Consumers often favor parallel imports due to their affordability compared to products sold through authorized distributors, even though the goods maintain the same quality as those from the original manufacturer. As a result, the market is saturated with parallel import channels, with some retailers offering both authorized and parallel-imported products side by side.

During the peak gifting season of Thanksgiving, a popular time for business gift exchanges, a significant issue emerged involving a best-selling imported spirit. Retailers were found selling the product at prices equivalent to wholesale rates. Regional distributors voiced their concerns to the main distributor, frustrated by the situation, which threatened their ability to meet sales quotas and avoid financial losses.

Lex Solution Investigations, a seasoned private investigation consultancy, was enlisted to address the issue. The main distributor’s initial findings revealed that the product was indeed authentic, sourced directly from the manufacturer, and packaged in a version tailored for the Asian market with appropriate labeling. The investigation suggested that the product’s origin might be linked to overstock initially allocated to Malaysia, where the market was unable to absorb the supply, leading to discounted exports to the U.S. market. This scenario would explain the retail prices matching wholesale rates. However, Lex Solution Investigations, with their extensive experience in business investigations, proposed a different theory: parallel importation was unlikely because even major retail chains carried the product, and such outlets would not risk selling unauthorized imports.

Ultimately, the investigation uncovered a case of internal misconduct. Two regional distributors, based in Los Angeles and Houston, were ordering large quantities of the product and then underselling it to competing liquor brands at discounted rates for cash transactions. The scheme allowed for smooth product circulation due to its profitability. The main distributor was puzzled as to why their authorized distributors would engage in such undercutting practices, as even with incentives like sales bonuses for hitting targets, this method appeared unprofitable.

The thorough investigation by Lex Solution provided clarity: both distributors involved shared a common side business—”short-term financing.” By selling the product at reduced prices for immediate cash, they could use the funds for their financial operations, leveraging the main distributor’s payment terms and effectively making the distributor an unwitting financier. The investigation highlighted systemic vulnerabilities in the main distributor’s operational policies.

The conclusion? Operational loopholes enabled unauthorized activities, and proactive reforms were necessary to safeguard the integrity of the distribution network. With Lex Solution Investigations, you can trust that even the most complex cases will be resolved with precision and professionalism.