Grey/Gray market is where sales of legal goods take place via a distribution system not intended by the manufacturer. In other words, this channel of distribution is not authorised by the distributor and is legal in the purview of the law.
Products sold here are priced lower than what a consumer pays at a genuine outlet. This is also known as the parallel market as it runs parallel to the channel authorised by the distributors.
Reasons why the Grey market exists:
- Goods not available in authorised channels
- Goods not usually sold in a country
- Goods which are usually cheaper in other countries.
- Goods which are costly in the genuine outlet and thus are sold at cheaper prices
- Some distributors cannot directly buy from manufacturers but they still want to sell those products. They usually buy them from the grey market and then sell through their unauthorised channels.
- Distributors sometimes use these market to achieve their sales target.
There, however, is a slight difference among the Grey market, Grey economy and Black economy.
- Black market is a market where the sale of illegal commodities takes place.
- Grey Economy is a parallel economy where the goods sold are not taxed by the government.
Types of Grey Market:
- Market where mostly new/original products are sold via unauthorized distribution channels.
- Market where usually old/used goods are sold. This sort of market is also called Green market.
- Market which regulates secretive and unregulated trading of goods such as crude oil is called the Dark market.
Grey market affects brand reputation and reliability. It leads to lower profit/ product.
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