More About the Gray (or Grey) Market

GRAY MARKET MARKETING

My recent post about Pirate Joe, a gray market retailer, was so popular that I'm following up with another post about the gray (or grey) market.

The gray market is also called the market for parallel imports because products are procured outside the regular channels--not an illegal practice. Also not a new practice.

An electronics retailer like B & H in New York City may import a branded camera or video unit without going through the manufacturer's official channel(s), for instance. In fact, that's exactly what B & H does in some cases--and it notifies customers on its website about how and why it uses a channel it calls direct import, meaning not through the manufacturer. The reason: the product is cheaper to buy and therefore can be sold at retail at a lower price than the same branded product is being sold at other retail outlets.

However, manufacturers may legitimately refuse to service such products or provide technical support if the items were not purchased from authorized retail channels. Nikon is one of many manufacturers that say so on their websites.

This is an ongoing situation in some product categories, including electronics and luxury goods. As a result, Chanel recently reduced its prices in China to avoid losing sales to non-authorized merchants who were purchasing abroad and selling at prices well below Chanel's retail prices.

Interestingly, companies like Kodak see the gray market as an opportunity to help brands protect themselves. Kodak Security Systems will help firms monitor the flow of products and defend against competition from gray market activities.