Buying off the gray market

Just Riding Along Bike Shop (JRABS) is a big supporter of KINDHuman sports (previously Team TOMS cycling). The other day the owner Travis posted the following note which has caused me to put some thought in how I purchase my cycling items. I got permission from Travis to repost it here because he wants the word to get out about. You can see the original facebook posting here (https://www.facebook.com/note.php?note_id=10150445220314604), and feel free to share it as you wish.

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: http://www.bicycling.com/news/featured-stories/italian-job

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: http://www.cbp.gov/xp/cgov/trade/basic_trade/internet_purchases.xml

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
www.jrabs.com

Some of you know that I've worked at a couple of bike shops in my life and know some of the struggles the shops face. On the other hand, I'm also a consumer, who isn't in the industry anymore, so don't get the great discounts. I generally buy my stuff from a variety of sources including local shops (Rochester Cycling, Bicycle Sports and Eriks), online (Jenson, Nashbar, etc), and eBay. Heck I even have some affiliate links on this blog in a effort to make enough money to buy a Clif bar one day.

After reading Travis' post, I'm thinking that I should reconsider some of these outlets. To be fair, all of my eBay purchases have been used items from people. But I know that buying from online stores takes money away from local retail.

As I struggle with personal vs. local vs. global economy, I wonder what some of you think. Feel free to comment.

I'm on the Twitters, follow me: @AnelloGrande