Nova workboard

a blog from young economists at Nova SBE

Grey’s Anatomy

When asked about your current occupation, ever felt urged to give an answer that is both vague and cool such as ‘I’m in import and export’?
Do so now by engaging in the grey market! The grey market is legally much sounder than the black market, but also much more shady than working in the ‘normal’ and boring (white) market – ergo much cooler!

A vague definition of the grey market is that it is a market in which goods are sold outside of traditional selling channels, usually without consent of the initial producer. So if a producer sells a product cheaper in market A than in market B, you exploit this. You buy the product in market A and sell it just below the price t the company sells in market B.
The catch is that unlike in the black market, the goods you sell are perfectly legal!

As an example, say a German customer would like to buy a brand new Volkswagen (VW) car. To fulfill his wish, he can either go to an authorized Volkswagen car dealer and pay the price set for the German market.
Or he makes his way to an unauthorized seller who specializes in so-called re-imports. These unauthorized sellers buy the exact same car in say Italy or the Netherlands (to where it was initially exported to by VW) and ship it back to Germany. Since the price in those countries is much lower compared to the German price, they can sell it for less than the official German price and still make profit. It’s a win-win situation! (If you take Volkswagen’s economic interest out of the equation of course)
You could be this unauthorized seller. Or if you would like to give it a better ring, call yourself an arbitrageur. It even sounds sophisticated. This specific practice is actually backed by the European Commission, as VW was fined after trying to stop it.

But the possibility of arbitrage is not exclusively given in the automobile sector (even though this can lead to absurd situations where for example Russian drivers drive imported Japanese cars, which then have the steering wheel on the wrong side): Especially for pharmaceuticals the practice of re-importing or just buying goods cheap in one market and selling them more expensive (but below producers’ prices) is common. Once again, this practice is legally sound in the European Union (if production took place within the EU) as all you do is make use of the pricing strategies of the respective companies. After all, it’s them who use their market power to set different prices in different markets. And why not get in on the high profits they generate?
Other goods used for this include video games, cigarettes (think of your next trip to a country with a low tax on nicotine!), personal computers (especially Apple products who usually just sell via authorized stores), cameras or even textbooks.
According to numbers from 2006, the grey market was estimated at 7.4bn € within the EU. As you can see, the sky is the limit.
All you need is to make sure that you buy cheap, sell high and enjoy your profits!



Author: studentnovasbe

Master student in Nova Sbe

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