What Are Grey Market Electronics and The Risks of Purchasing Them

stack of grey shopping baskets

Nov 22, 2022 by Taylor Krieg

As we all have experienced, in the time since the outbreak of Covid in the United States, it has been increasingly difficult for many businesses to purchase networking and infrastructure hardware. IT budgets have already been stretched thin, and the shortage of chips around the world continues to impact the availability of products and lead times – not to mention all of the other supply chain issues we’ve been seeing. In this situation, some business executives can be inclined to look into other hardware purchasing choices, such as grey market electronics. Purchasing grey market electronics is risky, and although the idea of decreased hardware costs and the seemingly endless supply of these grey market electronics is alluring, there are significant dangers to network performance, security, manufacturer support, and yes, your money.

When weighing your options, you may decide that purchasing new hardware directly from the manufacturer seems too expensive after inflation, or the lead time estimates are going to miss your deadlines (both are probably true), you might begin searching other options online or at a local second-hand shop and see some cheaper gear (possibly advertised as new or refurbished) that is in-stock! Making that purchase has the potential to feel just right; however, that gear comes with a lot of risks and conditions that customers must be ready to accept. For every trustworthy dealer, there are dozens of grey-market sellers eager to make fast cash on some old junk they managed to photograph well.

The grey market, though, is a minefield—is it worth it? And how can you avoid becoming one of the duped?

What Is the Grey Market?

Products sold lawfully but outside of a manufacturer’s approved distribution channels are referred to as “grey market” products. These goods are frequently sold on discount websites at low prices, and typically the merchants don’t have any local offices or reps. Similar products are offered for sale as used or reconditioned goods, sometimes by the same grey market vendors. Some popular examples of these sites include eBay, Overstock.com, Amazon, and most technology websites you find on Google (especially after the first page).

Prospective buyers run the same risks with both.

Typically, producers and dealers deliberately offer authentic purchases. These “white market” goods have licenses, have received legal approval, and are regulated for taxation and customer safety. Meanwhile, illegal goods, including things such as stolen artwork, drugs, guns, etc. are traded on the black market. These are smuggled into a nation and marketed without the knowledge, much less consent, of the government.

Grey market electronics, as the name suggests, lie in the middle of the two. Although they are real goods, sales take place outside of the typical supply chain and without manufacturer or distributor authorization. Physical items are only one facet of the trade; digital goods, such as movies and software, are also included.

The grey market continues to attract potential buyers and sellers alike, despite it violating a manufacturer’s Ts & Cs, for a number of reasons. For many, the biggest draw is lower prices. Because the products are not often distributed through channels, the vendor is able to offer them at a discount. Purchasers occasionally do not pay taxes or other charges associated with legitimate sales. Favored products might be difficult to locate, especially when there are continuous supply chain challenges or when goods are in great demand, such as during the holidays or the start of a new season, and deal hunters may use the grey market to circumvent such limited supply.

What Should You Be Aware Of?

Grey market products first appear to be a wonderful deal, but despite the temptation, you should resist buying them since they may end up costing you more than you anticipated. These products are not covered by manufacturer warranties or support, meaning that customers have no remedy if they malfunction or break. Despite being advertised as brand new, some products are actually used or of inferior quality. These issues can lead to irreparable harm to customers who may have hinged their entire network on a grey market product as well as to the manufacturer’s brand.

Other serious hazards include facing criminal charges or corporate penalties. Those involved can lose their right to make formal sales from the product provider or get permanently banned from making any more purchases. The products could be the result of theft, often due to leaks in the supply chains of the relatively limited white market goods being offered. This would further harm the reputation of the company or brand while also charging the customer with receiving stolen property. A customer who gives credit card information, banking information, or other personal sensitive information to a dubious vendor runs the danger of identity theft or fraud because there is no regulation or control.

Key risks of purchasing grey market electronics include:

  • The manufacturer’s warranty does not apply to grey market hardware. This implies that if you require assistance or if your hardware fails, you have nowhere to turn or no recourse. If anything, outside configuration is the problem, and you will have to buy a new product. Manufacturers keep track of hardware by serial numbers, and 95% won’t offer assistance or new hardware for equipment they believe wasn’t purchased legally or through an authorized seller. For instance, if edge devices come from the grey market, a manufacturer may postpone or even refuse support for an end-to-end network issue.
  • Hardware sold on the grey market is frequently counterfeit. The components of grey market electronics could be faulty, damaged, stolen, or illegally imported. Unreliable hardware may not function as intended and cause lengthy downtime for unsuspecting clients. Not only is fake hardware poorly made and frequently problematic, but it also poses a serious cybersecurity risk to your network. Because the firmware on counterfeit hardware is not fixed, you are exposed to a variety of vulnerabilities.
  • Hardware from other countries might not adhere to US safety and emission regulations. This could pose a fire risk, create an electrocution risk, and in some instances, result in fines.
  • FUD – Fear, Uncertainty and Doubt. Fear of the unknown is a real thing. It basically sums up everything above. If the reseller cannot track the product from production to you, the risk of the unknown is there. At Mirazon, we can tell you exactly where your good has been (it is always one of these three options: Manufacturer > Mirazon > Customer, Manufacturer > Customer, Manufacturer > Authorized Distributor > Mirazon > Customer).

As you can see, grey market hardware is far from the deal it first appears to be. This equipment has the tendency to cost more in the long term, and because of the weaknesses that hackers could exploit, you run the chance of suffering a significant financial loss in addition to all of the other risks mentioned above.

How To Protect Yourself

Fortunately, there are many ways to protect yourself and stay away from the risks associated with purchasing grey market electronics.

  • Understand Local Prices: Ask for a thorough listing and breakdown of every component in the project configuration if your hardware configuration is being sold at a price that is much lower than that of other re-sellers.
  • Obtain Serial Numbers: The item’s serial number makes warranty claims simple to recognize. To find out if the device is covered by warranty, get in touch with the manufacturer.
  • Report Suspect Dealers: We must make sure that grey market vendors are unmasked and that the public is alerted to these dishonest traders. Nobody wants to fall prey to deceit.
  • Research Your Supplier: Having a trustworthy relationship with an approved re-seller partner, like us here at Mirazon, will not only guarantee that you always receive authentic goods obtained through authorized purchase methods, but you also benefit from our certified experts, timely support, discounted rates, and access to cutting-edge technologies.

It goes without saying that buying directly from the manufacturer or a certified reseller is the safest option when purchasing a used machine.

While there are some genuinely good prices to be had there on the grey market, keep in mind that quality ultimately determines your bottom line and that replacing one poor piece of equipment with another will eventually add up.

The only definite approach to get the most out of every purchase is to buy new items through authorized sellers that will help keep your equipment in top condition. Work with a Vendor Authorized Reseller/Value Added Reseller (VAR), like Mirazon, to consistently assess your inventory of IT assets and make sure you’re maximizing the performance of your hardware and equipment.

Don’t be swayed by the enticing prices of the grey market. You’ll almost always end up spending more money in the long run, sprinkled with headaches and down time caused by unforeseen problems.

If you have any additional questions or concerns, please call 502-240-0404 or send us an email at info@mirazon.com.

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