’s background as a data analyst for Ernst & Young and PwC. When pitching to luxury brands in 2013, executives told him that a major pain point was not so much counterfeit goods, but authentic products sold by third parties outside of their authorised distribution networks. Guedri saw an opening. In 2015, Data&Data underwent a “big pivot” to respond to demand and won €600,000 in seed funding from PwC and some business angels to help it scale globally. The grey market is where boutiques within a brand’s authorised distribution network sell authentic products to an unauthorised third party retailer. These grey market sellers can then heavily discount or add a premium to the product and sell it from a new territory, without valid guarantees or robust aftercare policies. That can damage a brand’s reputation, says intellectual property lawyer Henry Priestley, partner at London-based law firm RPC. Depending on the jurisdiction, [grey market] sales could “exhaust” the brand owners' trademark rights and make it more challenging for brand owners to prevent unauthorised sales of their trademarked goods (particularly if the reseller does not undermine the aura of luxury and exclusivity of the brand in the way in which it re-sells the goods to customers), Priestley says. “In fact, to try and maintain the aura of luxury we have seen some grey market resellers try to mimic the look and feel of authorised luxury online platforms such as Farfetch.” Many luxury brands sell online via a small group of retailers or don’t have e-commerce at all, points out Guedri. For them, this grey market and resale activity, involving the sale of goods at 30 to 40 per cent lower prices than authorised stores, can be hugely harmful to the margin on luxury goods. “Also, you lose connection with your client because you’re not interacting with them first hand.” By tracking transactions via Data&Data, brands can identify which products are being heavily discounted and therefore potentially over-produced. As Guedri explains, brands might conclude that “in this area, it’s being sold for a premium of 20 per cent. So we need more of this specific style in Taiwan but we need a different style in China”, for instance. For some luxury brands, the grey market could provide an additional retail channel through which unsold stock left in its 'normal' sales channels can be sold, thereby reducing the amount of excess stock which may end up in landfill, says RPC’s Priestley. “By being engaged directly with grey market resellers, there could be an opportunity for brands to have a say in how their products are re-sold and to provide customers with peace of mind that they are purchasing authentic goods.” For brands that don’t wish to be sold via the grey market, tools like Data&Data can help, Priestley says. National legislation varies, but in England, for example, a grey market seller might be open to legal action for inducing a retailer to breach its distribution contract with a luxury brand. Facing the challenges of a startup As part of its investment PwC helped provide consultants to support Data&Data technology, introducing global luxury executives to the dashboards and helping educate them in interpreting the data — an early challenge for Guedri. “As a startup in technology, I didn't want to go into consulting or service because the company would not be scalable,” Guedri says. “If I want to work with a leading luxury beauty brand in Japan, I need consultants in Japan and I didn't want to build that. I want to use technology. So when we did this partnership with PwC we said “we have the data, we have the analytics and you can help us with the service.”” Over time, clients have developed the skill sets to interpret data for themselves, he adds. For now, Data&Data doesn’t have many direct competitors that can provide the full suite of metrics and years of historical data. “However, we have a lot of competition in the field of price monitoring; that's something a lot of companies can do,” Guedri acknowledges. After five years using its current technology, the company can now model data to predict pricing or transactions in the future. “Let’s say a watch is £10,000 on leading watch marketplace Chrono24 and we know that the price on that specific model has been increasing 10 per cent year over year; there’s high demand,” Guedri says. “If you price it at £11,000, you’ll sell it in two weeks. £12,000 and you’ll sell it in one month.” Most of the 15-strong team are data-scientists who can model this kind of data to inform luxury distribution and pricing. Finding talent and motivating his team are constant challenges for Guedri. Pricing appropriately for his service was also difficult initially. The technology was so new that potential clients had no reference point when negotiating. That meant negotiations with large luxury groups or brands could take a long time. “We used to spend more than 12 months before getting a new client,” Guedri says. “Today is much, much faster — three months maximum. And clients often recommend us to other brands.” One undisclosed client decided not to renew its contract for counterfeit tracking in 2019, Guedri discloses. As Data&Data increased its tracking capabilities using big data and AI, it scaled up from sending 200 data points to thousands per week — the client was overwhelmed by the sheer volume of data. “It was a good lesson for me,” admits Guedri, who has committed to delivering simpler and more actionable insights. Client requests are driving business development. “Every time we do a new release, it’s based on our clients asking us for it,” Guedri says. The company may raise funds in 2022 to help expand, with particular focus on winning clients in the US and UK and onboarding clients outside of luxury. “There are many brands in the US and UK,” he says. “So once we enter one market, we can leverage the other.” Key takeaway: Data&Data had a steady start in the luxury market from 2012-2015 as a counterfeit tracking consultancy. After pivoting to grey market and resale analytics in response to luxury CEO feedback, the company secured funding, joined LVMH’s startup accelerator and won a roster of luxury clients across Europe. Despite a slowdown in growth during 2020 and HR challenges, the company rebounded in 2021 and is on track to secure funding and expand globally next year. Comments, questions or feedback? Email us at feedback@voguebusiness.com. More from this author: Fashion month social strategies: What worked Celebrity favourite Di Petsa on scaling bespoke fashion Paris fashion-tech startups on luring luxury: fashion “Shazam” to virtual try-on

Make better business decisions

Make better business decisions