Grey Market

Definition:  New equipment sold outside of the primary OEM sales channel.

Why the word Grey/Gray?

OEMS have a marketing challenge when selling new equipment from their official channel at higher prices than their identical new equipment at lower prices.   They chose the term “Grey/Gray” deliberately to infer that such equipment is possibly illegal, as in “Black Market”.  Despite the pejorative inference, the industry name has become normalized.

Sources:   OEMs are the only source for Grey/Gray products.  Products become “Gray” at various points during wholesale distribution in a worldwide market.  Once an OEM has sold a batch of equipment to a distributor – the distributor is the owner and now controls their inventory.  Some equipment is sold at different prices around the world, leading to an opportunity to buy products at discounted prices.  Some OEMs will sell their own overstocks to distributors at deeply discounted prices so that they can book the revenue to meet sales targets.

Warranty:   The warranty status of Grey/Gray market products is highly variable and is a key part of the end user buying decision.  Some equipment may have full warranty if the manufacturer supports their warranty based on the end-user purchase date. The warranty clock may be ticking based on the sale date to the distributor for some products.  Imported equipment typically lose all warranty when crossing borders. 

Legality:   It has always been legal to buy and sell Grey/Gray market equipment.  The most recent legal question was if any copyright law could be used to block the importation of equipment manufactured overseas.  This question was settled by the US Supreme Court under the Kirtseang v Wiley ruling in 2013.  Once sold (the "First Sale") -- the former owner has "exhausted" rights to control the in future. 

First Sale is essential to used equipment trading because every chip contains what might be claimed as Copyrighted Intellectual Property (IP).  If the author of the IP within every part inside of any gadget had the right to prevent a sale, then trade in used electronics would cease even at the garage sale level.