Should You Buy Grey Market Smartphones?

The world of grey market is a large and complex one, and there can be some legalities depending where you’re from.

Just the past few weeks, we saw Facebook posts from a particular content creator prohibiting users to buy from Grey Market units as they are “smuggled”. A pretty strong and bold claim to say the least. This can lead to confusion and will probably make those who buy unofficial units have second opinions.

But really though, should you buy grey market units? What are the risks and consequences you’ll get if you do? Are they truly illegal and “smuggled”? Read on below so we can answer those questions.

WHAT IS GREY MARKET?

According to Investopedia, “Gray Market” (or “Grey Market” in British spelling standards) is a type of distribution channel that is legal but not authorized or intended by the manufacturer. They are also sometimes known as “parallel market”. In the context of electronics, say, smartphones, there are going to be limitations when you purchase a grey market unit, which we will discuss later.

There is another type of grey market called green market. In this case, buyers resell a second-hand grey market good. If you see sellers online selling phones like the Pixel 3a, then that is a clear example. It should not be confused with green marketing wherein businesses sell goods under the pretense that their products are environmentally friendly.

Moreover, grey markets are also not to be confused with the illegal black market. These products are truly smuggled, pirated, or counterfeited. Unlike grey market products which are genuinely made by a company and passed certain standards, black market goods are not.

There are certain times that a user happens to own a grey market unit inadvertently because they joined a contest or giveaway that caters to a global audience. In our case, we were rewarded with a grey OnePlus Nord 3 with a European version of the Global ROM from the OnePlus community app, effectively making our Nord 3 a grey unit. Checking on the regulatory section, there is no certification made by the NTC in the Philippines, only CST of Saudi Arabia, MCMC of Indonesia, and a Europe label. The official Nord 3 sold here is only sold in green.

Grey market products are not specific to phones. Sometimes, small distributors may receive donations from factories if they have a surplus, and some are bought from a place where the product is intended to be sold, then resold once they go back to their own country that is not the intended market. We’ve traveled and scoured Greenhills, a place widely known to have several grey market products from smartphones to general merchandise, and surprisingly, it was pretty hard already to find grey market phones there. We found only two stores that sell grey market electronics, such as the Microsoft Surface Pro and the Google Pixel series, and the rest either have counterfeits or phones that are legitimately sold here, such as the Infinix Hot 40 and Itel A70.

However, there are many collectibles that are being sold in the Shoppesville area that are meant to be sold in Japan only, as is the case with the Anya Forger figure above manufactured by Bandai. Underneath, you can find “this product is not licensed for the use and sale outside Japan”. Does this mean it is smuggled? Not really. If it was, the store should have been shut down by now by the local authorities as that would mean they are operating illegally. However, the business is registered with the BIR and also sells different products like milktea and cofee so this means that the store owners purchased a unit in Japan either physically or online and then resold it here in the Philippines.

Grey market imports are much more common with automobiles because they are much more regulated. In the United States for example, the Nissan Skyline GT-R R34, a popular sports car, is prohibited on US roads. However, it is legal to own one, just not drive one. So, it is one of the most sought-after vehicles in the country. Also, without the grey market, the Japan Domestic Market (JDM) scene will not be as popular as it is now internationally.

EXAMPLES:

We’re certain that you may have seen a smartphone reveal at least once in your life. You saw the specs, the interesting and convincing price tag… then you see it’s only available in China and in selected areas. The biggest culprits of these are Xiaomi’s Ultra series flagships and Google’s Pixel line. Until the Xiaomi 13 series, Xiaomi’s Ultra flagships are only available in Mainland China, and while the Xiaomi 14 Ultra is now available across many countries, the Philippines is not included and so people who wished to get the Xiaomi 14 Ultra would have to do so in different sales channels, such as Amazon and JD.com in China.

Another example of this would be realme’s latest GT series. While the first GT made global presence, its successors do not. Phones also leave or are absent in a country when a brand is falling behind. LG’s phones did not make a presence in the Philippines after the G6 was launched due to falling interest and its noncompetitive pricing.

