What is diversion and how does it affect me?
Over a million people walk by shelves of counterfeit product every day and have no idea it’s been placed there illegally. Our neighborhood drugstores and retailers carry them, and unknowingly, they are bought every day.
Welcome to the underground world of Cosmetics Diversion. Where products are illegally bought and sold much like drugs and other contraband just to make a profit.
Illegal Diversion occurs when a distributer sells a product to a retailer which they do not have a legal contract to do so. This is considered to be “Black Market” or “Grey Market” product on the shelves of retailers.
When professional hair product is seen on the shelves of big box retailers or drugstores, it is a diversion product. If it’s not in a salon, it’s not licensed to sell it. This trend has also moved into the cosmetics and fragrances world as well.
Bare Escentuals, i.d. Minerals Make-Up has recently appeared on Target and Costco shelves. It’s unclear still to BE Executives which distributer is responsible. There has been an ongoing investigation since fall of 2008 with no success. BE is just a small fraction of the Diversion Market.
Paul Mitchell, Redken, Bed Head, Biolage are all other name brands that are manufactured with the intention of being sold ONLY to licensed professional hair salons and spas. The fact of the matter is, it isn’t illegal for these other retailers to sell professional products. What is illegal is when the companies distribution chain breaches contract.
By purchasing black market products you are not only buying into a world of hijacking, illegal immigrants and counterfeit you are also aiding an industry that increases insurance rates and product prices.
Steps to Diversion and how this affects you
Agreement is reached illegally between a salon and sales representative outside of the normal distribution chain. Product is then ordered and received. Trucks are hijacked, products stolen Insurance claims are made increasing rates locally and nationally. Product prices are raised to cover the lost from stolen goods. Payment is made then product changes hands. Products are then transported to warehouses where illegal employees remove barcodes and/or tamper with products. Decoded products are then shipped to discount stores, grocery stores, etc.. Products are marked up on an average of 10% higher than salon prices in these locations.
What to do if you suspect a company is participating. Contact the companies Diversion Hotline or Customer Service line which can generally be found right on their website.