lets say company manufactures smartphones and sells them through authorized retailers. However, some individuals or small businesses acquire these smartphones directly from the manufacturer or through other means and sell them at lower prices outside the official distribution network, creating a gray market trade.

the main difference between gray goods and smuggled items lies in the legality of their acquisition. Gray goods involve the sale of genuine products through unauthorized channels, while smuggled items involve the illegal importation or movement of goods, often involving counterfeit or prohibited items.

Brand dilution: Gray market sales can undermine the manufacturer's brand image and reputation. When unauthorized sellers distribute products without adhering to the manufacturer's standards or pricing policies, it can result in a perception of decreased quality or value for the brand.

Warranty and support issues: Gray market products may lack manufacturer warranties or after-sales support. If consumers encounter issues with the purchased products, they may face difficulties in obtaining repairs, replacements, or refunds, as unauthorized sellers may not provide the same level of customer service as authorized channels.

Arbitrage opportunities: Gray market activities can also be driven by arbitrage opportunities, where individuals exploit price differences between two markets. They buy products at a lower price in one market and sell them at a higher price in another market, capitalizing on the price discrepancy.(2020)

Limited availability: When products are in high demand but supply is limited, the gray market arises as unauthorized sellers source products from alternative channels or regions to fulfill the demand.

Exclusive distribution agreements: Exclusive agreements between manufacturers and authorized distributors can inadvertently create opportunities for the gray market by restricting customer access, leading them to seek alternative sources outside authorized channels.