The Gray Market’s Anatomy
Seen a price for a pro camcorder that seems too good to be true? It probably is and here’s why…
By Jay Chapin
You’re excited. You’ve made the decision to buy that new camcorder for your business. So you start looking for the best price. You would like to buy from the few reputable companies you’ve bought from before, but then you see it! The price that’s not only below everyone else’s, but hundreds, perhaps even over a thousand dollars less! “How can they do it?” you ask yourself. “Perhaps they bought big”, you ponder. “Bigger than everyone else!” “Or perhaps they just have a better relationship with the manufacturer than all the other dealers?” “Or perhaps, at last, I’ve found the only ethical company in the bunch, who are not over inflating their prices!”
The unfortunate reality is that none of these theories are true. The truth is there are “fishermen” among the A/V dealers that are inventing new hooks every day to get new customers, or simply to make a quick sale. Bear in mind, though, that their creative, yet “gray” tactics may cost you more money in the long run, than you bargained for.
So what are some of the tactics of the gray market? There are too many to list here and a few that weren’t invented at the time that this article was written, but here are just a few to watch out for:
1) You think you’re getting the camera with all the accessories the manufacturer talks about, but when it arrives you receive just the chassis. No lens, no power, no strap, no remote and so on. So you call back the dealer and wonder of wonders, they have all the accessories you need…at a “great” price. (Note: Please be advised that many upper line pro and broadcast models do not come with a lens and very few, if any accessories. The point is, do your homework and know what you should be getting before you get scammed).
2) They sent you a Chinese model with a Chinese warranty, and a Chinese owner’s manual. So don’t be surprised when you try to set your camcorder’s internal menu preferences, and that’s in Chinese as well!
3) You got everything except for a warranty.
4) The price they quoted you included the manufacturer’s $300 rebate and they charged your credit card full price. Let’s say the camera you get quoted on is $3000. There is a manufacturer’s rebate of $300. So you figure $2700 after the rebate. When you get the credit card bill, you see that the dealer charged you $3300. You thought you were getting a special deal plus an extra $300 rebate, but no such luck.
5) They include “kits” or “packs” with the model you want. Now before I go on, I just want to say that there is certainly nothing “gray” in itself, in offering kits. Kits are and can be great. Some very reputable dealers offer kits…BUT, don’t assume, because a dealer is offering you extra batteries, a carrying case, 2 conversion lenses and a tripod along with your camcorder, and the price still seems great, that this is a great deal. Find out exactly what you’re getting. There are a lot of inferior accessories out there that I wouldn’t allow in the same carrying case with my camcorder. Most consumer grade accessories have no place with pro gear.
6) An online A/V dealer may have 6 or 7 (or more) different websites all with different names. Let’s say a dealer upset you so badly during your last purchase, that you vowed you would never buy from them again. The truth is they don’t care if you don’t buy again. A year from now the gray dealer will be gone from the web and other web business names (with less online complaints) have taken its place. The internet has made it very inexpensive to open up many “locations” and “new businesses.” You may still end up dealing with one of their other “companies” in your quest for the lowest price, and lo and behold, they gotcha again!
As a former sales rep for one of Sony’s only three U.S. distributors for their pro audio and pro video lines, I got calls all the time from my dealers, complaining to me that their customers are finding prices on the internet that are lower than what we can sell to the dealers for. This was always very disconcerting at first, as I tried to convince the dealer that we are an ethical business and that we are not over inflating our prices. So then I call the dealer offering the unbelievable low price to find what I call the “Grey Hook of the Week”.
Here’s an example. A dealer was complaining to me that a particular smaller, on line camera store in Brooklyn had an unbelievable price on a Sony HVR-Z1U. Even though I thought I had seen all the tricks, this one bothered me. They advertised, “U.S. model, U.S Warranty, and free shipping”, they listed all the accessories that Sony provided. They were all there.
Now I’m upset, because they had covered all the gray hooks that Iknew about. So I emailed one of my colleagues in NY, to see if he had heard of this dealer. He had not, but he urged me to call them. “But no matter what,” he said, “tell them you only have the amount of money stated in the ad.”
So I called them. The first issue was that I was on hold for 13 minutes. I was about to hang up, assuming that this was most probably some guy in his basement selling black market items, not even gray, when suddenly a man picked up. I told him I wanted the HVR-Z1U for the advertised price.
“Is it in stock? I asked.”
“Yes sir,” he replied.
“Is it the U.S. model?
“Yes sir.”
“Full Warranty?”
“Yes sir.”
“English Manual?”
“Yes sir.”
“With all the accessories Sony lists in their brochure?”
“Yes sir, everything is included.”
“Wow, that’s great! I said with excitement. “How can you sell it so much lower than all the other dealers?” I asked.
His reply was expected, “We buy in large quantities, and the other dealers are profit hungry.”
“Okay, I’ll take one.”
"Great! Now about the batteries.”
“Uh oh…” I thought.
“The Z1U comes with only one small battery, I’m sure you’ll want to get more.”
“No,” I said, “One will be enough at the beginning”.
