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Gray goods refer to goods that are sold through processes targeted toward the sale and distribution of the products or creative efforts of another person or business entity in an illegal manner. This means that even though the product itself might actually be the real deal, the manner in which the product is packaged, sold, imported, exported or distributed might differ significantly with the intent of the owner of the product for that particular product. There is a significant difference between gray goods and black market goods, despite the appearance of similarities. This is because the goods in the black market are usually illegal due to factors like attempts to fraudulently duplicate the original in addition to selling it illegally.
The main issue under consideration in the sale of gray goods is the effect that such an unauthorized sale has on the account of the manufacturers or the legally mandated distributers of the item. These goods are usually a huge problem for companies with global affiliations that may have a harder time keeping track of the distribution of its goods in foreign markets. Perpetrators of the sale of gray goods usually target high-profile companies with highly sought-after products. An attraction to these companies is the profit that can be made from the sale of the company’s product due to the level of demand for such products.
Usually, gray goods are sold at a lower price than the originals by the perpetrators of the act. An illustration of the concept of a gray good scan be seen in the case of a company that produces a high quality body lotion that is retailed for $85 US Dollars (USD) by the makers of the product. The same product might be sold by an unauthorized distributer for $60 USD on the gray market and affect the original makers of the product significantly by causing them to lose the profit that they would have made by selling the body lotion through their official distribution channels. Where this is the case, the legal company has the option of seeking legal redress from a court of competent jurisdiction.
Gray goods do not only affect the profit margin of the manufacturers and legal distributers, as it may also affect their reputations. For example, assuming the real owners of the body lotion have established a marketing strategy for the sale of the product, the act of the distributors of the gray goods may thwart this effort, causing them to lose both money and reputation. The gray goods may be repackaged, or the design of the label may be altered to reflect something that is against the principle of the real owners of the product.