Gray Market Research Articles

“Material Differences” in Gray Market Goods: A Rose Is a Rose Is a Rose?: Davidoff & Cie, SA v. PLD International Corporation,263 F.3d 1297 (11th Cir. 2001)

“Material Differences” in Gray Market Goods: A Rose Is a Rose Is a Rose?: Davidoff & Cie, SA v. PLD International Corporation,263 F.3d 1297 (11th Cir. 2001)

Determinants of Export Channel Intensity in Emerging Markets: The British Experience in China

Export channels into emerging markets differ markedly in channel intensity. This inductive study of 18 British manufacturers and their Chinese intermediaries led to propositions exploring the mechanism behind the marked differences. Findings from the study indicate that low channel intensity may restrict exporting manufacturers' market coverage and expose them to high risks of intermediary opportunism in emerging markets where channel environments are highly uncertain and legal frameworks are weak. However, low channel intensity policy can be an appropriate option when exporting manufacturers face the threats of gray marketing and fake products or when they require heavy intermediary commitments.

Grey Advantage: New strategies for the old

With nearly one fifth of the population of the industrialized world soon to be beyond a traditional retirement age, businesses need to re-appraise their attitudes towards both older workers and older customers. Whilst some public and private sector organizations may have signalled such intentions, the gap between the rhetoric and reality of ‘third age’ employment and grey market development is still substantial. Analysing the ‘Age-Quake’, this article reviews current ageing population trends and associated business agendas. Using case study analysis, it then challenges three perceived ‘grey discontinuities’, as well as the traditional perception of simplistic step-change declines in physical and mental abilities and economic activity at the traditional retirement age. Deriving from this, the article challenges the older received wisdom by offering the individual assessment of ‘third-agers’ in terms of abilities as employees and tastes as customers as two generic strategies to assist managers in the strategic alignment of their organizations in pursuit of “grey advantage”.

You can lead a horse to water, but you can’t (always) make it drink: postive freedom in the aftermath of German unification

This article investigates the degree to which the East Germans have acted on the freedoms they gained after the fall of the German Democratic Republic (GDR). Initially, many observers expected that the East Germans would quickly take advantage of their political, religious, and economic freedoms to become as entrepreneurial, partisan, and religious as their Western counterparts. Over the past decade, however, social scientists have discovered the persistence of ‘Leninist legacies,’ arguing that the East Europeans’ socialization under communism will make them reluctant to act on the before-mentioned freedoms. Contrary to both of these expectations, we find considerable variation in the Easterners’ behavior. In the economic sphere, while the Easterners have been willing to engage in legal market activity, they have been reluctant to get involved with gray market activity. In the political realm the elites have embraced partisan politics more thoroughly than have ordinary citizens. Finally, the Easterners have flocked neither to the Catholic and Protestant churches nor to new religious movements like Scientology. These results suggest that the combination of Western rights and Eastern Leninist legacies has created a unique incentive structure in East Germany. The Easterners face a different cost-benefit calculus than do the Westerners and, as a result, at times are less willing to act on their positive freedoms.

Gray marketing and unfair competition

With the European Court of Justice's (ECJ) relaxation of the definitions of cartels, price controls, and market manipulation in July 1998, the Court effectively banned the import of gray goods into the EU. This judgment, restricting parallel importation, raises arguments amongst trademark owners, gray marketers, and consumers. First of all, has the ECJ's judgment connived a situation of unfair competition? Secondly, can the import of gray market goods with genuine trademarks be considered a trademark infringement? Thirdly, is a gray marketer a free rider? To provide the answers to these questions, there is need to investigate the relationships of parallel importation, trademarks and market competition. In this study, the author uses a price dominant model to determine the positions of the trademark owner and the gray marketer. This study finds that parallel importation does not contravene trademark law. In the spirit of free competition, gray marketing activities can develop a situation of fair competition in which social welfare increases. Given the existence of heterogeneous preference of consumers, authorized distributors should offer better levels of service to gain market share. Therefore, the author strongly supports a parallel importation policy.

Consumer segmentation in the grey market relative to rehabilitation products

Purchasing decisions for “aids to daily living” (ADL) by the disabled and elderly tend to be commodity based to which value cannot be added through sales propositions. This paper reports research that investigated disparate customer segments in the “grey” sector. Quantitative research suggested that in order to develop market potential, different consumers need to be targeted and communicated to in different ways. Different psychographic categories had different personality based characteristics that need to be tapped into in order to better capture attention and interest. The traditional view of older people needing a rehabilitation product as being “desperate” needs to be changed through the use of promotional messages concentrating more upon humour and wit.

