Gray Marketing

One of our click-and-mortar clients recently received a new vendor agreement that contained a number of clauses about what could and could not be done at their website. “Gray marketing” was one of the things that was forbidden.

They called us up to check on this. You might want to know, too.

“Gray marketing” basically means selling things through channels that weren’t what the maker intended. Some examples of common gray market tactics:

• buying up blocks of tickets, holding them till the last minute, and then scalping them
• buying a quantity of the year’s most popular toy, and then reselling them at a premium price right before Christmas
• bringing lots of goods back with you from a vacation and selling them without going through the usual importing process
• buying bulk goods at a discount, repackaging them, and selling them at the normal retail price
• acquiring samples or seconds and reselling them slightly below the retail price

These moves may not be illegal (depends on your state and the details of the sale), but they all reduce the margin for the manufacturer, compared with the normal sales channels.

If you’re an authorized vendor, you can’t indulge in gray marketing. Some retailers are tempted to push the envelope online:

• selling old merchandise at sharp discounts online (maybe even on eBay), even if they’re not allowed to do that in the store
• using pictures or names of items on the website that aren’t available in the store
• implying a special relationship with the manufacturer, such as suggesting that the store’s website is their outlet site
• promising “low, low prices” online when the store sticks to the “within 99 cents of base retail” requirement

These things can cause you to lose your authorized dealer status.

We never go with gray (or gray hat) marketing of any kind, of course, but it’s worth reading those vendor agreements so you’ll know exactly how far you can go. The term “gray” is used precisely because it isn’t always clear when you’re crossed a line.