Grey market (also gray market or parallel market) refers to the selling and buying of goods through unauthorized or unofficial channels.
It isn't the same as buying a sleek and splendid Kartee-A watch from a guy on the street, thinking you've found the bargain of a lifetime on a first-rate timepiece. It's buying a real, new Cartier watch that doesn't carry any manufacturer guarantees because the store or Internet site from which you purchased it is not authorized by the manufacturer to sell it. The watch should be cheaper than buying directly from Cartier and more expensive than purchasing a counterfeit.
Grey markets exist because they can offer lower prices and sometimes provide highly anticipated items before they are widely available (think game consoles). That might involve importing the items from a country where they are already for sale. This re-sale of legitimate goods is not necessarily illegal. The sale of counterfeit or stolen goods would be illegal.
Some companies don't like grey-market sellers because their authorized dealers lose sales to the lower-price sellers. The Alliance for Gray Market and Counterfeit Abatement offers more information.
Any marketer who sells his product through multiple distribution channels and with several pricing tiers faces conflicts between those channels. Grey market is one of those conflicts. For example, a local retailer may find his wholesale cost is higher than Wal-mart's selling price for the same product.
In the early days of Personal Computers, IBM's could be purchased on the grey market because dealers would order extra computers to get volume discounts and then sell their surplus on the grey market at whatever price they could get.
In employment, grey market often refers to people who do odd jobs or construction work for cash. By working "off the books" they avoid paying income taxes or Social Security on the income received. To avoid detection, they try to do everything in cash and avoid checks or other activities that require deposits in banks. Signs in auto dealers sometimes advise that they do not accept cash payments for pick-up trucks. These signs could indicate areas were grey market employment is common.
Compare: black market
Related Fool Articles
Recent Mentions on Fool.com
- Can You Guess Which Movie Studio Recently Broke the All-Time Box Office Record? (Hint: It's Not Disn
- How Did Donald Trump Get So Rich?
- The Problem With Socially Responsible Investing
- Why Facebook Inc. Will Crush Twitter Inc.
- Move Over, Stratasys: Carbon3D's CLIP Tech Used for 3D Printing Hollywood Special Effects
- 4 Things Comcast Corporation Wants Investors to Know