Sales Managers' Perceptions of Gray Markets: The Role of Incentives, Channel Dependence, and Type of Gray Market

The objective of this paper is to develop an empirical understanding of sales managers' perceptions of gray markets, that is, exclusive territory violations. We examine a number of factors that can affect these perceptions and then make recommendations about how senior management can align actions on gray markets by changing aspects of the contexts in which sales managers operate. Specifically, we develop a typology of gray markets and use the typology in conjunction with the constructs of distributor dependence and managerial incentives to make predictions regarding sales managers' positive or negative perceptions of gray markets. We test these predictions with a within-subjects, full-factorial experiment that incorporates role-playing by experienced managers. Most of the predictions are supported by the analysis and we develop recommendations based on these results involving compensation design and distributor dependence by which top management can achieve consensus within firms about managing gray markets.

Copyright Law and Price Discrimination

I show that copyright law is intimately connected to price discrimination. First, price discrimination is common in markets for copyrighted works. Second, many features of copyright law affect resale or personal arbitrage and so influence the profitability of price discrimination. For example, the first sale doctrine and the fair use doctrine often facilitate arbitrage and discourage discrimination, while the derivative and public performance rights impede arbitrage and promote discrimination. Third, optimal copyright policy requires attention to the social costs and benefits from price discrimination. I use models of price discrimination to unify the analysis of a wide range of copyright policy issues. I argue that public performance rights are desirable because they support fine-grained price discrimination and displace other forms of price discrimination that have greater social cost. I argue against a broad definition of the derivative right that includes movie merchandise. Movie merchandising usually imposes allocative and implementation costs with little offsetting benefit in terms of creative incentive. I show that personal copying and other activities possibly covered by fair use have mixed effects on price discrimination and social welfare. Finally, I argue that the importation right should not cover gray market goods and should not be used to facilitate geographic price discrimination.

Gray marketing as an alternative market penetration strategy for entrepreneurs: Conceptual model and case evidence

Gray marketing is said to occur when authentic branded products reach the consumer through marketing channels other than that of the authorized distributor (Weigand 1991). Free-riding was first offered by Tan et al. (1995, 1997) as an alternative explanation for the occurrence of gray marketing. We extend the authors' work to show that free-riding can be an alternative strategy to niching for entrepreneurs contemplating entry into established markets. Almost exclusively, the existing literature on gray marketing treats the phenomenon as a pricing problem and fails to recognize it as a market entry opportunity for start-up entrepreneurs. The gray marketing strategy is appropriate for start-up entrepreneurs in view of their resource limitations and the risk of being a first-mover in market development. We show in this paper that an entrepreneur can successfully penetrate an established market by following a gray marketing strategy. This is because it can be optimal for the incumbent supplier to accommodate the entrepreneur/gray marketer even if the former could force the latter out of the market through aggressive counter actions. We developed a conceptual model using game theoretic concepts to aid entrepreneurs in understanding the strategic interactions amongst parties involved in gray marketing and to identify the conditions under which entrepreneurs can successfully penetrate a market via gray marketing. The deductive or game theoretic approach, we feel, is most appropriate because gray marketing involves multiple-party interactions and conflicts of interests. As Moorthy (1985) showed, the game theoretic methodology is most suited to analyzing the behavior of market participants in such a situation. This paper identifies the conditions under which gray marketing would be profitable and sustainable for entrepreneurs. First, by targeting markets that are already well established by the larger firms, the entrepreneurs' risk of failure due to demand uncertainty is reduced. In addition, they need not incur substantial costs for market developmental efforts. Furthermore, the free-riding strategy provides entrepreneurs with the opportunity to enter profitable markets that are currently supplied by larger firms, instead of being restricted to markets ignored or disdained by the latter. Second, entrepreneurs are able to benefit from the second-mover advantages in following the free-riding strategy. As late entrants into the market, entrepreneurs could learn from the experiences of the larger firms and avoid costly mistakes. By imitating the product strategy of the larger firm, entrepreneurs could also achieve cost savings in R&D and product development costs. All these effectively reduce the entrepreneur's cost of entry into the market. Hence, even with limited resource at their disposal, entrepreneurs could still enter the market successfully. Finally, by following the free-riding strategy, entrepreneurs are able to “nibble” at the market shares of the larger firms. This is possible because of the difficulties and costs faced by the larger firms in countering entries made by the entrepreneurs. Thus, the larger firms are left with little choice but to accommodate the entry of the entrepreneurs into the market. When the costs of countering the entrepreneurs' entry are sufficiently large, the free-riding strategy becomes feasible for entrepreneurs even if they do not posses competitive advantages over the larger firms. Our paper thus demonstrates that entrepreneurs do have an alternative market entry strategy besides the commonly prescribed niching strategy. It also shows them when such a free-riding strategy would be most beneficial and most likely to succeed. These are further illustrated and supported through two real-life cases involving companies in the luxury cars and cosmetics industries in Singapore.

