The Risks of Doing Business in the Gray Market

gray market

Gray Market

The term “gray market” refers to an underground or shadow market, which trades commodities in channels that are not authorized by the manufacturer. This can include websites and auction sites. However, if you’re using the internet to purchase a car, you’re not necessarily dealing with a gray market dealer. In fact, the it is an effective way to avoid paying high prices for a used car. However, you should be aware of the consequences of doing business this way.

Gray market costs

The gray market has exploded in recent years. According to some estimates, it has grown 60% in revenues. In 2015, more than 13 percent of global consumer sales came from markets other than those imagined by the manufacturer. These sales, which are typically 20% to 30% below the retail price, cut into the manufacturer’s gross margin, reducing it by about three percentage points. Moreover, consumers may think that a gray market-sold product is a bargain brand, which lowers its brand value.

The Consumer electronics products are among the most popular examples of gray market products. The high tax rates entice retailers to turn to gray marketing in order to compete with higher prices. However, these resellers often accept heavy conditions and lower margins than authorized retailers, lowering their profit margins. However, there are some advantages associated with this method of distribution. Among these are the peerless opportunities offered by online marketplaces and the potential for higher profits.


The legality of “gray market” goods depends on several factors. Courts in the United States and European Union make a number of assessments, including whether there are material differences between the gray market goods and authorized ones. For example, if the goods are identical, they may be sold lawfully in the United States. However, if they are different by a significant amount, they may be illegal. As a result, it is important to find out if these goods are licit or not before purchasing.

The Supreme Court recently addressed the legality of it’s goods. The court affirmed the legitimacy of Fred Perry trademarked goods that are manufactured by a third party outside the scope of the trademark license agreement. The decision establishes case law against the chain of trademark cases. It also articulates a theory of legality for it’s goods. In the United States,it is a blight on the legality of American consumer goods.

Gray market effects

The effects of market sales are far-reaching. These goods pose a direct threat to the reputation of U.S. manufacturers, as well as to the revenue and profitability of their companies. Consumer electronics, designer clothing, and jewelry, among other high-end products, can be seriously affected by the sales. Moreover, gray market sales can seriously disrupt the stability of distributor pricing, making dealer support and point-of-sale services difficult.

Moreover, it’s products may be more affordable than their authorized distributors’ products. This in turn affects the marketing performance of the company. Additionally, the activities have a negative impact on governments. While many consumers are unaware that they bought these goods outside the legitimate supply chain, they can’t verify whether the drugs they purchased have been handled properly. Some of these products may even be sold at inflated prices, leaving retailers no choice but to walk away.


Recognizing the risk and taking remedies against grey market trading can help protect your business. While parallel imports and exports are generally legal, gray market sellers rip off brands and harm their reputation. Moreover, gray market goods may lack service standards and may be counterfeits. In addition, the low prices of these goods can cause consumers to suspect that they are fakes and lose faith in the genuineness of brand products. Luckily, there are several remedies to combat this growing problem.

Different selling strategies are common causes of gray market sales. For example, resellers who consider products incremental in nature may not allocate overhead for the same product as a full-line distributor. Another extreme example of gray market tactics is loss-leader sales. Loss-leader sales are often driven by heavy advertising of the lowest priced product, such as a discount brand. This tactic is used by many gray marketers to entice customers into their stores.