Page 21 - Simply Electronics Case

Acquiring their products from the grey market implies that they must of
necessity be reactive rather than proactive, that they cannot effectively change
or influence their up-stream supplies.

Simply Electronics Limited earns a triple profit on their activities (See
Diagram5):

Profit 1: arbitrage
Profit 2: cost or near cost purchases plus undercutting margins discounts
Profit 3: internal cash flow manipulation (retained cash over 43 days, as in
GoPro example, before refund or goods dispatched)

Diagram 5

It's an elegant model, SE run the sale and collect cash immediately on
purchase. Based on Sales, they purchase only what was sold, nearly

eliminating their inventory risk. Additionally, because of their credit terms,
they are holding cash at the market rate of equity for the 7-40 days (assume 5