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  1. #1
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    Interesting Gray Market discussion as seen on BRAIN

    To quote:
    First off, I have tagged many people on this note in order to gain attention. Please "untag" yourself as you see fit. I don't mean to offend anyone. I'm not singling anyone out here, I just thought you might find the subject interesting. Also, please share this note with whomever you please. Thanks.

    Yesterday I posted that JRABS will have a new "corking policy": "There will be a 20% surcharge for the initial or re-installation of items purchased through eBay stores or overseas discounters. This fee will not apply to items purchased through any U.S. dealer with a legitimate store front." This posting has stirred up much controversy, which I think is good. This policy will be in effect from this point forward. I will also be adding this line: "we will offer a 10% discount on installation for products that are purchased through us".

    Businessdictionary.com defines Gray Market as: Genuine branded goods (called 'gray goods') sold outside of an authorized sales-territory (or by non-authorized dealers in an authorized territory) at prices lower than being charged in authorized sales territories (or by authorized dealers).

    Anytime a U.S. consumer purchase products from dealers such as Chain Reaction Cycles & Total Cycling in Ireland, or ProBikeKit.com in the U.K. is buying gray market merchandise. Unfortunately the laws in Europe are quite different, as are the channels of distribution. It has nothing to do with the value of the Dollar vs. the Euro. European bicycle shops buy directly from the manufacturer. U.S. shops buy from a distributor. The distributor buys from either the manufacturer or an importer. Not only is there a mark-up for this "middle man", there are also shipping costs and import tariffs. Instead of charging MSRP, or slightly below it, the aforementioned dealers (and others) have decided that instead of making a good margin on a few products, they would rather make less margin on many products, in order to get there name out. These dealers are able to sell products for far less than U.S. retailers; and in many cases, less than what we can buy the products for from our distributors.

    The majority of the time, the consumer has no idea what's going on. They just see that the price is less from these gray-market suppliers and think that it's a great deal. I don't really blame them, as it does look like a good deal.

    The most common manufacturer to fall victim to this practice is my favorite bicycle components manufacturer, Campagnolo. As you may know, being a Campy Pro Shop is something that I'm proud of and passionate about. To learn more about Campagnolo, and there current situation in today's global climate, you can go here: Can Italian Component Maker Campagnolo Survive? | Bicycling Magazine

    Everyone knows that the global economy is in great trouble, and jobs are scarce. As some of you may know, I have had to lay off John and Chad, and it's just me here now, trying to keep JRABS in business through the winter. Almost every day I have some sort of gray market product come through here, usually from consumers who have trusted me to work on their bikes for years. I have been doing this since 1986, and even as a little kid before that I was doing mechanical work on bikes for my friends. Basically, it's safe to say that I know what I'm doing. However it's very difficult and frustrating to have these products brought in to me every day when I am just trying to stay in business. To this day, I have not brought home one dime from work since I opened the store in on my 38th birthday (9/13/09) - seriously. One might say "You should be lucky that anybody is bringing you any business at all", and maybe that is correct. However, it goes deeper than just dollars - it's about what's right.

    When one buys from these companies they are: a) putting money in the pockets of somebody unknown, b) hurting the local economy, c) getting products with no warranty whatsoever, d) dealing with poor customer service after the sale - try to return something to them e) Could be in violation of U.S. Custom's import tariffs (everything over $2,000 must be reported - I STRONGLY recommend reading this: Internet Purchases - CBP.gov

    The buyer becomes the importer, and is responsible for all duties paid. The seller could care less. JRABS has reported violators, and will continue to do so. I have to do what I can to protect my business and the local economy. Whenever gray market purchasers complain about the unemployment rate, the value of the dollar, etc. they should look at themselves as being part of the problem. Could you imagine going to your favorite Italian restaurant and when the waiter says "Would you like some freshly grated parmesan cheese?" you pull out your own that you bought online and say "Yes, but I brought my own, so if you don't mind grating it over my plate for me that would be great. I bought this Italian D.O.P. Parmesan Reggiano on the internet." It sounds silly, but it's the EXACT same thing as taking your Italian bicycle parts to the local bike shop and asking them to install them on your frame, when you could have purchased these items from your LBS.

