INTRO:

[Originally drafted in May 2024 and subsequently updated on 15 June 2024 following events on X]

If you’re anything like us–that is, chronically online or keeping your finger on the pulse of all things lifestyle, beauty and retail in SA–by now you would have seen someone, somewhere talk about Sol de Janeiro.

Per an SEO research tool, the phrases ‘Sol de Janeiro South Africa, Sol de Janeiro Mist, Sol de Janeiro Dischem, Sol de Janeiro Takealot’ and so forth currently boast a search volume of around 4000 on Google alone, possibly more after a South African X (Twitter) user posted correspondence to both Sol De Janeiro and Dischem on 15 June. In general, the fragrance category has seen significant shifts, thanks to a changing consumer culture underpinned by non-luxury and niche players contributing to the category’s popularity. The category is set to grow 3.01% globally to US$59.87bn revenue worldwide with over 50% of the revenue stemming from non-luxury fragrances. Further, according to Glossy.co,  searching for ‘body mist’ on TikTok generates over 172,100 posts. In the same article, Launchmetrics ranked Sol De Janeiro as the 2nd ‘Most Talked About’ Body Mists (Fragrance), out-ranked only by the juggernaut beauty brand, Rare Beauty.

Finally, we have the Sol De Janeiro brand in South Africa. Or do we?

THE BROUHAHA:

It is quite uncanny how many people have questioned the legitimacy of the Sol De Janeiro Mists currently sold in South Africa. In general, both as industry insiders and as consumers ourselves, we have not seen such viral speculation regarding a brand available locally before. At first, we mostly brushed it off.

With the current IP (Intellectual Property) laws, the rules set out by the CPA (Consumer Protection Act), the Competition Commission clamping down on marketplaces and with reputations to uphold, it didn’t seem plausible to think that anyone would risk making misleading claims about a brand valued at more than $450 million. Additionally, Sol de Janeiro is a very experienced brand with regards to foreign market entry. Beauty Bag (or Link International), who claims to be the local distributor, suppling Dischem, Takealot and Superbalist, have reacted to social media questions regarding the speculation citing “batch problems”. In all  fairness, batch problems–especially with fragrances–aren’t unheard of; after all, even L’Oréal recently recalled products for batch problems. All good then.

A. WHAT SOL DE JANEIRO SAYS:

Like any responsible researchers, we got in touch with the Sol de Janeiro Head Office in Paris and asked the Regional Brand Manager for ME/APAC whether they are exporting, selling, distributing or stocked in SA. The answer was a firm ‘no’. Sol de Janeiro has no relation to the current ‘distributors’ or stockists in South Africa. The good news is, the brand is planning a proper entry into South Africa but have not done so yet, according to them. Before we were able to finish this draft, X users started ousting local retailers for misleading them regarding the sale of Sol De Janeiro. We chose not to upload the posts to uphold user privacy.

A QUICK INTERLUDE: Stockist pages

Many consumers have been pointed in the direction of Sol De Janeiro’s Authorised Retailer page to check for stockists. While this is generally the best practice, it’s not always 100% accurate.

Here’s why: many international brands use importers or distributors to help them enter a new region. Big brands will thus leave the responsibility up to local distributors to update the public on official regional stockists (for example, we list partners on our Salt & Stone page). Yet on the international website, it doesn’t always get updated immediately. While we recommend checking with brands, the lists might not always be complete or updated. Additionally, the social media team might not always have the latest stockist list. 

👉 If you’d like us to publish a verification tool to check whether you are buying international beauty brands from authorised retailers, let us know in the form at the bottom of the page.

B. MORE ON THE GREY MARKET:

This, however, speaks to a larger topic that we have been researching since 2020/1–the fervent grey market in beauty in South Africa. And why mainstream media or those in the industry have rarely broached the topic; often even promoting it. If you cannot rely on publications such as digital magazines, content creators or beauty curators at retailers to ensure that you are protected and all product information is correct, then who? Eloquently, an X user and content creator alluded to the conflicts of interest most people face: “you either have an opinion or you have brand deals.” 

The grey market (alternatively known as ‘parallel imports’ or ‘diverted supply’) refers to products imported to a geographic region without the knowledge or approval of the brand owner (often skirting SARS rules too). It is generally not counterfeit goods, however, theoretically there is no way to tell. Moreover, countries might have different laws, in this case in terms of ingredients or composition, hence grey markets similarly skirt these ingredient or product composition laws put in place for our protection.