Problems in making telecommunications services accessible

Information technology is continually developing and in the last few years there has been a rapid growth in electronic telecommunications to provide Internet and other network-based services. Interest in using telecommunications to provide services to the public is growing, with a number of pilot services being set up across the country to explore market potential and/or stimulate demand.Administrations across Europe are now using telecommunications technology to provide citizens with information (Hoare, 1998). The British Government, for instance, has issued a directive that 25% of all civil service communications must be on-line by 2002. This is intended to provide savings in paperwork and a streamlined service.An area of possible government assistance is to provide the public with on-line information about welfare benefit entitlement. This may have benefits for all members of society but could be of particular value for retired and older members of the public, many of whom do not always claim their entitlement. It is estimated in the UK, for example, that one million pensioners could be entitled to Income Support that they are not claiming (Benefits Agency, 1998). To provide information to the public, the Benefits Agency produces a website of over 1,000 pages for customers to browse through which can be viewed at http://www.dss.gov.uk/ba. Yet while many people are now connected to the Internet, and the EU average is 25 computers connected per thousand people, (Lennon, 1999) the number of older or retired people using it is still quite small. An indication of this is given by the results of the worldwide 10th Georgia Tech web survey (GVU, 1999). The survey, conducted in 1998, received 5,022 responses of which only 2.7% were from people who were 66 years of age and over.This raises the key question of whether older people will be able to benefit from the promise of the connected future, with information available electronically on tap, or whether they will get left behind. This also represents a lost opportunity for suppliers as, according to Oftel (the UK telephone watchdog organisation) and disability campaign groups, A growing grey market containing millions of potential customers is being ignored in the telecoms boom, Dawe (1998). This paper, therefore, discusses a number of issues relating to making telecommunication services accessible to the population as a whole.

Organizational—and Product-Related Influences of Gray Market Channel Activity

Gray market activity has increased dramatically with the rise in the number of manufacturers participating in export activities. A survey of U.S. exporters, coupled with qualitative interviews with export managers, were used to explore organizational factors of commitment and firm size and product related factors of product maturity and input factor costs' influence on gray market activity. Our results indicate that commitment and firm size are both related to the amount of gray market activity a firm experiences, while the product related factors were not associated with such activity. A detailed discussion of these relationships is offered, along with implications for export managers.

The implications of intellectual property law for the auditing and protection of national and international brands: Part II. Brands in the grey market

Provides a practical snapshot of the legal situation governing the protection and exploitation of brand power within the European “grey market”. Predominantly, this occurs through the use and enforcement of intellectual property rights, namely the trade mark. However, legal events over the last year or so have fundamentally affected the antics of grey marketers and the subsequent powers granted to the owners of a range of branded marks, including famously lucrative names such as Levi’s, Nike and Calvin Klein. The recent pronouncements from the European Court of Justice (ECJ) in Luxembourg together with national court decisions have created a degree of confusion. The landmark Silhouette Case has proved immensely controversial with regard to the operation of trade mark law throughout the European Union (EU). The decision seems to prohibit the importation into the EU of branded goods or services, unless such activity has been specifically consented to by the brand owner. At a glance, the culmination of these legal precedents seems to have dealt the grey market operators and traders a severe blow – with potentially adverse effects for the European consumer as well. Seeks to analyse recent events by providing the backdrop to the controversy and then putting the cases into perspective so as to offer sound and practical advice to all interested parties in the now modified grey market environment.

Trademark rights in gray markets

Parallel importation, the selling of trademarked products through unauthorized distribution channels, can erode trademark image, strain channel relationships and disrupt global planning efforts. With the recent changes in federal court precedent and the landmark 1998 L’Anza Supreme Court decision, the legal rights associated with trademarked products in gray markets have forever changed. Therefore, the authors review the current status of regulatory and judicial decisions affecting gray marketing activities to provide a practical framework for marketing managers. Legal and nonlegal suggestions, for the protection of trademarks in gray market competition, are offered.

