Black Market, grey market, white market ever market. If you think selling replica bags and luxury accessories is shady, take a journey to the different markets of fashion. The frontiers are unmarked, and the lines are blurry.

Fashion’s favorite poster boy of disruption Guram Gvasalia skewered the industry last year for its practice of quietly selling product on the grey market to boost sales, dubbing it the sector’s “dirty secret.” The Vetements co-founder told the Financial Times that luxury brands routinely inflated sales figures by allowing product to leak into “horrible” stores where it’s sold at a discount. The grey market refers to the trade in goods from unofficial suppliers. The way this often works in luxury fashion is a retailer buys product at wholesale from a designer, and instead of selling it directly to end consumers, sells it to another retailer or agent who isn’t approved by the brand and typically lacks the same aura of exclusivity as official sellers. The product is legitimate but sold via an unofficial channel, hence the term grey. (This is distinct from counterfeit goods, which are “black” market).

Often grey market sales are a play on price differentials. Retailers engaged in this practice typically buy product at wholesale prices, about one-third to half of recommended retail prices, and then resell it for a smaller margin to unauthorized retailers. When that unauthorized channel is based in another country — typically China, Japan, South Korea and the Middle East for luxury products — this is known as “parallel imports” because the product is sold in a market for which it was not intended and without the permission of the company that created it.

Many major luxury brands are known to turn a blind eye to such sales, or even sell directly to grey market players themselves to boost their sales revenues, with known Chinese grey market partners even coming to view product in their Paris and Milan showrooms, usually the preserve of an exclusive coterie of buyers and editors. One senior fashion insider close to several of the biggest global luxury houses described it as a “tap” that brands open or close, depending on their sales targets.

Few luxury brands will discuss the practice, though most participate in some form including Gucci, Prada, Dior, Louis Vuitton and Valentino, several sources confirmed. All of these brands declined to comment for this article. Few luxury brands will discuss the practice, though most participate in some form. “Brands tolerate grey market activity for the sake of making their short-term results better — never mind the long-term damage,” says Luca Solca, head of luxury goods at Exane BNP Paribas, referring to the impact on carefully cultivated luxury brands of having their products appear in sales channels that are less exclusive than official retailers.
“It appears what happens is retailers will often over order on a wholesale basis and then resell at a small margin to an agent often in China or elsewhere. This agent will then open a legitimate online channel to generate direct-to-consumer sales or pretend they are an authorized distributor and sell to unsuspecting boutiques often selling the product at a substantial discount,” Lock explains. This, in turn, “undermines any product that is positioned at recommended retail prices through an authentic channel, be it online or bricks or mortar.” Much of the “parallel” market for luxury goods stems from boutiques in Italy, where smaller, independent stores dominate, as well as other markets in Europe home to luxury brands and the US, according to Mario Ortelli, managing partner of luxury advisors Ortelli & Co.


“Traditionally the Italian and European stores, priced in Euro, have the lowest prices, and Italy in comparison to other markets in Europe, is the one with the highest number of wholesale accounts, so this is a source for the grey markets.
The brands most at risk are those that are most in-demand, especially when it comes to their iconic, high-value, perennial products like Chanel’s 2.55 handbag and LOUIS VUITTON sneakers. Those products offer better margins and less risk for unauthorized retailers. Comparatively, a €300 BALENCIAGA T-shirt that’s only in season for four months offers a shorter life cycle and lower margins, so it is less appealing.
One fashion insider who spoke on condition of anonymity said handbags and accessories are top of the list for grey market vendors, alongside “hot” items like BBALENCIAGA sneakers and anything from GUCCI. Retailers will often over order on a wholesale basis and then resell at a small margin to an agent often in China.
So, what should luxury brands do about it? Instead of over-producing goods that end up on the grey market, some brands strictly limit supply to wholesale accounts to help retain desirability, he told the Financial Times. But selling less, albeit at full price, runs counter to the shareholder model of chasing sales growth.


CHANEL, which is privately owned and sells its clothing and handbags exclusively via its own stores, took a different approach by harmonising prices globally in 2015 to avoid grey market sales by Daigou or personal shoppers who buy goods on commission overseas to take advantage of tax reductions, but also better serve domestic customers in China and reduce reliance on European tourism.
“We were trendsetters in this matter and definitely believe that it was the right decision taken with a long-term vision: the resale market has decreased, the traffic in our boutiques is clearly more balanced and it has given us the opportunity to better serve our clients,” says Bruno Pavlovsky, CHANEL’s president of fashion. “It also helped to fight against parallel resale markets, which benefited from these price differentials and jeopardized the business, the image, and the exclusivity of CHANEL.”


There is a market for authentic quality luxury goods with different price points but not lacking quality, which can only be regulated with great effort. The markets look for themselves, and whoever can serve them will do the business.