Gruppe-S

iTrader: (66)

True. BUT only true in the case of a perfectly efficient model when a gray marketer is purchasing at the same cost of the regional distributor and "free riding" on the advertising revenue. RATHER, this is in fact not the case. I'll explain why:

1. Gray marketers purchase from Japanese distributors (not from the mfg). From an incentive point of view the wholesale cost of a Product is A. Unit production cost B. Amortized R&D costs C. Domestic Advertising / Infrastructure costs D. Incentive (gross profit)

So Wholesale Cost (WC)= A + B + C + D

The Landed Cost (LC) for a gray marketer needs to include transportation (T) and would thus be (LC) = WC + T

2. Now in a perfectly efficient distribution model the regional distributor should be purchasing at:

(WC) = A + B + D(0.5)

The reason (C) is removed is because this product doesn't need Japanese domestic advertising or infrastructure. And the reason D is (0.5) is because the manufacturer should reduce their gross profit to support their regional distributor.

Of course the regional distributor will need to add in its own local advertising & infrastructure costs. Lets call this (US"C"). So a regional's distributor's landed cost is:

(Dist LC) = A + B + 0.5D + US'C' + T

versus

(Gray LC) = A + B + C + D + T

Now assume USC = C, and T = T.

Therefore a US Distributor should be able to eliminate gray marketing completely by selling to the Gray Marketer at the Gray marketer's cost and STILL enjoy 0.5D of profit.

This is how efficient firms set pricing and stamp out gray market. But if USC is out of control or T costs are out of control for the US regional importer, than obviously they will have a problem. Another reason is trust - sometimes the MFG does not trust their regional dist to re-import the product back into the domestic market if 0.5D is far greater than T. The only other reason would be plain and simple greed...

It's very simple math - if the manufacturer and the regional distributor wanted to put a stop to gray marketing the could easily do so...

As for warranty on an HKS clutch (we buy everything obtainable through US channels through us channels) - Good luck with that, we've waited 6 months after putting in a brand new clutch for the customer on our dime.

Oh BTW, the rumor is that Nismo did not want to want to reinvest in the FRP mold for the wing because there were too many replicas and not enough demand for the genuine units. Same reason Ralliart stop selling a bunch of their carbon fiber stuff.

Cheers,

Gary
Gruppe-S

World Famous Z

iTrader: (42)

So what was the exact intent of the thread, since from a purely economic standpoint gray markets in general offer both posatives and negatives for both markets. It's not a one sided issue, its all about business philosophy, that's why there's no laws against it... to embrace capitalism is to allow competition and gray markets...

I'm not in support or against gray merkets, just stating the basic economics of it all...

u say gray markets affect us all negatively... y not use an example to illsutrate this... something that we all know...?


and a lot of the issue with gray markets has to do with the manufacturer itself in it's home market, and how they distribute there... after all, for all intents and purposes, a gray marketer will be buying product from a local distributor in the home market, not the manufacturer itself, so the issues at hand at least in part (and that is if you happen to think that this is an issue at all) , stem from the manufacturer and their local distributors...

from what i understand, Mackin does make attempts to stop gray marketers, which is a perfect example of how the manufacturer's business beliefs are carried out. Since there are no laws against it, it's unfortunate that a lot of the weight of stopping gray marketing must be taken on by the manufacturer... There are a lot of manufacturers out there in EVERY industry that do not care even though they are technically against it. Some do and some take it upon themselves to try and curb it.

Andy@Performance

iTrader: (92)

Tony, read post #100 on page 5. That should answer your question.

Z1 Performance

iTrader: (564)

I am sure we are one of the reasons the thread was started since the picture of a certain wheel we got sort of started put someone's panties in a bunch, and thus the ball started rolling. I can't ,and won't speak for others on here as to what their motivations are in bringing things in direct from Japan - I can only speak for myself. In our case, it haa absolutely nothing to do with the economics. Although the price we paid for the wheels in Japan was good, if I had faith that the US distributor could have obtained said wheel in a reasonable time frame, we would have gone that route. But having been on the losing end of that arrangement more times than I can count, I decided that getting it direct from Japan was the more advantageous route.

