Define Greymarket?

[RonFrank]

I have been dealing with the issue of Greymarket in the photo gear market for a couple decades. With camera and electronics gear most everything is made outside the USA, and grey market is:

Equipment that is manufactured with the intent to be sold in a specific country or region, but is NOT sold in that country.

The main reason camera companies say they will NOT support grey is due to quality control issues in shipping (Nikon/Canon) and manufacture. In some cases there are several manufacturing facilities in various places, and gear destined for third world markets may not go through the quality contol that first rate gear does.

In the photo world many large retailers (B&H) sell BOTH grey AND are also authorized dealers.

Enter the world if scuba gear. In this case WHAT is GREYMARKET Zeagle (for example)? This stuff is ALL made in the USA I believe, and these companies are NOT the giants that dominate the eletronics industry. How can a product that ALL comes from a USA factory be grey, or a better way to ask this is WHY is there such a market?

Obviously places like LP do NOT get their products from some guy in an alley. They are obviously purchasing from a wholesaler, or the manufacture direct. I've purchased from LP, and unlike Grey electronics, these products are packaged EXACTLY as one would purchase them in the USA dive store.

So WHY is there a GREY market for scuba gear? Making a Rubber fin does NOT have the quality control issues, and manufactuing complexity of producing even the most simple of consumer digital camera.

May guess is because manufactures are attempting to control dealer pricing, and sales avenues, but will sell to unauthorized dealers (how else does LP get EVERY brand of gear made in good supply.

I am actually very sad to find this concept has extended beyond electronics where at least there are some valid reasons for grey. In this case I'm not so sure there IS a good reason for Grey in this market?

Ron

 

[RonDawg]

Actually, if I'm not mistaken the term "Grey (or gray) Market Import" comes from the 1970's and especially the 1980's, when many people began importing large numbers of cars (particularly high end German stuff like Mercedes/BMW/Porsche) into the US outside of the channels provided by the manufacturer. Although cars have been privately imported to the US for as long as the automobile has existed, a true "gray market import" was one built and privately imported after the US passed safety and emissions control laws in the late 1960's. Prior to that it didn't matter as there were little or no US standards for the car to meet.

The manufacturers themselves naturally objected to it. The "Gray" was used to denote a practice of selling goods that is not exactly illegal (i.e. "Black Market") but not necessarily 100% kosher either. I'm not sure if it was the manufacturers who coined the phrase, or if it was the US automotive press.

To answer your question, YES it is possible to have a US made gray market import. Certain "foreign" models are only made in the US and then exported back to the manufacturers' home countries. Examples are the Mercedes M-Class SUV which is made in Alabama, and the BMW X5 SUV which is made in South Carolina. These plants make Europe-specific versions which cannot be legally sold in the US, mostly as they have not been certified for US emissions laws (particularly diesel-engined versions). So if you go to Europe and buy such vehicles, bring them back to the US, and somehow get them emissions-certified, yes you now have an American-made gray market import.

As far as why it's done with SCUBA gear, my guess it has something to do with controlling distribution and especially pricing, as you have suggested. With cars it's obvious why there are different models for different regions (safety/emissions regs of each country, plus local tastes and desires), but I can't imagine why a company like Mares or Scubapro would need a different reg for different parts of the world.

 

[Talon]

They are called "Grey Market" because they are not "authorized" dealerships and can not offer manufactors warrenties. So how do they get the products then?? They get them from the same peole who complain the MOST about them!!!! AUTHORIZED DEALERSHIPS!

How - Well, lets say I own XYZ Scuba store and carry Aeris equipment. Now, my Aeris sales rep shows up at the store and wants me to place my order for this quarter. He says if I buy 10 sets of their regs, my cost is $100 each. But if I buy 50, he will drop the cost down to $75 and give me 6 months to pay for them.

Now, let's say based on experience I know I can only sell 8-10 of these regs a quarter at their set price of $200 (which Aeris prevents me from changing). That gives me a protif margin of $100 each, where as I could have a profit margin of $125. Plus if I only buy 10, I have to pay in full in 30 days (versus 6-12 months if I buy in larger quanities).

So is what SOME dive shops do is go ahead and buy the full 100 regs. Now the sales rep knows I can't really sell that many, but he doesn't care. Remember, he works off of commission also. Manufactorer is also happy.

Now I have 90 extra regs I can't sell, so what am I going to do with them.... Ahh.. I can call Leisure Pro and sell the EXTRA regs to them for $85 a piece. Now, not only am I making a small profit on those 90, I also get to keep the money for 6-12 months before I have to pay off the loan. So I can even make money off the interest.

LP then gets to sell the product for $150. Which is still a tidy profit margin for them.

 

[AmyJ]

Thanks for an easy to understand explanation!! Makes sense to me

 

[RonFrank]

I think that LP either 1) just buys direct from a manufacture, or 2) buys directly from a wholesaler (or several). I do NOT think authorized retailers would sell to non-authorized retailers because it would violate their agreement....but I've been wrong before

LP has WAY to much stock and is just too big to be making purchases from smaller authorized dealers. They are bigger than any of them based on what I can determine.
In the camera world dealers from big retail chains obtain grey by going oversea's, and dealing directly with wholesalers, or even the manufacture.

The thing that makes me upset about the entire practice is that the manufacture *acts* like they can do nothing about this market, but they could stop it.

The question becomes, why would they? They get to basically sell products, and they do NOT have to back them. Then they play dumb about the entire process. It's Win/Win for them all the way.

BTW, I am NOT saying that this is true of all scuba manufactures, but suspect it's true in the scuba market.

Ron

They are called "Grey Market" because they are not "authorized" dealerships and can not offer manufactors warrenties. So how do they get the products then?? They get them from the same peole who complain the MOST about them!!!! AUTHORIZED DEALERSHIPS!

How - Well, lets say I own XYZ Scuba store and carry Aeris equipment. Now, my Aeris sales rep shows up at the store and wants me to place my order for this quarter. He says if I buy 10 sets of their regs, my cost is $100 each. But if I buy 50, he will drop the cost down to $75 and give me 6 months to pay for them.

Now, let's say based on experience I know I can only sell 8-10 of these regs a quarter at their set price of $200 (which Aeris prevents me from changing). That gives me a protif margin of $100 each, where as I could have a profit margin of $125. Plus if I only buy 10, I have to pay in full in 30 days (versus 6-12 months if I buy in larger quanities).

So is what SOME dive shops do is go ahead and buy the full 100 regs. Now the sales rep knows I can't really sell that many, but he doesn't care. Remember, he works off of commission also. Manufactorer is also happy.

Now I have 90 extra regs I can't sell, so what am I going to do with them.... Ahh.. I can call Leisure Pro and sell the EXTRA regs to them for $85 a piece. Now, not only am I making a small profit on those 90, I also get to keep the money for 6-12 months before I have to pay off the loan. So I can even make money off the interest.

LP then gets to sell the product for $150. Which is still a tidy profit margin for them.