The grey, or parallel, market consists of the sale of genuine goods outside their official distribution networks where such sales are neither organised nor authorised by the product manufacturer or its representative.
Grey market products are generally sold at prices 30 to 40% lower than those recommended by the manufacturer for the geographical area.
Grey market players use “alternative” sources of supply through authorised but unscrupulous resellers in countries with lower pricing conditions. They also evade the obligations of official resellers under contracts with the manufacturer such as the conditions under which the products must be marketed. They can thus offer prices defying all competition, in particular from manufacturer-approved resellers, while remaining extremely profitable. This competitive advantage is increased if they can also avoid paying normal customs duty or VAT.
Added to the manufacturer’s shortfall and the unfair competition with authorised dealers is the risk for consumers, who have no guarantees with regard to the seller and the conditions of sale on grey market products.
This phenomenon has been growing with the Internet’s increased distribution capacity, and accelerating the fragmentation of trade that allows resellers – and their merchandise – to be located in countries where the sale of products from the parallel market is completely legal and sell them in Europe, where such sales are punishable under certain conditions.