GREY MARKET SELLERS

You can find many grey market phones in Lazada, Shopee, and Facebook marketplace. You may find a store (e.g. Xiaomi Mall) that has the “Lazada Mall” or “Shopee Mall” badge and they seem to be affiliated with the manufacturer. You also notice that they price their products way lower than the official SRP. While they are legitimate, these phones are shipped from China and lack warranties or local support. While sometimes they do have the name of the manufacturer as their store, they do not necessarily mean that they are affiliated with them.

Xiaomi Zone is a store dedicated to selling Xiaomi products and have a “LazMall” badge. However, they are a grey market seller not affiliated with Xiaomi Philippines. Not only that, they also sell the OnePlus Ace 3 which obviously an authorized Xiaomi store will never do. Many of these grey market sellers ship from overseas as they take their inventory from China.

Sometimes though, grey market is the only way to get a limited edition product directly. An anticipated collectible are OnePlus’ Genshin Impact-themed phones. Typically, they are only available in China but the latest OnePlus 12R Keqing Edition are actually sold in the US and in Europe, but not in the Philippines or anywhere else in Asia. The official OnePlus here in the Philippines will never sell these as those phones are only intended to be sold in select regions. You can find them in Amazon, through a simple Google search, or if you’re lucky, a trustworthy grey market seller in Shopee or Lazada. Even those are hard to find if you aren’t searching thoroughly.

Also do note that many grey market phones have China ROMs built in that are converted to global. This is included in the purchase process but that also means the phone has been unlocked in some way. Many phones with unlocked bootloaders are void to warranties, so be careful with that. On the other side of that coin, some sellers sell the phone with the Chinese ROM without changes and you have to manually convert it yourself. We’ll discuss the difference between Global and China ROM in another article as this one is pretty long already and we don’t want to go down a deep rabbit hole. Just know that China ROMs don’t have Google services and use cellular bands applicable to China only.

ADVANTAGES:

The main advantage of getting into grey market is to purchase a certain product that is not available in a certain country. Buyers approach these sellers for the novelty and rarity. In the context of smartphones, grey market buyers have the advantage of either getting the phone at early access or purchasing a unit that has way better specs and lower pricing than the equivalent phone that is brought here. For instance, you can get a Redmi K60 Pro at a fraction of the cost than the equivalent POCO F5 Pro.

Many grey market sellers purchase several units from the origin country (in the case of smartphones, typically in China), resell them to their target market at a slightly higher price than the origin country, but lower than the market price. For instance, the iQoo Neo9 which is not available in the Philippines is currently being sold by Winmishop for PHP 30,990 (16/512). It is a flagship phone. In China, the phone costs CNY 3,199 (~PHP 25.2K) The closest comparable phones to it are the OnePlus 11 and Xiaomi 13 Pro. Its highest-tier offering are sold for PHP 49,990 (16/256) and PHP 59,999 (12/256) respectively which is nowhere close to what the Neo9 sells for. Grey market goods are also not bound by import duties and hence why they can sell them at a cheaper price, even competitively.

Another advantage of purchasing a grey market unit is the novelty, value, and rarity, as in, many of these products are collectibles. Through grey market retailers, you can get a limited-edition Redmi K70 Lamborghini Edition or the OnePlus Ace2 Pro Genshin Edition which, again, will not be sold by official channels.

DISADVANTAGES:

As grey market items are not officially distributed by the original manufacturer, you can come across some problems. For instance, many smartphones sold only to China are shipped with China ROM which lacks any Google services. So it’s like owning a Huawei device. However, unlike officially sold Huawei phones, the liability of a grey market phone lies with the retailer and the buyer. Some retailers offer to convert China ROM to Global ROM, sometimes with an additional fee. This means unlocking the bootloader and that normally voids the warranty.

