Buying gray? Be careful!

The "gray market" can provide some cost savings up front, but in the long run, it may cost you quite a bit.

We know that the smart business shoppers out there are always looking for ways to save money. Buying gray market goods may seem like a good way to save on expensive office equipment, but it can cause considerable headaches later if you're not careful.

The term "gray market" refers to transactions that fall somewhere between illegal (the black market) and completely legitimate. If you’ve been bargain-hunting for IT products or office electronics like LCD projectors or copiers, you may have encountered dealers who offer you unbelievably good prices on slightly older models or “special inventory.” In many cases, these amazing deals are for products that are not being sold in the manner their manufacturer intended. Two of the most common examples:

• Equipment manufactured and/or packaged for one country that is sold in another. Safety standards and labeling requirements are sometimes the only real difference between high tech equipment destined for one continent and another. Sometimes, middlemen seize the opportunity to sell products prepared for Europe in the U.S., or do other cross-border shuffling.
• OEM components being sold directly to end users. This is most common with computer hardware such as hard drives and video cards. Component manufacturers occasionally direct sell excess inventory intended to be bundled into a complete computer.

There are many variations on these themes – any route to the customer that isn’t the one intended by the manufacturer can be considered gray market. According to The Alliance for Gray Market and Counterfeit Abatement (AGMA), an estimated $40 billion passes through the gray market every year.

What’s the catch?
You can save quite a bit of money buying gray market equipment. Some of the most popular products on the gray market are expensive pieces of hardware: computers and peripherals, camera equipment, and other electronics. And, it’s not technically illegal – it’s just unofficial. So what’s the problem?

The most significant drawback is the lack of support. Beyond the dealer’s warranty (maybe 30 days), you won’t have any protection at all if the equipment breaks down: no guarantee, no technical support from the manufacturer, and no one to turn to if your costly new equipment isn’t working correctly. On a $20 calculator, you may not worry much about the potential risk, but on a $6,000 copier, you should think twice.

Goods intended for distribution in other countries carry additional risks. Adapters and connections to other devices may not match UlS. standards. Equipment designed for use in countries with different electrical voltages may work fine at first – but over time, slight differences in power delivery can damage vital circuits. With OEM equipment, you’re more likely to find that accessories and documentation are missing. Similarly, documentation and labels may be in another language.

One of the best ways to avoid gray market offers is to buy from authorized dealers. The “authorized dealer” label usually means that in addition to receiving support and training from the manufacturer, the dealer has agreed to sell only official product lines. They will stop selling outdated models when the manufacturer discontinues them and only sell region-appropriate equipment, ensuring that you get equipment that is fully supported.

Another way to avoid buying gray market products is to maintain a healthy dose of skepticism when you see a price that is significantly lower than the market average. If you are suspicious, ask the dealer why their price is so low. Some vendors will explicitly offer you the choice of gray market and official merchandise, allowing you to make the decision for yourself.

Gray market equipment can be a good choice for some businesses. If the cost savings are so significant that they outweigh the lack of support and warranty, you can save a bundle. However in most cases, business shoppers shouldn’t take the risk with high-priced office equipment.

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