The Gray market can be defined as the sale of new, used, surplus and refurbished products through unauthorized re-sellers and channels. The rapid expansion of the gray market has caused major problems for authorized re-sellers since they pay more through the contracts they have in place with the brand name suppliers to purchase the wholesale products. Consequently, they have to resell the apparel at much higher prices then their gray market counterparts who purchase the apparel overseas at a much reduced cost then import it into the United States.
In the United States the supply chain for apparel is as follows; branded clothing is designed in the US, manufactured overseas, and then sold all over the world. The majority of brands have territorial clauses in their contracts with their re-sellers which prohibits them from selling in authorized markets. The root of the problem is gray market importers can purchase apparel overseas, then import into the US and sell it across the country with no restrictions in regards to territorial contracts because they are not authorized by the supplier in the first place to be selling their products. The consumer does not care because they are getting the brand name apparel at a discounted price. As one can imagine this is extremely frustrating to authorized dealers, who have spent time & money creating a legitimate distribution model, and in turn this can disrupt their relationship with their brand partners.
With the creation of online auction sites such as ebay and alibaba, they have actually made it easier for gray marketers to skirt the traditional distribution model. Also, since the sales are made over the internet it makes it even harder for authorized distributors and some of the watch dog groups they utilize to monitor the transactions.
Authorized re-sellers may feel that they are victims of the gray market and they are not receiving adequate support from their suppliers. These re-sellers may want to utilize a website that enables suppliers and distributors the ability to source and engage one another in an effort to either increase their product line or find new relevant re-sellers. Websites such as Supplyseeker provide the ability for a re-seller or supplier to manage all of their channel partners in one centralized location. This would be a great place for frustrated re-sellers to find new channel partners.