Gray Market Imports Not All Black or White
There are still people, of course, who don’t know what gray market goods are. Products for senior citizens, guessed one woman. Counterfeits but not black market, guessed another.
They may never know--unless their new Sony or new Seiko stops working while still under warranty and an authorized service center rejects it, saying flatly: “It’s not ours.”
Well, it is and it isn’t.
Gray market imports don’t enter the United States by a foreign manufacturer’s chosen channels of distribution, which usually involve shipment to its owned subsidiary here and subsequent sale to a group of authorized regional distributors. These were products--by the same manufacturer--intended for sale in other countries but bought overseas by independent importers who sell them to U.S. retailers at prices well below those of official distributors. They’re then sold to consumers at bargain prices.
Sometimes they’re cheaper versions of products aimed at the exceptionally affluent American mass market. Sometimes they’re cheaper because official distributors don’t pass on the advantage they get from a strong dollar--margins they justify by their costs of packaging, advertising and servicing a branded product.
Such “parallel imports” are nevertheless genuine trademarked goods, produced in the same factories. They’re also imported quite legally; although the foreign-owned official distributors want help in keeping their exclusivity, the U.S. government has not been inclined to protect one arm of a foreign company from another arm’s production. In the last half a dozen years, the gray market has expanded from cameras and watches to perfume, electronic equipment, cars, even Caterpillar heavy machinery, and estimates of its size at retail run up to $7 billion. The resulting competitive pressure--and a vision of potential profit--have also widened their availability: They’re sold now not just in discount and catalogue stores, supermarkets and drugstores but in upscale department stores and by specialists who also sell the authorized merchandise.
Gray market goods also present real problems. Many buyers don’t know they’re not getting an official manufacturer’s warranty; says one: “You don’t look at the piece of paper till something goes wrong.” Then, if something does go wrong with it, an authorized service center may refuse to fix it or may charge for the work.
Such warranties are often immediately recognizable. Gray market Seikos recently advertised at 40% off by one Los Angeles department store supposedly include manufacturer’s warranties, but they’re crude photostat forms referring consumers not to a local Seiko center but to an unknown trading company in New York, demanding $10 for handling--both, incidentally, making the warranty invalid under California law. The store apparently couldn’t tell what was or wasn’t a manufacturer’s warranty, and Seiko took the store and its suppliers to court and got a temporary restraining order--not to stop the retailer from selling gray market watches but from implying that they weren’t by advertising that the merchandise “comes with a manufacturer’s warranty.”
“The distributor said it was a manufacturer’s warranty, and we didn’t realize where it was coming from,” the store’s chairman says. Besides, he adds: “I’m not sure we’re supposed to be watching, even for goods that are counterfeit.”
Manufacturer’s rebates won’t apply either, and any manufacturer’s suggested American retail price (from which the item is supposedly “marked down”) is usually fictional. Furthermore, the products may be made to different specifications--a considerable problem when it’s a small appliance made for a different wall current, some complex electronic equipment with full instructions in Japanese or a luxury car that needs to be “retrofitted” to conform to U.S. emissions standards.
Gray market products may even be lower quality than their authorized counterparts: Only in the United States, says one jeweler, could one sell a $150 watch to a mass market. “It’s the same product in that it’s made in the same factory,” says Robert Pliskin, president of Seiko Time Corp., U.S. subsidiary of Japan’s Hattori Seiko Corp., “but it may have a different crystal, a printed rather than embossed dial, different metal-plating.”
Unfortunately, the consumer rarely knows what he’s buying. No one advertises quality differences and missing manufacturer’s warranties, although the consumer’s response, a retailer says, might be: “At these prices, who cares about the warranty?”
If so, the gray market would be a problem only for authorized distributors, who’d still lose a lot of sales. It’s their time and money, they say, that build the brand name by advertising and support it with service, and they want gray marketeering stopped--a plea that isn’t getting a lot of sympathy. That’s just competition, they’re told, to which Pliskin replies: “Let them compete, but take my brand name off their dial.”
The consumer’s problem with gray market goods would be helped by disclosure of the sort required now in New York state. Retailers there must note that goods are gray market imports and explain the resultant problems of warranty (unless a warranty as good or better than the manufacturer’s is offered), rebates and foreign language instructions. “The point is to clarify these things in advance,” says Nathan Riley, spokesman for New York’s attorney general, “so the consumer can make an informed choice whether the saving is worth it.”
