Page 14 - Simply Electronics Case

Negative and Positive Impact Of The Grey Market On The Manufacturer

Negative

The grey market can also create customer dissatisfaction which can impact
adversely on the brand and its image especially if products that normally
command premium prices are offered at a discount by grey market vendors.
Many customers will desert the official retailer and purchase from grey
market vendors who are free-riding on the manufacturer’s reputation and
brand image.

The grey market destabilises pricing policies among the manufacturer’s
distributors especially if prices and margins erode. In this instance dealer
support and point-of-sale services may be harder to maintain especially if
after-sales services are eroded whilst exclusivity is also diluted and existing
business relationships are damaged. The manufacturer is completely unaware
of where their product has ended up. For the consumer, there is no traceability
and no protection.

The grey market can also create customer dissatisfaction which can impact
adversely on the brand and its image especially if products that normally
command premium prices are offered at a discount by grey market vendors.
Many customers will desert the official retailer and purchase from grey
market vendors who are free-riding on the manufacturer’s reputation and
brand image.

Diagram 2