Speaking of warranties, grey market items have no guaranteed parts in case they break. So don’t expect looking for a Google Pixel display replacement in the Philippines, it’s not possible since Google does not sell their phones here. Software updates are also a challenge and you have to do that yourself manually. Also, since grey market phones have cellular bands applicable only to countries where it is sold, you may not get the full experience. So there might be cases when you cannot have 5G services even though the device supports it, just like the situation with one of our colleagues who happens to own a Google Pixel 6. If you purchase a China ROM Huawei Mate 60, you can’t take advantage of its satellite communications technology as that only applies to China.

Also, while legal, there are still some challenges to it. For instance, many grey market phones are not exactly NTC-approved so you really won’t get the network bands that are applicable in the Philippines.

Since these grey market phones ship from overseas, getting parts and servicing are a hassle. You have to ship the phone back and it can take months before the phone gets back to you, same goes when you purchase it online, it can take a while before they arrive and many sellers do not offer Cash-on Delivery (COD) which adds security risks.

Grey market phones can also hurt a brand’s equity. These companies are not getting the sales they deserved. Also, the lower price tag can cause confusion among customers who sometimes already scream OVERPRICED at an officially-sold phone, even though they are not. Take a look at the above image. It shows the same phone, the OnePlus 11 at different price tags but also different types of ROMs. The Global one is the official price tag in the Philippines while the China ROM is grey. Checking through the post’s comments, there is a commenter that perceives the phone as expensive when in reality, they are not. Also, one commenter even recommended a OnePlus Ace Pro, a phone that is sold here as the OnePlus 10T at a more expensive pricing.

Brand image is also at risk with the grey market. If the phone a consumer buys does not reach their expectations, then they will associate that with the brand and prevent them from purchasing any further. This is also why many authorized sellers do not honor them.

Not being bound by import duties is also a double-edged sword, as while customers have the advantage of getting the phone or product for less, the government is not getting any import taxes from it.

WHAT BRANDS DO?

To combat grey markets, brands usually sell the same phone under a different name. The OnePlus Nord 3 is sold in China as the OnePlus Ace 2V which can also be a problem since this can add to a level of confusion. Users might see a listing online for the Ace 2V at a lower price against the Nord 3 at a normal market price. They may instinctively purchase the Ace 2V due to that without knowing they’re simply getting a Nord 3 with China ROM. Xiaomi is a huge culprit to this branding scheme. The Redmi K70e is only sold in China but resold elsewhere either under the Xiaomi brand or POCO brand, whichever market segmentation the company decides. However, there are still users who purchase the Redmi K70e because it is priced lower while also getting the same specs as the POCO X6 Pro.

Another way brands combat it is through warranties and protection. As mentioned in the advantages section, official products get guaranteed servicing and parts unlike the grey ones. If you want to get your phone serviced, you have to approach a third-party technician which can cause trust issues unless you know them personally.

Finally, many smartphone brands offer flash sales and huge discounts so that they can match or closely match the prices of grey market units. Not to mention, they watch over their sales channels and reach out to both the government and third-party retailers so that they can sell their products at ease while also benefiting the country with tax incentives and the reseller with a peace of mind.

SHOULD YOU PURCHASE A GREY MARKET PHONE?

The answer is: up to you. Just know the risks of it, mainly the lack of warranty and support. Are they smuggled? Absolutely not, however, they also do not benefit the brands that sell these lower-priced products and they also do not help countries economically. However, they are far more cost-effective for consumers since they offer more features at a strikingly low price point than the ones available at the market.

If you’re a novice, you might find it a hassle to boot Global ROM from China ROM. In addition, not all grey market sellers are trustworthy. Some of them do not offer cash-on delivery so when you pay a huge price, when it gets lost, it’s also a huge toll on you.

If you’re careful, you can live with the grey market phone without having to service it however it is still a better option to have the guarantee. If you’re into custom ROMs, then you might not have any issue on the software side of things.

So, go ahead purchase that grey market phone, just be aware of the risks it will give you. Grey market phones are far more limiting software-wise, especially with certain network bands.

Source: Brand Alignment, Investopedia, Wikipedia, Dentsu Tracking