Grey Market

Definition

A grey market or gray market is an unauthorized and unofficial market where products are bought and sold at lower prices than the official price of that product. While grey market is legal, it is an unofficial market where goods are traded through distribution channels which are unauthorized by the manufacturer of that product. Grey market is similar to the term black market. However grey economy, sometimes known as ‘hidden economy’ or underground economy means paying the workers under the table where no income tax is paid or no contribution is made to Medicare, Social Security and such other public services.

Grey market is mainly of two types – one, is for imported goods which are generally very expensive or are unavailable and the other is for securities that are not yet issued and traded in the official market. The term dark market is used at times for describing unregulated and secretive trade of commodity futures which is technically legal and this can be another type of grey market.

Overview

Grey market goods are unofficial, unauthorized but legal goods that are bought and sold outside the authorized channels of distribution which may or may not have any connection with the manufacturer of those goods. This type of parallel import is very common in cases where the price of a product is higher is one country in comparison to another. Grey market is very common for electronic equipments.

This situation occurs when goods are bought from a place where it is available and cheap, either at retail or at wholesale and import them in a legal way to the target market. Then these goods are sold at a price that is lower than the normal market price, but high enough for the entrepreneur to make profit. International efforts for promoting free trade that includes harmonized national standards and low tariffs help this type of arbitrage, whenever producers try to follow extreme disparate pricing. In grey market, tracking the number of sales is very difficult because of its nature. Goods available in grey market can either be new or existing. Some of the common types of grey market goods are electronic goods like camera, video gaming consoles, dolls, etc.