    Restaurants charge a "corking" fee for pouring the wine that the customer brought in for the exact same reason that I will charge this extra 20% on top of regular labor rates for gray market purchases. I have absolutely no problem with products that were purchased at another store that plays by the rules, even mail order. I will gladly install these items, or even used items off of eBay, for my regular labor rate. I will reward my loyal customers who purchase their products from JRABS with a 10% discount on labor.

    Thank you for taking the time to read this, and I welcome your opinions. I'm just trying to do what's right, enjoy what I do, and keep my business afloat.

    In closing, I ask that the next time you consider purchasing from one of these companies, to please consider either my store or another U.S.-based shop with a storefront. All you have to do is ask for the best price.

    Thanks again,
    Travis


    Thanks again,
    Travis
    301.963.1273
    travis@jrabs.com
    Just Riding Along Bicycle Shop
    So if it wasn't a case of tl;dr, discuss.
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  2. #2
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    total FUD.

    -Most sellers in europe buy from distributors as well and not directly from manufacturers

    -Warranty apply to goods bought at CRC or Total Cycling or any other european sellers even if returning the good can have an higher cost. Better : the european union laws define a minimum warranty of 2 years for any product sold in eu, even if the manufacturer says it is only 1y.

    European sellers make indeed some money by selling some specific goods to us citizen. But as a european, I know that a lot more products are also way cheaper in the USA than in europe. It goes in both sense and I know a lot of people who are renting an "US Adress" just for this specific purpose. The author of this rant look emotionnal because he lose a lot of money in the campagnolo aera but he could surely compensate this by shipping us branded products to europeans.

    In the end, this guy should just understand he is in a global world. If his business model doesn't work, he just need to change it or look for another job.

  3. #3
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    A couple things jumped out at me:

    1: The charge of labor to install parts purchased at his shop. Quite a few shops will install it for free if you buy from them.

    2: The 20% surcharge for "gray market" installation. What stops someone from saying they bought it from an online shop like JensonUSA or Competitive Cyclist? His model will only work as long as people don't hear about it and "just tell him you bought it at XXX online retailer."

    3: (maybe someone in the industry can answer this: Platty?) Aren't those european places like Ribble and CRC authorized dealers of things like Campy components? Aren't they then allowed to sell said components online?
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  4. #4
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    I've never heard of such a ridiculous policy. First, he's in his shop, the lights are on, and he is getting income from installations. What is bad about that?

    Second: is he requiring proof of purchase? How about if I bring him a new part but claim I bought it used from a local private party or ebay? A lot of used stuff, especially take-off stuff that really hasn't been used, does look like new.

    He's a foolish businessman who does not accept the real world economy. Wishing things were different doesn't make it different.

  5. #5
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    " JRABS has reported violators, and will continue to do so. I have to do what I can to protect my business "

    So he rats out his customers to Customs? He loses all sympathy right there. I can see CBP swat teams kicking in doors in search of unreported sets of Clark's Cables.

    His "article" is more like a rant, and he is factually incorrect in a few places. It doesn't look like he understands the global marketplace at all. Whether he likes it or not, the world has changed, and it is not going to change back to 1960 because he stamps his feet and pouts.

  6. #6
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    The ease of internet shopping and the speed of international deliveries has made the world small and accessible for purchasing.
    Sometimes I ride my bike to nowhere, to see nothing, just so I can ride my bike.

  7. #7
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    I live in Spain and buy nearly all bike supplies in the US. If there is any one in Europe who has lower prices I wish someone would point them out. This is serious bike country Armstrong wintered about 20 miles away
    for years. Go into a LBS and it looks like you were transported to Taiwan. Ed

  8. #8
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    No problem. He's reconciled himself to the reality of the Grey market and adjusted his pricing accordingly. Nothing unusual. Manufacturers, distributors, online shops, and people in other industries do it all the time. It's a standard capitalist practice.
    However if the was smart, he would have presented it as, "My labor rates are increasing. However, just as I offer free lifetime tuneups with a bike purchase, I'll offer discounted installation rates for parts purchased in house."