Understanding the Older Consumer – The Grey Market

Understanding the Older Consumer – The Grey Market

Le marché du Xérès en France//The Sherry market in France

France tends to ignore Sherry wines though for Sherries have virtually no competition in France, not even the Yellow wine from Jura. In the middle of the 19th century, the largest Sherry companies had commercial agents in France. As soon as 1830, Sherry wines were reexported from France. This country was a field testing country for brandy. Today, Sherry has almost disappeared and France mostly consumes Port wine. Sherry is favored only by Spanish residents in France or by feria fans. However, there are grey market imports in south-west France which is close to Spain. French market for Sherry wines, if not an economical subject in itself seems to be worthy of interest from a geographical point of view : as an historical study, Sherry in France is socio-cultural mark that easily differentiates one French region from another

Strategies for combating gray market activity

Strategies for combating gray market activity

Understanding the older consumer: the grey market

In Understanding the Older Consumer, Barrie Gunter provides a detailed examination of the demographic, behavioural and psychological profiles of the older consumer. He shows that without the responsibilities of loans and child raising and with better financial provision than in previous years, the over-50s represent a powerful spending force. In order to reach this group, Barrie Gunter shows how to target advertising and respond to the changes that have occurred. Understanding the Older Consumer provides a wealth of information on older people's lifestyles and leisure, their interest in the mass media, their perceptions of advertising and their shopping.

`Old spice'—Developing successful relationships with the grey market

The growth of the grey market in recent years is well documented. Many industries are now recognizing the importance of consumers aged over fifty, but fail to appreciate the sensitivities of delivering appropriate products and services. In particular, 50+ consumers are often treated in an inappropriately homogeneous manner. This article discusses the growth of the grey market, before examining the motivations behind the buyer behaviour of older consumers, and then goes on to develop a needs-based segmentation framework linked to customer satisfaction and relationship marketing. The article concludes by illustrating these principles in relation to the sports and leisure industry, and concludes with implications for marketing in general.

Gray Markets in Cyberspace

In this paper I respond to Professor Julie Cohen's argument that Cyberspace is lochnerized through the use of neo-classical economics to support a regime of strong and contract rights for web-based transactions. I develop an alternative model that also has neo-classical foundations but has different implications from the prescription of Professor Cohen's cyberlochnerians. The legal and economic analysis I develop puts flesh to Professor Carol Rose's category of limited common property and draws on the theory of gray markets and club goods. I propose that a gray market model is an appropriate one by which to describe and analyze Cyberspace transactions. In the paper, I develop the gray market legal model and apply it to the phenomenon of hypertext linking and framing. The paper concludes with my laying the foundation for the legal model in the economic theory of club goods, especially the problem of club good pricing. I show how websites can be understood as club goods, and I discuss the resulting allocation and distribution issues. Appropriate allocation mechanisms will depend upon the nature and heterogeneity of uses by users of the site. If users are heterogeneous in the intensity of use, website owners are better off if they allow some unauthorized uses of the site as opposed to expanding resources on technological and legal means of exclusion. As a result, gray markets in information arise and are socially desirable. The economic model I develop supports my legal prescription: relatively weak contract and rights for web-based transactions and greater allowance for fair use under intellectual law.

Incidents of Gray Market Activity Among U.S. Exporters: Occurrences, Characteristics, and Consequences

Each year, the value of gray market products sold throughout the world runs into the billions of dollars. Past research has stated that exporters of manufactured goods can hardly afford to ignore the possibility of this phenomenon due to the often severe effects on their sales volume, margins, and relationships with distributors and end-users. Through a survey of export managers of manufacturing firms, coupled with a series of qualitative interviews, this study investigates how organizational specific, control specific, and market specific factors drive gray market activity, and in turn explores the effects of unauthorized distribution on export performance. Several factors are shown to evaluate the potential of unauthorized distribution in their export markets, namely the centralization of decision making, the degree to which the product is standardized, channel integration, and channel control. International experience, market volatility, and the number of markets served were found to have no effect on gray market activity, this contrary to traditional thinking. Furthermore, the effects of gray market activity on strategic versus economic performance is shown to be significantly different. Each of these issues is discussed in detail, along with the implications for export managers.