grey market

A grey market is a form of exploiting price differences between territorial boundaries that is legal in a legal sense but undesirable for companies.

In particular, manufacturers of higher-value products such as automobiles or luxury items are exposed to grey markets problems. A grey market is created when products can be obtained at a cheaper price within a country than in a neighboring or nearby country. The occurrence of the Internet has created many new grey markets, as products can easily be distributed from a country with lower prices. In essence, three possible forms of the grey markets exist:

  1. In the case of reimportation, products which were exported, and offered at lower prices abroad, are imported back into the country of origin.
  2. In the case of parallel import, the dealer imports the products from the cheaper country of origin into his own country, and brings the product in parallel with the reference product into circulation.
  3. In the case of lateral import, the dealer obtains the products for his own exporting country from a cheaper exporting country.

One strategy to prevent grey markets is to create a price corridor.