Why you should care:

• As a consumer, buying on the grey market means that you no longer have warranties, guarantees, or protection. That means, should a product be faulty or harmful, you no longer qualify for refunds or recourse.
• However, if you have been misled or if there was no proper disclosure warning you that it’s ‘grey’, you have protection under the Consumer Protection Act: “The right to product labelling and trade description”.
• In the case of grey beauty products, the prices are often inflated and shifted onto the buyer.
• Despite the technical definition of grey goods being that it is genuine goods, theoretically, unless asked for proof, there is no way to tell where the goods come from. Or worse, if it is in fact genuine. If the places we shop from are willing to mislead on origin, it’s not a stretch to imagine other discrepancies. 

C. WHAT DOES THE CPA SAY?

The South African Consumer Act has the following to say:

1. (You) have the right to clear disclosure of reconditioned or grey market goods. Suppliers are required to display notice that ‘grey’ market goods have been reconditioned, rebuilt or remade.
2. Suppliers are required to disclose, by means of a clear and visible notice, that goods are being sold without the approval or licence of the registered trademark owner.
3. Parallel/grey goods are goods intended for sale in one national market, but imported from their original destination for sale in another market and do not carry any warranties or guarantees against the original manufacturer; for example, goods intended for China that are sold in South Africa.

Since straål’s inception, we’ve made a few demure attempts to broach the topic. It seemed that very few audience members understood what we meant when we said, “we only work with official and authorised partnerships”. Despite pressure, we never budged on our primary value proposition to be a trusted, legitimate e-tailer. Albeit a slower method, it is a feather in straål’s hat, given that the beauty industry in SA is dominated by two main ‘players’:

1) the incumbent retailers (in turn dominated by only a handful of suppliers; we’ll leave it up to Michael Porter fans to extrapolate on that) and

2) marketplace sellers or fringe e-commerce websites with everything from Rhode to Rare to Glossier; undoubtedly of which Ms Bieber, Gomez and Weiss carry no knowledge, respectively.

This leaves very little room for any independent participants hoping to challenge the norm. In fact, the most prominent reason the two aforementioned groups rule the retail roost is because, in the latter case, entrepreneurs in South Africa rarely get the right (affordable) financing or support to compete with retailers, hence it’s easier to fold or take short cuts. 

A tale of two Sephoras:

At this point, we always enjoy adding that challengers to the norm should be cheered, when done right, as it only benefits consumers. A little known tale is that Sephora USA was once snubbed and pegged as an outcast when it landed in the US in the late 90s from its mothership in France. As Sephora USA well proved, having a different approach (i.e. seeking out more niche brands) can often be what sets you apart. Trying something different or “niche” is not the crux of the matter. Back to business–

D. RISKY BUSINESS: Legal precedence and implications.

According to the SEO tool mentioned at the beginning, one of the most searched for topics related to skincare in South Africa is whether the skincare on Amazon is fake. While Amazon only recently landed on our shores, this speaks to the confusion that unauthorised retail creates in general; it’s this confusion that takes advantage of unwitting consumers.

More legal talk:

Brands taking unauthorised sellers to court is not unheard of. In 2017, a court in Luxembourg ruled that Coty, a luxury beauty product maker, has the right to block unauthorised online sales in marketplaces (For reference: Takealot, Bobshop, Zando and Makro are examples of South African marketplaces.)

In 2018, Dermalogica sued the American based Target Corporation for selling their products unauthorised and/or having misleading information related to the brand. The crux of the case was cited as both ‘unfair competition’ in addition to ‘trademark violation’ (per the Lanham Act).

Most recently, an article in the Business of Fashion by Daniela Morosini segued into the ‘grey’ topic too while dissecting Amazon’s role in the beauty industry. As Amazon now digs its teeth into South Africa too, one key argument of the article is that although beauty brands have previously shunned marketplaces, having an unauthorised presence (i.e. resellers) on platforms like Amazon (or locally, Takealot and Dischem) might be even more damaging to a brand than conceding to partner with the rogue retailers or marketplaces that the brand might find less ideal and would have otherwise not considered.

According to the same article, the Front Row e-commerce accelerator indicates that the top grey market brands on Amazon USA is, among others: The Ordinary, Rare Beauty and Glossier with a combined $60 million in revenue stemming, or rather siphoned, from it. From a layman’s perspective, one might argue that that’s still money in a brand’s pocket; however, contrary to popular belief, a brand does not make any more incremental profit from the grey market than it does with “official retail”.

