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Old 09-27-08, 01:23 PM   #1
timo888
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Gray Market vs Authorized Reseller

Let's say the closest brick-and-mortar bike shop that carries a line of bikes is an inconvenient distance away, they don't even stock the bikes but order them only as needed, and so the consumer is considering an internet purchase. Is there any resource where one can determine if a merchant is "authorized" and not gray-market?

The issue has arisen with several makes of bike and at the moment I don't have a particular make of bike in mind; but when I did contact a specific manufacturer by phone a few weeks ago, after consulting their online list of resellers, I could not get a definitive answer from them. Some names on their list were out-of-date and other resellers had not yet been added to the list.

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Old 09-27-08, 04:27 PM   #2
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Is gray-market bad or illegal? What's the problem?
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Old 09-27-08, 06:57 PM   #3
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The issue with gray-market bikes is they often have no warranty.
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Old 09-27-08, 07:19 PM   #4
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Gray-market items are legal items that the manufacturer does not want sold in the USA, or your particular country/region.
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Old 09-28-08, 07:26 PM   #5
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Is gray-market bad or illegal? What's the problem?
Wikipedia has a fairly good discussion of Gray Market.

For bikes, the main issue is denial of warranty coverage and perhaps refusal by the manufacturer to supply parts for repair or upgrade.

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Old 09-29-08, 03:20 AM   #6
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Gray-market items are legal items that the manufacturer does not want sold in the USA, or your particular country/region.
Just like my having to order a rollerbrake/dyno hub from the NL. Shimano USA refused to even admit they make one. I won't be able to get any warranty work done in the US on it. But that is a risk I am willing to take.

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Old 09-29-08, 06:55 AM   #7
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I worked in Gray Market electronics for years. Most of the time, you will be buying the exact same product at 20% to 30% of the MSRP. Yes, warranty will be an issue, buy so what if I can buy 3 for the price of one. Just stock a spare. How often do things break?

There are a lot of counterfeit products in the electronics gray market, so be careful. Most comes out of Asia. Don't know about bike parts being counterfeit.

Gray market drives the manufacturers crazy. They are competing with their own product at a fraction of the cost. They try to control their distribution channels and product in this gray aftermarket, and they will go to great pains not to help you or warranty the product. Most of what they do is illegal, but who has time to fight it.

Imagine if you took your new Ford to the dealer down the street for warranty work, and they refused to work on it because you didn't buy it at that Ford dealership?
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Old 09-29-08, 07:59 AM   #8
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Imagine if you took your new Ford to the dealer down the street for warranty work, and they refused to work on it because you didn't buy it at that Ford dealership?
Not quite the same. At least draw a reasonable parallel.

Imagine taking it to the local Ford dealership and them not working on it because you didn't buy it from any Ford dealer.

Part of what makes gray market cheaper is that you are not paying for the aftermarket service and warrantees, so you should not expect it. You should also expect to eat this yourself.

You also do not get whatever (if any) protection the manufacturer would give you of buying from an "approved" vendor. In theory this means that the manufacturer has some level of trust in the vendor. How much this matters in real life, I don't know. In reality it probably just means that the manufacturer gets paid.

The down side of the gray market other than no warrantee is that you could be getting a counterfeit item (I don't really think this is as likely in components as in frames, though I have no info to back this up). I think the issues more common than counterfeiting would be buying stolen items or factory seconds that should have been destroyed.
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Old 09-29-08, 09:52 AM   #9
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Depends on the bike that you're in the market for. If its like a Cervelo, and you're spending a lot even for a frameset, you want the build up done by the local dealer so that you can have all that warranty work done by them and backed up by Toronto. If you are going to race, even in a triathlon, you want that bike adjusted correctly which might take a few visits.

Your local bike shop dealer and the warranty work are closely tied together. The extra premium over and above gray market is your "insurance", so to speak. Do you need insurance? Depends on the bike and what you're going to use it for.
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Old 09-29-08, 12:30 PM   #10
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Not quite the same. At least draw a reasonable parallel.

