Salon-Only Hair Care Products Found Outside the Salon

High-end, salon-only hair care products have been showing up on the shelves at grocery stores, discounters, and drugstores. Premium brands such as Nexxus, Paul Mitchell, Redken, Rusk, and Sebastian are clearly marked with "For Sale in Professional Salons Only."However, these brands are being sold through mass-market chains in addition to the exclusive salon-only channel.This practice is known as diverting products from the intended channel of distribution.

Is this practice illegal? Currently there is no legislation prohibiting mass retailers from selling premium brands.Because a strong gray market exists for professional hair care products, drug chains, discounters, and food retailers offer salon-only brands in the same health and beauty aisles as the mass-market hair care brands. These high-demand hair care lines are also available through online retail sites.

When beauty supply distributors or wholesalers break contractual agreements with manufacturers, the makers of salon-only brands lose millions of dollars and risk their exclusive brand image and reputation when their products are sold in stores. Improperly diverted hair care products are estimated to be valued at up to $800 million of the industry's $29 billion in annual sales.

On the Paul Mitchell Web site (www.paulmitchell.com), the company is reminding customers to fight against the manufacturing, distribution, and retailing of counterfeit products through its Product Control Campaign. This education program is designed to warn customers of the possible danger of purchasing the Paul Mitchell brand from intermediaries other than professional salons.The risks associated with purchasing diverted products include possible tampering, expiration, contamination, or substitution.

DISCUSSION QUESTIONS

1. How do customers, manufacturers, salons, and retailers react to the practice of diverting "salon-only" products to discounters, drug chains, and grocery stores?

1. Will the education campaign launched by Paul Mitchell change where consumers shop for professional hair care products? Explain your rationale.