What is a Grey Market?

The term “grey market” is used in several different ways in the world of finance. The two primary uses of the term reflect a market for legal goods which is conducted in a way not intended by the original purveyor of those goods. The grey market itself is not usually illegal, and neither are the goods purchased on it, but it is unregulated, and this can create problems for consumers who purchase goods on the grey market. This is especially true of cases in which people buy such goods without realizing that they are purchasing through the grey market.

Manufactured goods are often sold on a grey market. Manufacturers have official distributors and outlets for their products. The authorized distributors receive products which comply with safety laws in a given region and provide use and repair instructions in languages commonly used in that region. By contrast, on the grey market, unauthorized or unintended distributors sell the company's products. These products may have been designed for use in another country, may have been imported without going through the official distributor, or may have been obtained in other ways.

Manufacturers decline to provide support for products purchased on the grey market. People usually buy in this market because it's possible to get goods very cheaply, and they are aware of the risks, such as incompatibility with other products from that manufacturer, no support or manufacturer warranty, and so forth. Thanks to the Internet, however, some consumers operate in the grey market unawares and are taken by surprise when they have problems with the products they buy.

In the securities trade, the grey market is a market for securities which are not officially available to the public yet. Activity in the grey market is sometimes used to judge readiness for a fully public offering. People sometimes also refer to the “dark market” in commodity futures, a largely unregulated market which has a profound impact on the prices for goods and commodities on the open market.

People also sometimes refer to the “grey market” in the sense of a consumer demographic. Members of this demographic are senior citizens, with the term “grey market” referencing the natural greying of the hair which occurs with age. When advertisers and companies wish to target this demographic, they must think about the attitudes, tastes, and trends within this market to develop campaigns which will appeal to older consumers.