Imagine taking it to the local Ford dealership and them not working on it because you didn't buy it from any Ford dealer.

Part of what makes gray market cheaper is that you are not paying for the aftermarket service and warrantees, so you should not expect it. You should also expect to eat this yourself.
You proved my point. The only reason Ford, in this case, is pissed off, is because I didn't buy it from ANY of their subsidized, overpriced dealerships. This is always the way the manufacturers attempt to justify their price fixing through their channels.

The Parallel is reasonable and totally correct. Who cares who sold it. It was built by Ford, with Ford parts in a Ford plant, and sold by Ford to someone. Now it's available at 30% of list and they want to block my access to it because it escaped from their channel.

Thus, gray market FORDS!
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Old 09-29-08, 03:23 PM   #11
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You proved my point. The only reason Ford, in this case, is pissed off, is because I didn't buy it from ANY of their subsidized, overpriced dealerships. This is always the way the manufacturers attempt to justify their price fixing through their channels.

The Parallel is reasonable and totally correct. Who cares who sold it. It was built by Ford, with Ford parts in a Ford plant, and sold by Ford to someone. Now it's available at 30% of list and they want to block my access to it because it escaped from their channel.

Thus, gray market FORDS!
No, I didn't make your point, you ignored mine, or I didn't make it clear enough.

Part of what inflates the price at the authorized dealer is the warrantee.

If you can get your gray marketeer to throw in a warrantee where you are able to take it to any Gray Market dealer in the country, then you have a valid argument and are comparing apples to apples.

It is what makes internet buying cheaper than brick & mortar... not having to have an outlet in your neighborhood makes selling a lot cheaper, so I can pass on the savings.

If I am selling gray market, without warrantees, then I can pass those savings on to you as well. I suspect this is why Shimano sells OEM parts to bicycle manufacturers so cheaply is that the bicycle manufacturers take on the burden of warrantee to the consumer.

You or I as the buyer of a gray market product have no legitimate reason to complain about lack of service or warrantee, since we haven't paid for it. The Ford dealer will not refuse to perform our service (nor will the bike shop/Shimano dealer) they will simply refuse to do it for free, since we didn't pay the cost of the warrantee.

Also, "price fixing" is perfectly valid practice for a product, it is only invalid if different manufacturers get together and work together against the consumer. An individual manufacturer has every right to insist on a specific price for their product, just as a consumer has every right to refuse to pay it.

In cycling, this would mean that Campagnolo, SRAM and Shimano (or any two of them) got together and decided that they would each charge $3500 for their top group. Since only Campagnolo did this, there is obviously not any price fixing going on at the top end of the market.

I have no issue with the availability of gray market items, but if someone buys gray market, then expects the same service as someone who does pay retail price (or near it) from an authorized dealer, I think they are delusional. The reduced price has a cost.
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Old 09-30-08, 06:22 AM   #12
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I guess we will just have to "agree to disagree" on some points. This is what makes the Gray Market so frustrating for the manufacturers.

I totally agree with your statement about warranty. If you buy gray market, you should expect no service, support or warranties of any kind.

My original point was if I can buy real Shimano components at 25% of MSRP, who needs a warranty. I will just buy a spare. Stuff doesn't break under warranty that often anyway.
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Old 10-04-08, 05:19 AM   #13
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Originally Posted by DieselDan View Post
Gray-market items are legal items that the manufacturer does not want sold in the USA, or your particular country/region.
Or does not want sold at a price that reflects only the cost of manufacture + shipping + the profit margins of the "gray" middlemen, because the company has spent money on design, safety testing, marketing, advertising, maintaining a physical presence/headquarters, etc.

When a company outsources manufacturing overseas, their savings there (in labor costs) can come back to bite them in the ass.

Regards
T

Last edited by timo888; 10-04-08 at 05:26 AM.
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