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An Empirical Investigation of Online Gray Markets

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  • Zhao, Kexin
  • Zhao, Xia
  • Deng, Jing

Abstract

A gray market is an unauthorized distribution channel of genuine branded products. Worldwide gray markets compete with authorized distribution channels of branded products and pose significant challenges to brand owners on the management of global supply chains. Therefore, it is important for brand owners to understand sellers’ and buyers’ behavior in gray markets in order to better address this threat. In recent years, online gray markets, a rapidly growing form of gray marketing, have seen significant growth and provide us an unprecedented opportunity to empirically investigate this phenomenon. In this study, we tracked the number of online gray market sellers and transactions on the largest Internet retail website in China for a 34-week period. We focus on two channel control strategies that brand owners can proactively adopt to manage online gray market incidents: controlling product availability and pricing. The results show that less expensive styles are offered by a larger number of gray market sellers and have more transactions. While product availability is positively associated with the number of online gray market sellers, its impact on online gray market transaction quantities is insignificant. This study provides important implications on managing global supply chains that are relevant for researchers and practitioners alike.

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  • Zhao, Kexin & Zhao, Xia & Deng, Jing, 2016. "An Empirical Investigation of Online Gray Markets," Journal of Retailing, Elsevier, vol. 92(4), pages 397-410.
    • Handle: RePEc:eee:jouret:v:92:y:2016:i:4:p:397-410
    DOI: 10.1016/j.jretai.2016.05.002
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    References listed on IDEAS

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    Cited by:

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    2. Glavas, Charmaine & Mortimer, Gary & Ding, Han & Grimmer, Louise & Vorobjovas-Pinta, Oscar & Grimmer, Martin, 2023. "How entrepreneurial behaviors manifest in non-traditional, heterodox contexts: Exploration of the Daigou phenomenon," Journal of Business Venturing Insights, Elsevier, vol. 19(C).
    3. Wang, Yingjia & Lin, Jiaxin & Choi, Tsan-Ming, 2020. "Gray market and counterfeiting in supply chains: A review of the operations literature and implications to luxury industries," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).
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    5. Gimeno-Arias, Fernando, 2021. "Participation of SME distributors in the gray market: An empirical analysis of Spanish firms," Small Business International Review, Asociación Española de Contabilidad y Administración de Empresas - AECA, vol. 5(2), pages 372-372, September.

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