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12-Volt: Transshipping & Gray Market Goods

A look at the problem – and some solutions

May 28, 2014 By Todd Ramsey
Transshipping goods and the existence of a gray market are controversial topics in the aftermarket car electronics business.  It proves convoluted when you peel back the layers of the onion in open discussion. Many industry folks paint both topics as the same thing or with a broad brush that blames Internet sales, when they are different scenarios for different stakeholders.

To clarify the difference between terminology:

Transshipping is defined as the shipment of goods to an intermediate destination, then to yet another destination that is unauthorized. In the case of aftermarket car electronics, it often means a large quantity of product shipped to an authorized dealer, then elsewhere and sold to consumers through that unauthorized secondary point of shipment. 

Gray Market is defined as the trade of a commodity through distribution channels that, while legal, are unofficial, unauthorized, or unintended by the original manufacturer. In the case of aftermarket car electronics, gray market goods are often intended for another country and omit the same scrutiny of import duty or tax. Thus, they are sold with either lower cost for the consumer or more margin to the seller, either of which makes it hard for ‘legally imported and taxed goods’ to be competitive.
We reached out to several manufacturers and retailers for their thoughts on the topics. To be fair, some chose to decline comment and others wanted to remain unnamed. We made every effort to acquire positive suggestions and proactive approaches, rather than engage in finger-pointing or blame. After all, regardless of anyone’s particular feelings, transshipping and gray market goods are not going to disappear tomorrow. Instead, see how retailers or manufacturers deal with it to be part of a solution or part of perpetuating the problem.
Mike Dixon of Audio Logic in Hollywood, Fla., has been in business 32 years and is a retailer for brands like Audison, Hertz, Kenwood and JL Audio. Dixon says he can afford to walk a few customers who are shoppers of transshipped goods looking for a similar deal. “When I encounter the Internet shopper who has suggested purchasing what we know to be transshipped goods, I can confidently provide a counterpoint of why it is better to buy from me than another source,” explains Dixon.
Derek Pace of Certified Sounds in Wailuku, Hawaii, has 10 years as a store owner and, being located in a completely different part of the country, has very different market density than Dixon. Still, Pace is an authorized dealer for several well-known brands like JL Audio, Focal and Alpine and does well against the challenge of competition from transshippers. “Sure, transshipped goods are out there, but out on an island where shipping broken or damaged goods back and forth to the Mainland it means my added value as an authorized retailer helps bridge the gap. We’re selling service, expertise and peace of mind,” remarks Pace.

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