DEFINITION of Gray market
Gray market refers to trade in goods through distribution channels that are legal but inadequate by the original manufacturer or trademark owner.
WHAT IT IS IN ESSENCE
Gray products on the market (gray goods) are products which the manufacturer or their authorized agent are producing. But outside the deal between the seller and the manufacturer.
Grey market goods are legal, non-counterfeit goods sold outside normal distribution channels. By entities which may have no relationship with the producer of the goods.
This form of parallel import frequently occurs when the price of an item is significantly higher in one country than another.
Entrepreneurs buy the product where it is available cheaply. It is often at retail but sometimes at wholesale. And import it legally to the target market.
They then sell it at a price high enough to provide a profit. But below the normal market price.
International efforts to promote free trade, including reduced tariffs and harmonized national standards, facilitate this form of arbitrage whenever manufacturers attempt to preserve highly disparate pricing.
Because of the nature of grey markets, it is difficult or impossible to track the precise numbers of grey market sales.
Grey market goods are often new, but some grey market goods are used goods. A market in such goods sometimes has the nickname, a green market.
HOW TO USE
There are two main types of grey markets.
Imported manufactured goods. That would normally be unavailable or more expensive in a certain country.
Unissued securities that are not yet traded in official markets.
Sometimes the term dark market is used to describe secretively, unregulated trading in commodity futures.
Secretively, though often technically legal. Notably trading crude oil in 2008.
This can be the third type of “grey market”, for instance.
Since it is legal, yet unregulated. And probably not intended or explicitly authorized by oil producers.