  9. #9
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    Quote Originally Posted by robdamanii View Post
    2: The 20% surcharge for "gray market" installation. What stops someone from saying they bought it from an online shop like JensonUSA or Competitive Cyclist?
    I don't know for sure, but I believe for some products (cameras, for example) the unit's serial number encodes what market the product is for. Hence a customer coming in with a "European market" serial number product in new condition for installation would probably be what he checks.

  10. #10
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    This is clueless and I don't expect him to be in business much longer.

    Buying form European shops is NOT gray market. Just because some European shops can buy direct and NOT through distributors, its gray market?

    I think he shows how US shops are getting ripped off, buy not able to buy direct and therefore offering US consumers better and more competitive rates.

    Here I think he is way off base and flatly WRONG:

    When one buys from these companies they are: a) putting money in the pockets of somebody unknown, b) hurting the local economy, c) getting products with no warranty whatsoever, d) dealing with poor customer service after the sale - try to return something to them e) Could be in violation of U.S. Custom's import tariffs (everything over $2,000 must be reported - I STRONGLY recommend reading this: Internet Purchases - CBP.gov
    I have bought form CR, Total Cycling, Ribble and PBK. Everything had a standard warranty. Shimano USA even warrantied pedals I bought form PBK, no questions asked.



    He has every right to charge a "corking fee." but to "rat out" customers for not paying duties? How does he know? Does the customer have parts shipped DIRECT to his shop and he accepts the package? I wonder if US laws make HIM the one guilty as he is accepting the parts and not paying duties.

    Is it my fault if USPS does NOT want to charge my duties? How does he prove this? If I don't offer a receipt? Even if I did, I wonder if the post mater general will come after me?

    All I would say to this guy is, welcomed to the 21st century and say good buy when your shops lights go out. You must adapt to survive or say good night.

    I mean, I understand his point to a certain extent. Its sad, when I can buy parts overseas cheaper than say J&B Importers and still get a full warranty form NON-GREY market parts.

    This is a US shop issues with middle men, not over sea shops. That is what must change.
    DIRT BOY

    "Pain is a big fat creature riding on your back. The farther you pedal, the heavier he feels. The harder you push, the tighter he squeezes your chest. The steeper the climb, the deeper he digs his jagged, sharp claws into your muscles." - Scott Martin


  11. #11
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    Yeah. "Grey market" means sales channels that are not authorized by the manufacturer. Manufacturers have generally policies regarding their authorized sales channels but will also modify these in specific agreements with individual distributors and retail companies. If it complies with the manufacturers policies and agreements, it's not grey market. e.g. If SRAM's agreement with Ribble doesn't prohibit them from selling components into the US, those sales aren't' grey market.

  12. #12
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    I think he's completely within his rights to do it.

    A lot of us her in the US complain about how all our jobs are going overseas and then we turn around and buy $15 jeans at Old Navy, made in sweatshops in Bangladesh for a dollar a day.

    Protecting your local economy means paying more, even when you could pay less. That's not an easy thing to do. It's counter-intuitive and it hurts your wallet. BUT, it helps your neighbors, and when they do well, you do well.

    When I bought my custom frame a couple years ago, I could have gotten a stock, made in Taiwan frame for a lot less and it probably would have been 90% of the bike I had made for 30% of the price. But if I don't support my businesses, who will? I picked a builder that lives and works in my city- The money I give him will go right back into my local economy- he'll pay rent, he'll buy his welding and brazing supplies locally, he'll go to local restaurants, buy local beer, employ local designers to create his t-shirts and logos.

    So, if JRABS wants to charge more for people bringing him parts from overseas, good for him.
    Quote Originally Posted by JustTooBig View Post
    Your Logical-to-Dumbass ratio is way out of kilter, buddy

  13. #13
    classiquesklassieker
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    We can't tell him how to run his shop any more than he can tell us how to shop and spend our money.

    It's perfectly within his rights to enact his pricing model for service and goods. Whether it's a rational decision is another matter. It's also within his rights to rant to everybody who cares to read it or to listen to him, even if his rant contains errors and unfair comparisons.