I'll give you guys an example of why people get pissy....because they like to think they control a certain segment of the marketplace. It's got nothing to do with "R&D", it's got everything to do with the bottom line, and maintaining a grip on your dealer base. Being official CAN be a very advantageous thing.\ to a retail shop, as it tends to give more "clout" when talking to some end users. In this day and age though, where everyone expects Ritz Carlton service at WalMart pricing, it's less and less important. What remains important is having inventory. I'll use my own example again where we've been let down by the official channel many times. Going the "official" route offered us 0 benefit. As such, we chose to bypass it. When the official source for a given product can't supply said product in a reasonable timeframe, their utility is no longer there. As such, one can chose to simply drop that product completely from the lineup of items they sell, or, look to other means towards obtaining it.

Another xample - for the longest time we brought in Work from Japan ourselves. The pricing was good, the supply was relatively adequate, and things went smoothly. Things reached a critical mass (in terms of the volume we were doing), and the official distributor (AKH) caught wind. They approached us, in a very professional manner, and we had a talk about why we were going direct, etc etc. We didn't get threatening messages, or emails telling us we "had" to stop - they simply tried to earn our business. When it was all said and done, AKH knew they had to step up the plate, stock more things, get things in quicker, and do better deals to make it advantageous. They did just that, and we made the decision here that going through the official channel was the best means to accomplish our goal of getting the product to our customer on time, in a reliable manner, at a fair price. Hence, we do our best to push their product, as we believe in it, use it, and we know they have our backs should any issue arise.

Same goes for Cusco - we brought it in ourselves for a long time, but with the introduction of a real US distributor (going through Greddy was a mess), we've now become their #1 retailer in the US. Again, large inventory levels, willingness to help, and on time delivery has paved that path.

As Will said, the grey market has always been there with these parts, and it always will be. However, isn't it ironic that when the distributors do a better job of stocking product, and/or delivering special order products in a timely fashion that the need, usefulness and desire to bring that same product in through any channel BUT the official one, largely goes away? It never completely goes away, but it becomes greatly reduced. I know HKS has dealt with grey market issues in the past on some of their products - somehow I don't think it's a HUGE issue for them anymore though, because they do a good job stocking parts. I can't comment on how fast they warranty stuff as I've never had anything go back except a boost controller several years ago. Same goes for many other lines - Defi being a perfect example as well. At one stage the only way to get it was grey market. Now they have 2 distributors, with 2 sets of customers and everything goes all nicey-nice.

Set up good distributors with sufficient product, deliver said product on time at a price the market will bear, and you'll do just fine. If something is not in stock or has to be ordered - no problem, customers understand. Be realistic about the timetable required to obtain said product, and if it's not in by that time, offer the dealer a way out (credit, air it in, etc), and you'll keep people coming back. Many companies follow this model to a "T" and as such, maintain non-stressful releationships with their dealers.

The pricing side of things is a complete other discussion, and since it's not the motivation behind why we occassionally grey market things in, I can't comment on that side of things.

Will Pwr

iTrader: (4)

Everything is obtainable through US channels....some items are stocked and some are special ordered. Any authorized dealer has the ability to special order any item that is currently available or listed in the Goods Master.

My example of the clutch was referring to after sale service and support, not specifically warranty. It is common knowledge that a used clutch from most any manf. is not warrantied by the typical means of warranty..and if it were to be "warrantied" under good will, research of the situation will need to be done. My example was referring to support...which is not limited to merely warranting a product.

As for the wait time, I cant speak for your situation in particular because I dont know the details of it, nor will it need to be looked into. What is done, is done. I can speak from my personal experience is that many of the HKS authorized dealers which are on very good standing often have the fastest reaction to remedy time. If it needs to trickle down to a sub dealer of them, that is at the hands of the relationship between the authorized dealer and the sub dealer.....one of the subtle reasons why Authorized dealers are able to offer "better" support. Please keep in mind that Im not referring to you in particular...Im just stating the facts of my experience...and be it that Im am not a vendor or retail dealer, I have nothing to personally gain financial with this. In fact, I am no longer at HKS USA. I work in another aspect of the industry.

