What Is The Gray Market, And Why Should I Care?

Back in February, we posted the story of a reader who got a great deal from an online discount vendor on a Samsung MP3 player, but learned that there was a reason why the deal was so fab. It had been manufactured for the Chinese market, not the United States market, and made its way to her pocket through gray market channels. That meant that it didn’t have a warranty through Samsung USA: if she wanted to fix it, she had to send it for repair in Hong Kong. Okay, but what’s the “gray market?”

The black market is where people traffic in goods that are strictly controlled or illegal. The gray market consists of people selling things that aren’t really illegal, but that haven’t been imported legally, either. The official term is “parallel imports.”

Let’s say, for example, that there is a particular Nikon camera that you want, but that model is only sold in Japan. How would you get it? You could have a friend visiting Japan bring one back for you. Perhaps a camera store or a third-party vendor here in the U.S. has obtained a few and can sell it to you. Once you’ve got the camera in hand, though, you’re assuming certain risks.

The biggest problem, as our reader with the Chinese MP3 player learned, is that your camera will not be covered by the same warranty that covers cameras imported through Nikon U.S.A. That’s fine if you happen to need a repair while on vacation there, but means that it’s all on you when the camera breaks while you’re at home.

We used Nikon as an example here because they have a detailed article about this on their web site. They spell it out for their customers: you’re on your own if your gray market item breaks.

Nikon Inc. USA cannot provide any technical support or warranty service on Gray Market items. Additionally Nikon Inc. USA cannot perform any fee-based repair work on Gray Market items. Please do not contact Nikon Inc. USA for help with any Gray Market products. Please contact the reseller or importer of your Gray Market items for warranty and service information as well as software updates and downloads.

The gray market isn’t just for electronics, either. Gray market textbooks imported from the developing world were the subject of a recent Supreme Court decision. Wiley v. Kirstaeng. In yesterday’s post about quantity limits on cosmetics at Macy’s, a customer who was stockpiling her favorite color of lip gloss ran up against limits meant to keep people from buying huge amounts of pricey makeup items and perfumes and selling them elsewhere.

How can you stay away from gray market goods? Ask a lot of questions. If a deal seems too good, it’s possible that it is. If you’ve purchased an electronic item that’s supposed to have a warranty but it doesn’t come with registration paperwork, be wary. Perhaps call the company and verify the serial number before anything goes wrong. You may be able to return the item for a full refund if you learn about its warranty status only after purchase.

The Better Business Bureau offers suggestions for questions you ought to ask when you know or suspect that you may be buying a gray market item. Ask: does this item have a warranty in the United States? If not, is an extended warranty or protection plan that actually applies to this item included or available for purchase? If I have a problem, where can I take it for repair?

What is Gray Market? [Nikon]
Gray Market Goods [New York BBB]