Buying Grey Market Products on the Internet

grey marketThe Internet can be a great place to buy many different types of products at reduced prices. Especially grey market electronics. It’s not uncommon save upwards of 20% or more on just about anything, saving the consumer quite a bit of money. Local retail stores may have the same exact product for a much higher price, so what’s the catch? Why would anyone want to spend more money going to a local retailer when they can get it way cheaper online in the grey market? Well, cheaper isn’t always better.

There are typically five ways of buying a product both on the internet or at a local store; you can buy that product from an authorized dealer, straight from the manufacturer, on the grey market, buy it used, or buy it stolen. I’ll talk about authorized dealer purchases and grey market, since the others are self-explanatory

Authorized dealers are the way most people make purchases. If buying from a store such as Best Buy, Circuit City, Fry’s Electronics or any other common outlet, it’s an authorized dealer. What that means is, the product is being sold through the manufacturer’s desired distribution channels.

It’s when you shop on the Internet that the Grey Market items become available.

Grey market items come off the same product assembly line as the products sold in your local authorized retail stores. They are made with the same parts. They are packaged in the same unopened factory sealed boxes. They are exactly the same except for one cosmetic difference; the serial number.

Manufactures send their products to many different countries around the world, and believe it or not, they sell the same exact product for cheaper in other places. They must, otherwise people in those regions couldn’t afford them. For example, a $1,000 camera here in America could be the equivalent of a $5,000 camera in another country whose currency is worth a lot less. So the manufacture, takes the exact same product off the assembly line, but changes the serial number sequence so they know what country it is destined. They log this in their database.

This is where you can potentially save lots of money, but there’s a catch.

iphoneUnauthorized retailers will acquire these products at a much cheaper cost that are destined for another country and sell them on the grey market here in the US. In other words, the grey market is where retailers move product through unintended distribution channels at a discounted rate, and it’s perfectly legal! It’s not uncommon to find grey market items selling for 40% less than had you bought it in your local store. This is why a products at Best Buy might cost $1000 (authorized US dealer), but online through a grey market distributor it sells for $650. Again, this is a legit business for both the seller and the buyer. So, If I can find it online for 40% less and it’s exactly the same product, why not buy it?

Remember, I said there’s a catch! And here it is …

As mentioned before, when these products come off the same exact manufacturing assembly line, the only difference is the serial number. If you bought this product outside the intended foreign distribution channel (grey market), the manufacturer will NOT accept a warranty claim if the product is defective. There is no way around this because the serial number is stamped on the product.

As an example, let’s say you buy a product on the grey market and 10 days later it dies. When you send that product back to the manufacturer in the US for repairs, they are going to cross-reference the serial number on that product within their database and see that it was supposed to be sold in Nigeria. Unless you have a return address in Nigeria, they will know you bought in the grey market’s and they are not going to honor the warranty. You will have to send your product to the regional authorized Nigerien repair shop, or send it to an unauthorized repair shop in the US … and that can be pricey.

Bottom line is, you can save hundreds of dollars on grey market items, but you take the risk that if the product is defective, the repairs and shipping will be equally as expensive. Remember, it is perfectly legal to buy grey market items. It’s not like the black market, where stolen goods are exchanged.

So how do you know if it’s a grey market item? First, take a look at the price. If it’s considerably less than what the local retailer is selling it for, that should raise concern. Second, if the online retailer doesn’t mention they honor “FACTORY WARRANTY” or “MANUFACTURER WARRANTY”, beware. They may advertise something like “US WARRANTY” which is different. A US warranty just means there is a company other than the manufacturer that can perform repairs, and will usually sell this service as their own warranty (for a hefty price). That’s not to say it’s a scam, it just means they work with someone else who knows how to fix that product. If you do buy a product that mentions it has a warranty, read over the fine print carefully as they sometimes do not cover all damages.

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