You are right in the aspect that grey marketers buy from jpn distributers and not the mfg, thats the whole premise of this. A mfg would not undermine their regional office/division/import/etc. It is jdm distributers that would like to move "additional" volume to increase or maintain a certain level. But thats a whole other story.

It is simple math, but as you would say "in an ideal situation". You and I both know its not that simple. Furthermore, you are going into the assumption that "C" is factored into the the wholesale cost of a product. In fact, that is not always the case. Im not going to speak on behalf of any company or say that everyone does it that, but C is what marketing budgets and business operations budgets are for (ala operational costs). If you are a company that is selling a sole product, then your formula might more sense...but as a larger scale company that may have a vast and/or deep product line, adding C cost to each product is not efficient.

In the end, Im not here to argue with you Gary or anyone for that matter....so dont take it that way. Im here to state a side of the truth of the story to add to the informational knowledge...not to the fire. I felt the need to give my $0.02 from a view that hasnt been expressed here ..aka a non vendor/retailer.

thx

Gruppe-S

iTrader: (66)

Very very well said Adam. We (I think you guys too) were importing DEFI LONG before Tein decided to be the official distributor. In fact I honestly feel Gruppe-S, Z1, along with a few of the old school importers contributed to DEFI's popularity here in the states. The president of Tein USA came by saw all the DEFI gauges we had in stock and asked us "what can we do to make sure you buy this product from us?". We told him - good inventory and reasonable prices.

Yes we can still get DEFI for a couple of bucks cheaper per gauge in Japan. But we don't, we buy 100% from Tein USA because it makes good business sense. There's a right way to be a US regional distributor and a wrong way.

Cheers,

Gary
Gruppe-S

Will Pwr

iTrader: (4)

Adam,

Goods words

You are right in your examples, and I can honestly say those are very good true real world situations and senarios.

Yes, HKS does not have much of an issue with grey market anymore...which is a combined effort of EVERYONE involved.

and yes...the pricing side of things is a complete other discussion.

Sean

if grey market helps keeps prices down on both sides, than I can't find fault with it.
As Gruppe-S said
"The president of Tein USA came by saw all the DEFI gauges we had in stock and asked us "what can we do to make sure you buy this product from us?". We told him - good inventory and reasonable prices."

If it wasn't for the grey market, they would have been negotiating from a weak position.

Andy@Performance

iTrader: (92)

I know it is a very long thread, but you should read the thread in its entirety. Your topic has been discussed, grey marketing doesn't always necessarily keep prices down. I'm sure the read will be informative.

Sean

I read the first few pages when it first started, does anyone make a good case for a monopoly benifiting the consumer? Just point me to that post and save me time.

Will Pwr

iTrader: (4)

Its not a monopoly....if its a limited to a single retailer, then yes it can be seen as a monopoly, but that is not the case. US divisions have multiple dealers where the parts are available from.

World Famous Z

iTrader: (42)

Using HKS as an example, it's not a monopoly when the manufacturer itself has a branch set up in a different country/market, and then has it's own list of authorized retailers....

if it were only one retailer in the country/market that was the SOLE retailer, then that's sorta along the lines of a monopoly, but a monopoly is sole control of a particular industry so it's still not quite accurate of a description.

So HKS wouldn't be monopolizing anything since they actually are the manufacturer themselves...

but now to add, and I may be mistaken on this since it's been years since my honda days, but back in the mid 90's i remember that MUGEN was only available here in the USA from one retailer, King Motorsports. Things have changed since then i'm sure and i have not read up on it in years, but during that time, King was the only authorized retailer here for Mugen. so i think this example is what you mean by monopoly... where only one retailer has sole control of selling a certain product in a specific market.

Sean

If they are all forced to advertise the same price, it may as well be one single company.

Will Pwr

iTrader: (4)

No one is forced to advertised at the same price. You might be referring to a minimum advertised price that many mfg enforce....but thats pretty much evident in every industry or product being sold. Look at Apple, Nissan, etc.... A single company dictates the MSRP, WS price, etc....

