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Grey market or free market?

By Bobby Buys

Republish: EasyPublish™ Published: 16Jan2009 Word count: 461 Viewed: 282 time(s) Get Free Content For Your Site

Many small sellers on auction-type online sites opt to sell "grey" products. These products should not be confused with fakes or replicas of bid brand names.

The grey market refers to the flow of goods through distribution channels other than those authorised or intended by the manufacturer or producer. There is also a more specific term used for the same practice, namely parallel imports. Parallel imports are goods that are imported through non-official channels from low to high price countries - a completely legal transaction.

For example, one might be able to source a pair of legitimate Nike shoes in Malaysia for half the price than one could do so in South Africa. Local entrepreneurs spotting such an opportunity could then import this merchandise and sell it for a profit in the local market, thus undercutting local retailers - a practice that is perfectly legal in South Africa. Many small - and not so small - sellers on use this method of parallel importing to source goods at competitive prices and then make a profit by selling them on our site.

Problems tend to arise with certain items, such as consumer electronics, where the importer is not able to provide the relevant service for the products and the local distributors refuse to service these items. This is where the buyer needs to make a decision balancing out the cost savings with the potential risk, should something go wrong with the item and they are not able to receive the necessary support for the item locally.

Due to the nature of grey market economics, it is generally difficult or even impossible to track and verify the precise numbers of grey market sales. Manufacturers frown on the practice and often take active steps to prevent it, especially if the already have an authorised dealer they may have in the country in question. Others hold that grey importation is part of globalisation and is something that everybody concerned should get accustomed to. After all, if a grey importer can offer the same product at a more competitive price (either with a similar level of support or at a price low enough to justifying a lower support level), then that is simply part of operating in a free market and being part of the global economy. After all, with access to the Internet nothing is hindering South African consumers from accessing a web site in Malaysia and making a purchase directly from a Malaysian vendor.

However, importers and sellers should take the responsibility to inform consumers of the level of support that they are likely to receive when purchasing a product through the grey marketing channel. This way one eliminates any confusion regarding the product and consequent support structure and contributes to a more satisfied sale process.

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