    Basically he's punishing his customers who don't follow a certain purchasing model. Whether they stay around and accept the punishment, he'll soon find out.

  14. #14
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    I find it more than a little ironic that he has a "privacy policy" on his web page yet he seems to be quite willing to abrogate the privacy of his customers to "report" them, possibly erroneously, for non-payment of duties and taxes.

    I suspect there will soon be additional retail space available in Laytonsville, MD.

  15. #15
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    Quote Originally Posted by Lotophage View Post
    I think he's completely within his rights to do it.

    A lot of us her in the US complain about how all our jobs are going overseas and then we turn around and buy $15 jeans at Old Navy, made in sweatshops in Bangladesh for a dollar a day.

    Protecting your local economy means paying more, even when you could pay less. That's not an easy thing to do. It's counter-intuitive and it hurts your wallet. BUT, it helps your neighbors, and when they do well, you do well.

    When I bought my custom frame a couple years ago, I could have gotten a stock, made in Taiwan frame for a lot less and it probably would have been 90% of the bike I had made for 30% of the price. But if I don't support my businesses, who will? I picked a builder that lives and works in my city- The money I give him will go right back into my local economy- he'll pay rent, he'll buy his welding and brazing supplies locally, he'll go to local restaurants, buy local beer, employ local designers to create his t-shirts and logos.

    So, if JRABS wants to charge more for people bringing him parts from overseas, good for him.
    Sure. But his comments on the grey market thing are off base and flatly wrong, on the shops he mentioned, period. But he can charge what ever he wants.

    A local shop did this to me, WITHOUT telling me. So They lost what little business I gave them and plenty more. I no longer send my friends, customers and people form my spinning classes to buy stuff from them.
    DIRT BOY

    "Pain is a big fat creature riding on your back. The farther you pedal, the heavier he feels. The harder you push, the tighter he squeezes your chest. The steeper the climb, the deeper he digs his jagged, sharp claws into your muscles." - Scott Martin


  16. #16
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    Reading that, I took it as he was reporting the overseas shops he believes are unscrupulous...

    Here's a question, as I've never bought from PBK, Ribble or any of the overseas discounters- Are you getting an actual boxed item or are you getting a takeoff?

    If yer getting takeoffs, that's probably how they're getting around any contracts they have with SRAM, Shimano or Campy. Which is gray indeed.
    Quote Originally Posted by JustTooBig View Post
    Your Logical-to-Dumbass ratio is way out of kilter, buddy

  17. #17
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    Most of us have somewhat fixed amount of money we can spend on cycling gear. If I can buy parts and gear for lower prices, I will buy more of them. I will also spend more on labor costs at my LBS to install parts. However, if I have to pay the ridiculous, inflated MSRP for most bike equipment, clothes and gear, I will simply cut back on my purchases -- way back. That means I will also spend much less at the LBS because I won't upgrade parts.

    One of my main reasons for buying on-line is better selection. If I go to my LBS, 9 times out of 10 they will not have cycling clothes in my size, the brand I am looking for, or the color. The same goes with other components such as bike lights, saddle bags, fenders, you name it. If I order the parts through my LBS, I have to wait for him to order the gear, get them delivered and then go pick them up -- and pay sales tax on top of that. On the other hand, if I order on-line, I have unlimited selection, can find exactly the size/color/brand I am looking for, and usually get a better price, free shipping and no sales tax.

    The ranter in the OP seems to be oblivious to the fact that most people are financially strapped these days. Many people have lost jobs, had pay cuts or not seen a pay raise in many years. Yet bike companies keep raising prices for components, clothing and other gear. So most cyclists either have to find ways to buy gear for lower prices or cut way back on their purchases. Most of us are not the guy who walks in the LBS and orders a Pinarella Dogma with Campy Record parts and Zipp wheels.
    Last edited by tarwheel2; 12-22-2011 at 09:13 AM.

  18. #18
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    JRABS mentality = Kodak mentality.

    Meaning, things change. Adjust.

  19. #19
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    That's why I do my own builds and repairs. I never use local shops.

