Difference in the Price of iPhones in Hong Kong's Gray Market

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  • Topic: Grey market, Marketing, Parallel import
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The Price Change of iphone4 in Hong Kong's Gray Market
-How It Affects Stakeholders

On 24th June 2010, the expecting iPhone 4 was first launched in America but not yet in Hong Kong. The price in Hong Kong gray market was extremely high at that time. But after the official launch in Hong Kong on 30th July, the gray market price gradually dropped down. <Nevertheless, the case of iPhone 4 is different from many other cases, such as iPhone 3G. In 2009, when iPhone 3Gs were officially launched in China’s market, the gray market was mature and the price in gray market was much lower than the official price. Hence, sales of authorized distributors were largely affected by the parallel import.>与iphone4无关 删? -香港发售前 水货市场价格

-香港发售后 水货市场价格+行货价格==》4988港元(16GB)与5888港元(32GB) In the report, the reason for iPhone 4 price changes in Hong Kong gray market will be analyzed in details with the description of its basic distribution model. And the benefits and drawbacks discussion for different stakeholders will be followed. Finally, a concise conclusion will be drawn. Description of Basic Distribution Model

Before the official launch in Hong Kong, most iPhone 4s in gray markets were parallel imported from U.S. The gray marketers purchased iPhone 4s from the OEMs or from the American authorized retailers directly and then sold them to the end customers in Hong Kong at a superior high price to gain profits.

During first week, the supply of parallel imported iPhone4 was heavily relied on purchasing of authorized shop or second hand goods, which were sold by local customers. Surprisingly, the actual number of re-purchased iPhone4 was extremely lower than importer’s expectation. The iPhone4 price in gray market pumped up to over ten thousand dollars.

After the official launch, the gray market price went down to compete with the Hong Kong authorized retailers, who sold iPhone 4s at a relatively low price. However, at the very beginning, the price was still very high due to the short supply in the markets. As more goods were imported and more channels were constructed so that competition among parallel imports were intensified and forced the price to drop. The major reason of price dropping was the incoming launch day of local authorized dealers. Users can purchase iPhone4 at a lower price with guaranteed after-sale services in local market, while Parallel importers could not offer the same services to the demand side. In addition, the gray market’s advantages of time and place values were weakened by the authorized dealer’s competition. Therefore, parallel importers forced to lower their price and target other segments of the market (such as mainland purchasers because there was no authorized launch of iPhone4 at that time).

The basic distribution model can be described concisely in the following smart chart.

24th June 30th July time Benefits and Drawbacks Discussion for different Stakeholders 1. Manufacturers

Parallel imports are not always bad for the manufacturers and even can be beneficial in some ways. The manufacturers are more tolerant about parallel imports if they get benefits from it. Followings are the benefits of parallel imports to the manufacturers: Incremental sales, Overcome Supply Constraints, and Market Intelligence.

a) Incremental Sales
Through parallel importers, the manufactures can reach untapped markets and grey markets also reveal the existence of new markets. The parallel importers observe the demands in their local markets and then they import from the other countries and supply to the customers. Since they usually don’t sell stolen or second-hand goods, all sales from parallel importers contribute to the manufacturer. The importers sell the products for them.

b) Overcome Supply Constraints
Parallel importers can...
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