Along the crowded counters of Bi-Rite Photo in midtown Manhattan, bargain hunters contend not only with the usual bewildering selection of cameras and lenses but also with a choice of prices for the same item. The popular Nikon FE-2 camera, for example, costs either $279.50 or $239.50. What's the difference? Top dollar buys a camera backed by an authorized U.S. Nikon distributor. For the lower price, a buyer gets the same machine but with only Bi-Rite's guarantee.
Welcome to the world of the gray market. Embraced by bargain hunters at the same time that it is cursed by conventional retailers, the gray market thrives by selling brand-name cameras, consumer electronics, personal computers, cars and even excavators without the imprimatur of a manufacturer's authorized distributor. The products do not have either the standard warranty or the higher markup. Unlike black-market trafficking in stolen or counterfeit goods, gray-market trade is perfectly legal and has even been encouraged by the Reagan Administration.
The gray market offers considerable bargains for the wary consumer and has grabbed about a $5.5 billion chunk of the nation's retail trade. This includes $ an estimated 30% of high-quality camera sales. These goods are sold across the country by such giant chains as K mart and Montgomery Ward, as well as by local specialty outlets. Some stores carry both gray-market products and normally discounted goods.
Perhaps the best-known retailer of gray-market goods is New York City's 47 St. Photo, which last year sold about $100 million worth of cameras, personal computers and other products through four stores and a mail-order operation. The cramped and chaotic original outlet is located in mid-Manhattan above a deli and reached by a dingy staircase. The store, though, is stuffed armpit- to-elbow with bargain hunters: pinstripe lawyers who are on their lunch hour, families in from suburban New Jersey, Japanese bankers, white-robed Egyptians, high-decibel hagglers in Spanish, Hebrew and Korean.
Many gray-market retailers, including 47 St. Photo, contend that they are sharing with American consumers the benefits of the dollar's purchasing power abroad. Despite its recent downturn, the dollar is still worth 19% more against many foreign currencies than it averaged from 1980 to 1982. That should mean cheaper imports in the U.S., but many American distributors have decided to pocket the profits rather than lower their prices. Yves Saint Laurent's Opium perfume, for example, has climbed from $135 an oz. in 1980 to $165 an oz. today, although the cost of the perfume to the importer has simultaneously fallen by about 50%.
Enter the gray marketers. They buy their products in Europe, Asia and elsewhere instead of getting them from authorized U.S. distributors. K mart last year spent about $100 million on gray-market imports, including Swiss- made Accutron watches that it sells for less than $100, or about half the manufacturer's suggested price. Says Robert Stevenson, K mart vice president: "There is no reason to pay unreasonable prices to the manufacturer's U.S. distributor when you can obtain exactly the same products at lower cost overseas." Importers have even invaded the market for heavy machinery. Caterpillar excavators imported from France sell in the U.S. for between $85,000 and $215,000, 15% less than an American-made model.