In this article by TAYLOR BRYANT for Refinery29 in 2016, the author recounts how the publication was held to task for unwittingly promoting grey goods, promptly being requested to remove the content. It led to further investigation by Bryant into the grey market, who summed the risk on consumers in a simple, breviloquent statement: “for the consumer, it means they may end up buying a product that […] at worst, (is) a counterfeit.” While it was refreshing to see esteemed publications bring up the topic again, in South Africa the topic remains taboo. Apart from the taboo and consumer risk, it poses massive financial and legal risk for the resellers, content creators or retailers working with rogue distributors. 

Grey tech for context:

Historically, the grey market is much more discussed in the tech sector; having been a thorn in the industry’s side for decades, this sector has developed rigorous methods to deal with it. A good example is ICASA–the regulatory body for telecommunication hardware in South Africa. Their work in the tech sector helps protect consumers against unknowingly purchasing grey tech products. Keep that word in mind: “unknowingly”, as this is largely the crux of the matter.

More than words:

The grey market isn’t a new thing; while it skirts legal loopholes, one of the main issues is that sellers purposely mislead consumers with semantically optimized phrasing such as:

• ‘legitimate brands’,
• ‘from the source’
• ‘authentic’

designed to appear like a proper disclosure when it really isn’t. Secondly, failing to then explicitly disclose or alert consumers to the fact that the resellers have no relation to the brands (thus waiving any guarantees to customers) is in fact illegal. Without the disclosure, it can be argued that a consumer could not make an informed choice. Unlike telecommunication in SA, for cosmetics–a product that is used on the body which could pose potential health risk–it seems there is absolutely no one looking out for South African consumers. 

PREVIOUS PROMINENT CASE(S): The Summer Fridays debacle and a local skincare brand ends up on the grey market–is SA destined for a hostile entrepreneurship landscape with bad faith actors?

Back in 2021, the American blockbuster brand Summer Fridays had to recall their Jet Lag masks due to a batch problem that caused burning sensations or reactions. Anecdotally, some customers reportedly had to go to hospital. While batch problems and recalls are not unheard of, as a consumer who buys from resellers, you are pretty much left with no recourse: no customer service and no refund should a product be faulty. In extreme cases where life threatening damage might occur (we do not imply that’s the case here), you’ll likely not have recourse through civil suits either. With Summer Fridays being exclusively available through unauthorised sellers in South Africa, consumers were left holding the bag.

However, if the above makes it sound that resellers, marketplaces and influencers promoting the goods are getting off scot-free due to legal fuzziness, read on. These parties are only in the clear if disclosures were made explicit, which is rarely the case. Resellers, retailers and content creators might be taken to task via various legal mechanisms that fall under agent liability, in the case of creators and respondeat superior  in the case of marketplaces or retailers. Today, Summer Fridays is no longer as easy to find in South Africa; presumably due to the fallout the recall created between unauthorised resellers and consumers. It should be noted again, that any time you purchase a product on the grey market and weren’t made aware of it by the seller, you have the legal right to return it for a refund due to being misled. 

Local brands aren’t safe either. More recently, a local independent skincare brand ended up on marketplaces such as Takealot and Makro via resellers, much to the dismay of the founder who had expressed their annoyance online. It meant that they had lost control over the actual product consumers would receive with their branding on, not to mention the incorrect pricing. Though it makes little sense to resell local brands on the grey market, since the function of both the grey- and black market is for products with high demand that are either unobtainable locally (or illegal).

In essence, all of the mentioned details ultimately create an environment of suspicion and distrust in retail that is off-putting to entrepreneurs, consumers and foreign investors. For example, due to The Ordinary being available for years online before it officially landed in SA in 2023, the brand is often up against counterfeit speculation and might never shake suspicion.

Generally, consumers have a few retailers earmarked as trustworthy, however, it seems as competition gets stiff, even trusted platforms known to be hallowed halls for South African talent goes astray. Allegedly, more and more grey market beauty has been popping up at so-called ‘legitimate’ retailers. A recent addition to the South African retail landscape took it up one notch by reselling Sephora branded products. Anyone worth their salt in the beauty retail industry, knows that this in particular is a big industry faux-pas. It’s important to reiterate that the issue is not that these are grey market goods; rather the lack of transparency and disclosures, essentially duping consumers into buying under false pretences. Should a consumer be happy to purchase in this manner, then that is their prerogative. However, given the legal standards that most established retailers and business owners are constantly held to, it stands to reason that undisclosed grey goods should be held to the same legal standard, if not higher. Yet, it seems that resellers, marketplaces and content creators are rarely held to account.