I see your logic, but its not that simple...and if it were....every company that sells their own product would be considered a monopoly.

Again, grey market is not about pricing. Its about bypassing the authorized chain in which a product is structured to be sold, supported and serviced. Pricing comes into play when a grey marketer is using it as an advantage for the consumer to buy from them. The concern that is valid here is that a consumer must know that with the less price, there is a sacrafice in the amount of support that is included with the item. Is that loss a concern to all? no....but it needs to be made aware of.

Z1 Performance

iTrader: (564)

I'd correct that by saying the POTENTIAL level of post sale support might be limited. You and I both know there are shops that are often more well versed and better informed on a product than the company selling it

cubu

iTrader: (21)

Andy you are missing my point, your reason for starting this thread was for moral reasons and negative influences to this 'culture', if this is the case how can you pick and choose what you support and do not support when its all negative? it seems to me that you are against the grey market but are in favor or at least support replica's and knockoffs by selling them, i know you have reasons and justifications to sell them but either way you twist it, its either you do or you don't

so my question is, which do you think is has a more profound effect on this culture/market, grey or knockoffs? which is less of a debate than a real problem? why do/did you sell these items knowing that you were doing the originators a disservice? i just want your to know your stand on replicas, even though you may say its off topic, but its very much on topic according to the reasons you stated for starting this thread

heres how it seems to me right now:
replicas - very bad, but since it brings you profit its ok
grey market - good/bad, but since its takes away from your profit its very bad

it seems the only person that is really passionate and realistic about being against grey market is 'Will', though it seems he has misinterpreted my posts probably because i posted mostly out of frustration, and that is fine, im not here to fight for or against the grey market, cause in the end i will still be modding my car, getting parts from who ever that is legit and trustworthy and at the lowest prices, be that you or not really doesn't matter to me, business is business and life goes on

Sean

even if you don't take advantage of the grey market sellers, they benifit the rest of the consumers by providing competition for the authorised dealers.

World Famous Z

iTrader: (42)

Who is more at fault for replicas, those who make them or those who sell the original product to the replica company to copy?

Replicas are a completely different issue IMO, and can be debated since in MOST cases replicas do not offer anywhere near the same quality as the original. Replica Volks for example may look similar, but are not as well built. I'd say in most cases for most products, the quality difference or fitment issus are completely evident and not worth the sacrafice in R-D or quality

Will Pwr

iTrader: (4)

hahaha...I can accept I know what your saying on that point

Andy@Performance

iTrader: (92)

Replicas are a completely different topic but I feel just as strongly as replicas as I do grey market. You said it yourself, besides the replica NISMO wing, do you see any other replica parts on our site? When I first started at Performance, I wasn't in any position to say what we sell, now that I am apart of management, I have full control of what we sell, hence the reason why you don't see as many replicas on our site.

I sincerely believe both grey market and replicas are a severe issue we have in this industry but obviously replicas have a far more direct and immediate affect than grey marketing. You can take this thread how you like it, at least you are now aware of what grey marketing does to this culture or did you already know?

I don't understand why you are even bringing up the subject of replicas when it has nothing to do with this thread. Grey marketing and replicating is not the same thing. It obviously seems like you have something personal against me because you keep directing your posts to me and obviously trying to prove me wrong or make me look bad. And it is also obvious you know a lot more than what you actually post. Actually, your posts and arguments are very familiar and similar to a conversation I had very recently. Nonetheless, you can take what I have to say however you wish. Obviously you have your beliefs and I have mine. At the end of the day, I am not anyone to say that you are wrong for purchasing grey market products (if you do) but at least you will remember this thread and the contents of it. You still seem to not be able to grasp the whole concept of how grey marketing affects us as a whole and maybe you never will, but at least you acknowledged this thread and had something to say. That to me, is a step foward in finding a common ground. Regardless of all the negative things you had/have to say, it at least opens the up the subject for discussion for the rest of the people that are reading this to know.