Whether it’s on Amazon, eBay or a third-party Web site, diversion exists, but let’s face it, the beauty industry doesn’t really want to talk about it.
But ZO Skin Health is one of the few exceptions addressing the issue so that its consumer has a good experience on all fronts. One unusual development is that the typical diverter of the Seventies and Eighties has been reincarnated into a new and unexpected persona — a doctor.
“We want to have a lot of integrity,” said Jim Headley, chief executive officer of ZO Skin Health, who noted the products are exclusively sold in physician’s offices. “We don’t want to divert goods ourselves and it’s one of our key tenants on how we operate our company.”
The company allocates around $400,000 for its antidiversion strategy and according to Headley that will likely continue.
“We do daily moderating and we get results of who’s selling the product online,” said Whitney Gibson, ZO Skin Health’s lawyer, who added that they’ve caught physicians, employees of physicians and their family members selling items online. “Then, if we find anybody, we’ll send them a cease and desist letter. The minute they tell us the source of the product, we demand that they remove the products from the Internet and return all of them. Sometimes we’ll demand monetary compensation. If they don’t do that, then we’ll file a lawsuit against them and get a court order.”
Gibson added that the company doesn’t go to litigation often. “We file lawsuits, but usually people will settle with us because they realize they don’t really have a defense,” he said. “We have court authority to serve subpoenas on Web sites or the host of the Web site to get the identifying information of who’s behind the product. Eighty percent is cease and desist letters versus actually having to take it to court.”
In the last three years the company and Gibson have brought down 120 Web sites. If someone is selling a diverted product they’re not looking at expiration dates, they are not sending them with the special packaging that’s required and they aren’t making sure that they’re stored in accordance to room temperature.
“More than 50 percent of the time, products will be tampered and things will be scraped off on the packaging,” Gibson said. “We have strict contracts with all of our distributors, and if we catch them diverting products, we’ll terminate their account,” Gibson said.
“If we open the gates [and divert our products] we could increase our business 20 to 35 percent easily,” Headley said. “But it wouldn’t be good for us. It would really cut down on the life cycle of the brand.”