Unfortunately, South Africa has a long history of creating a poor consumer environment,  ranking very poorly on indexes like the Transparency Org’s Corruption Perception Index, down-ranked two places since 2022. More contributing factors related to the grey market and our transparency index (when it comes to beauty and fashion) is, for example, copying IP. There are also plenty of examples in local beauty and skincare of IP copying such as this case between L’Oréal South Africa and Dermacare South Africa. Although tying well into the topic, this is best left for another time.

With very few voices speaking up or upholding standards in South Africa, we seem destined to churn out even more bad faith actors if we keep it up. 

The role of facilitators such as retail buyers, advertisement, consumers and BNPL

While historically, grey market resellers would operate rather clandestinely without much access to facilities normal business owners have, that ship has long sailed in South Africa. It seems grey market sellers now have more access to traditional retail spaces, digital retail including advertising (calling the Advertising Regulatory Board?) and financial services such ad BNPL services than normal business owners. The difference is that ‘normal business owners’ take on various risks in favour of legitimacy: contracts, minimum requirements, and legal obligations that grey markets skirt. Legitimacy takes time and is capital intensive; now that retailers are relying more on grey markets, who can we trust? When the benefits of short cuts is further incentivised by positive consumer sentiment, it ultimately creates a landscape that is hostile for entrepreneurship or new entrants. If you’ve personally ever had a dream of being a content creator, of starting a podcast, of starting a brand, or of creating something, anything of your own–an environment without consumer or IP protection should be concerning.

E. BUT IS IT LEGAL?

In short: Yes, albeit frowned upon. However, it is only legal if disclosed properly according to the CPA outlines. Which is not the case with Sol De Janeiro (or other brands’) sellers in South Africa. Lastly, if a retailer or supplier is willing to mislead on this issue, other risks are implied.

F. THEY KNOW: If you think brands don’t know, think again.

There are however various tools that “Beauty Power Players” use to monitor these activities to take legal action against suppliers, retailers and advertisers (that is, content creators and publishers). And like we’ve seen above, legal action might soon come.

Some methods include specialized ‘web scraping’ technology–which is why these unauthorised products are often not listed online or taken down to avoid detection (coincidentally, also why it is necessary for retailers to disclose parallel imports online to remain within legal bounds, which they do not do.) Other methods of control/tracking is digital marks on packaging to track locations of products. A third option is to partner with consultants in the local market to monitor activity and advise on proper entry. 

CONCLUSION, why you should care:

Grey beauty (or tech or fashion) isn’t a new thing in South Africa, nor is it unique to our geographical region or just the Sol De Janeiro brand; the only difference now is the power of social media–consumers are wising up. It’s important to caution here that there is a difference between reviewing a product subjectively based on like/dislike and efficacy vs being purposely misled. While we predict that in a few weeks, the saga will blow over, we should ask ourselves as South Africans if we want to keep supporting enterprises, retailers and suppliers who require us to be our own detectives, who wait to get called out before making the proper disclosures. 

SUMMARY OF KEY ISSUES:

Five key problems for the three stakeholders:

• (Consumer) Price:  Ever wonder why you were paying R700 for a R150 The Ordinary serum? It is because  grey or unauthorised sellers shift extra costs onto consumers to make profits.  
• (Consumer) Harm: For many, the grey market is perfectly acceptable because it meets their demand for certain brands. However, there is no legal recourse for faulty products. In the case of cosmetics, it could be harmful. “Buying products from grey market resellers might receive expired, damaged, incorrectly priced or otherwise unacceptable stock, damaging a brand’s reputation,” Renee Parker, co-founder of Amazon advisory firm Invinci.
• (Industry) Competition: The practise leads to lost revenue, disincentives legitimate participants, creates suspicion and distrust leading international brands and investors being loath to partner with Africa.
• (Industry) Reputation: Overall, it harms South Africa’s reputation as a trusted partner.
• (Brand): Lost revenue, loss of control over quality, dilution of brand, poor service. 

Post script: When we started our platform, we realized that there are very few independent participants in the South African beauty retail industry unlike in other markets (i.e youth-founded retail or e-tail that work independent of retail groups; these participants are generally denied access to robust financial facilities and supply contracts that enable fair–and interesting–competition.) We’d love to change that, in the right way, let us know what you’d like to see below!

Are you an international brand? Look out for our LinkedIn article coming soon, entitled: “What international brands can do to enter South Africa legitimately” or contact us for a consultation. 

*This article is not a reflection on the Sol De Janeiro brand or products, rather on South African retail practices.