When it comes to buying authentic products, it’s important to know the difference between “authorized” and “unauthorized” dealers.

What is an “Authorized” Dealer?

An authorized retailer has a contractual relationship with a manufacturer. Simply put, authorized dealers are granted official rights to sell the brand’s merchandise.

This relationship benefits both the retailer and the manufacturer. For manufacturers, authorized dealers ensure supply chain transparency and related sales research, pricing consistency and greater profits.

An authorized retailer benefits from recognition by the brand as authorized seller, which gives their store reputability and verifies their merchandise as authentic. Additionally, their products are covered by the manufacturer’s warranty.

What is an “Unauthorized” Dealer?

On the contrary, an unauthorized dealer does not have official rights to sell a brand’s merchandise. Also known as gray market dealers, unauthorized retailers generally obtain genuine merchandise overseas and bring it back to the U.S. for sale. However, their merchandise can be acquired from questionable sources including damaged, defective, used, or stolen goods.

Due to the questionable nature of goods sold by unauthorized sellers, manufacturers discourage the purchase of such items. In fact, brands will not honor the manufacturer’s warranty of items purchased from unauthorized retailers. This is why so many gray market sellers offer their own in-house extended warranties.

Why Sell Unauthorized Merchandise?

From Costco to Amazon, even big box stores have engaged in unauthorized retailing. Why? Quite simply, to offer lower prices. An unauthorized retailer can often purchase and then re-sell products at a lower price than an authorized retailer.

Are Unauthorized Goods Legal?

In the UK, the sale of gray market goods was recently made illegal. In the U.S., because gray market goods are not counterfeit or pirated, it’s generally legal.

What’s the Big Deal?

Those who sell gray market goods seek to profit from differences across markets, such as currency fluctuations, tax differences and manufacturer’s regional pricing differences.

Because most gray market goods are obtained overseas,  they pilfer purchases from stateside retailers. When a brand’s products are purchased overseas and then resold in the U.S. marketplace, it negatively impacts the brand’s U.S. sales.

Gray market goods can also negatively affect sales price. Authorized retailers are forced to sell their merchandise for less in order to compete with lower-priced authentic foreign products.

While some consumers may appreciate the discounted price of gray market goods, it comes at a cost to brands and legitimate regional sellers.