  20. #20
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    Quote Originally Posted by tarwheel2 View Post
    The ranter in the OP seems to be oblivious to the fact that most people are financially strapped these days. Many people have lost jobs, had pay cuts or not seen a pay raise in many years.
    True,, but to play devil's advocate, how is buying cheap stuff from overseas going to help the economy here?

    How is buying from Nashbar going to keep money in your local economy where it's going to benefit you in the end?

    As long as we all concentrate only on our own finances and forget that we are all part of the economy, things aren't gonna get better.
    Quote Originally Posted by JustTooBig View Post
    Your Logical-to-Dumbass ratio is way out of kilter, buddy

  21. #21
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    Quote Originally Posted by Lotophage View Post
    True,, but to play devil's advocate, how is buying cheap stuff from overseas going to help the economy here?

    How is buying from Nashbar going to keep money in your local economy where it's going to benefit you in the end?

    As long as we all concentrate only on our own finances and forget that we are all part of the economy, things aren't gonna get better.
    Everyone is just trying to get by, not just bike shop owners. I'm not going to spend $80 on a tire at the LBS that I can buy on-line for half of that amount and easily install myself. I'm sure that bike shops make the same sort of choices all the time. Are they willing to pay twice as much for the exact same product, just to support their middlemen?

    On the other hand, I am more than willing to pay my LBS for repairs/maintenance and buy the parts I need for repairs. I spend A LOT of money at local bike shops, but not ALL of my cycling budget.

    Here's a good example. I recently bought a new bike light for commuting. After comparing various models, I bought my choice on-line for about about 30% less than MSRP and received the light in about 2 days, with free shipping and no sales tax. To buy the same product at a bike shop, they would have had to order it for me because few shops around here stock many bike lights and are unlikely to have the particular brand and model. So, I would have had to wait at least a week to receive the light, make another trip to the bike shop to pick it up, and pay 7% sales tax. As a consumer, how am I benefited in any way by going through the bike shop? It takes me more time, is more inconvenient (2 trips to the LBS), and costs significantly more money.

  22. #22
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    I have an opinion on this, but I'm not sure that I'm ready to spend the time writing it all out. In the meantime, I'll post this useless post so that I'm subscribed to the thread.

    I'll just say that I agree with him and I disagree with him. Oh, and Lotophage seems to have it figured out.
    Other countries need to stop hatin' or we'll unfriend them. - Christine

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  23. #23
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    I like Campy components and Continental tires but don't have a lot to spend. It seems like the US importers have determined that these products should fetch a premium price; their wholesale price is probably greater than what I pay shipped from the likes of Ribble, PBK, etc. So the shop owner should be pissed at the US distributors. I'm just doing what I need to do to have stuff I like - that shop owner can get stuffed if he thinks I would darken his door with an attitude like that.

    My last Ribble purchase consisted of Campy Zonda wheels, Centaur cassette, and some Conti GP 4000 tires - each at about half of the best US price. I don't think Euro cyclists (where the sport has more working class roots) would or could put up with some of the prices we pay. I do all my own work, so have little use for shops who want to behave like Lexus dealerships.

  24. #24
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    Quote Originally Posted by PlatyPius View Post
    I have an opinion on this, but I'm not sure that I'm ready to spend the time writing it all out. In the meantime, I'll post this useless post so that I'm subscribed to the thread.

    I'll just say that I agree with him and I disagree with him. Oh, and Lotophage seems to have it figured out.
    I was waiting to hear your take on it.
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  25. #25
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    Its funny, i 've read on here over the years how people complain about driving fifty miles to get to a bike shop to have work done. The only way a bike shop stays in business is by making money. If you want to have a bicycle shop close to you that does good work you have to throw them some business also. Otherwise they will fold up and go away.

    Now granted, im not getting reporting your customers to the goverment. But im not sure a "corking fee" is right either. You have it posted that you charge X number of dollars to instal a der, then that should be the price. Besides a 20% extra fee is a sure way to drive buisiness away from the shop. My thoughts are 50% of something is better then 100% of nothing.

    Having installed many parts over 20 years i have a simple view on it. I greet the customer with a smile, oggle and go wow over their parts, give them great service and treat them well. And make sure to add that we would like a chance next time to fill their parts needs. .

    Bill

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