He protested, saying that I really needed them. I declined twice more. So he started on the carrying case which I also declined more than once. He offered tripods, conversion lenses, lens cleaner, editing software, wireless mics and monitors. I declined it all and finally told him that I was on a tight budget. I only had the amount stated in the ad and that’s why I called them. Once he came to the conclusion that I would not budge, he gave up and told me he had made a mistake and he did not have any HVR-Z1U’s in stock at that time, but perhaps I should call in a few weeks. Which brings us to gray hook #7:
7) They advertise with artificially low prices, at or below their cost that will bring in customers who will hopefully buy inferior accessories, at superior prices.
8) They charge extravagant prices for shipping and handling. After all, they have to make up for there loss some how.
9) Finally, the most horrifying Grey Market tactic of them all! The dealer will charge you whatever they feel like charging you! Basically they ended up charging you a higher price than the price that was advertised. And most people won’t know that until they receive their credit card statement. Some people will fight it, (if you can get a hold of them) and some people won’t. If you do get them on the line, they promise to credit your credit card but never do. Eventually you have to take it up with your credit card company.
Are these guys true recognized dealers? Sony, JVC, Canon, Panasonic and other major A/V manufacturers choose their distributors and dealers wisely. It is based on reputation, as well as ethics and of course their ability to bring in a certain amount of sales per year. There are also legal dealer agreements that have to be signed and are monitored by the manufacturer.
One thing the manufacturers are very stubborn about with their authorized dealers, is the adherence of MAP pricing. For those of you not familiar with MAP, it is the “Manufacturers Advertised Price”, similar to MSRP. The MAP is typically lower than the list price. This is the manufacturer’s attempt to keep the market from turning into a commodity. An authorized dealer is strongly advised to not advertise a model lower than the MAP. They can advertise higher, but not lower.
Of course, there are ways around MAP. For example, a dealer will advertise at MAP and then say, “Call (or email) for a lower price”. Sometimes they will opt to not show any price at all (for fear that the MAP price will scare you away) and ask you to call. When you call, they will give you your special cost, below MAP. Of course legally, a dealer can charge whatever they want. They can sell you a camcorder for a penny if they want to. But if they want to remain an authorized dealer in the good graces of the manufacturer, they know they must adhere to MAP’s.
So, what’s the point of telling you about all this MAP stuff? I would urge you to find MAP pricing on the web. Look at a Sony distributor’s site for instance. www.shoreviewdistribution.com . Do any model search and it will give you the List and MAP price (sorry, you won’t get any other prices here unless you are a registered dealer with them and you’re logged in). Compare that to the deal you think you’re getting. Therefore if you see a dealer advertising for lower than the MAP, chances are he is not an authorized dealer and dealing with them spells trouble, more money spent than you think, and a gray hook at every turn.
To sum up, it is your responsibility to be an educated consumer. In order to keep you out of the gray market, here are some tips for planning your next large A/V purchase.
- Know exactly what you’re buying Do your homework; read the manufacturers literature on the model you plan to buy. Most manufacturer websites have specs which show the supplied accessories.
- Is the dealer authorized by the manufacturer? If not, you may want to look elsewhere.
- Is the dealer’s advertised price lower than the MAP? If so, the dealer is probably not authorized. In these cases you may want to look elsewhere.
- Is the advertised price too good to be true? It probably is…BUT, there’s no harm in checking it out with the following tip.
- Call the dealer and ask questions. Hold them to their answers. Get the name of the customer service person or sales rep that helped you. Write all their answers down and email it back to them asking for a confirmation. Now you have it in writing if legal action ever came about. If it’s a gray deal, chances are they won’t confirm. They will simply plead “out of stock” as in the previously mentioned example. Make sure what you are getting is exactly what the manufacturer offers.
- Be comfortable with the dealer. Buying solely on price is unwise. I’m all for ordering things on the internet, but for large ticket items, know the company you’ve decided on buying from. A reputable authorized dealer will be more than happy to get on the phone with you to answer all your questions and make you feel comfortable. Once you’ve bought from them and have had a positive experience, ordering online should be no problem. Sometimes, paying a little extra for peace of mind is well worth it.
- Be aware of rebates. Manufacturers’ websites will list rebates. Know which items have end-user rebates, and find out if the rebate is part of the dealer’s advertised price or not. An end user rebate from the manufacturer is good no matter which authorized dealer you buy it from. So don’t think just because one dealer is pushing it, that you can’t get it from another. Most rebates come from the manufacturer, not the dealer.
- Google the name of the company. Buyers are getting more computer and online savvy everyday, but as good as they are on comparing online advertised prices, they rarely do a search on the unfamiliar company name who advertised the miraculous low price. I did this once when a customer hit me with an extremely low online price for a camcorder, and hundreds of “Buyer Beware” complaints came up.
The problem with the anatomy of the gray market is, it’s hard to spot. You think you’ve seen it all and that you’ve covered all the loopholes. So why do we fall into these traps? For the same reason that Hansel and Gretel didn’t notice (or didn’t care) that the one who had invited them in was a witch. It’s was because, the deal seemed sooooo gooood. So do your homework and ask lots of questions and find a dealer you are comfortable with and it will save you a lot of money and heartache in the end.
Have a story about your experiences with the gray market? Share it with the group to keep us wise and out of trouble!
-----------------------------------------------------------------------
Jay Chapin is the administrator of DragonukConnects and the owner of Biz Video Solutions, a video production company in the Washington, DC area.
Posted 1:13 AM Oct. 3, 2009 
