How can those online merchants be selling iPhones and Samsung phones at $$$ cheaper than Australian retailers or the actual manufacturers? Things to know and consider before you go grey...
You've seen the ads right? I can't miss them. Every day, landing in my inbox, are offers for cheap smartphones from all the big online deal merchants - Kogan, Groupon, Catch of the Day, Your Deals.
How can they offer these brand new devices hundreds of dollars cheaper than the price charged by the manufacturer, or in the shop down the road?
Where are the phones from?, is it safe to buy a phone from an online merchant?, and what else do I need to look out for?
Buying on the Grey Market
The practice of buying goods online from overseas is referred to as the grey market. As opposed to the black market where goods are traded illegally, the grey market is completely legal. One of the biggest brands in the world - Amazon - operates in the grey market.
The Grey Market, sometimes called a parallel market, is "the trade of a product through distribution channels that are legal but unintended by the original manufacturer."
Smartphones sold on the grey market are most often genuine, authentic and original products.
A description of the product on the seller's website will state clearly whether it is brand new, never been used, and in original condition. The seller should also give full product specifications so consumers can be sure it is compatible with the Australian marketplace.
Why is it so tempting to buy on the grey market ?
There are two main advantages to buying a smartphone online - price and availability.
The cost of that latest smartphone will be cheaper online than you can buy it in Australia - from either the manufacturer's outlet or from local retailers. If it wasn't, there would be no point in the offer!
There are several factors that make it possible for online merchants to sell at a lower price and they are all legitimate. These include
- International currency fluctuations
- Regional pricing by the manufacturer making it cheaper for the merchant to source the device in an overseas market
- Australian taxes applied to local retail sales are not applied to grey imports
- The merchant leveraging the purchase price by bulk buying
The second major advantage of purchasing on the grey market is being able to buy products which have not yet been released in Australia or which have sold out locally.
Always, in Australia, when Apple announces the launch of a new iPhone, we experience a constraint on the supply of existing end-of-life models and the arrival of the new iPhone is often a month or more behind other overseas markets. The same goes for Samsung devices.
If you can't wait then the online stores might be for you.
Three Important Things to Consider Before You Buy
The upside of the online purchase is fairly obvious, but what are some of the pitfalls we should be looking out for? These can be grouped into three main areas
- Origin of the Device - where has it come from (and where has it been!)?
- Condition of the Device - is it genuine, brand new, undamaged?
- State of the Warranty - what if something goes wrong?
1. Origin of the Device
In itself, the origin of the device is not that important as all smartphones for sale in the Australian market have been manufactured overseas.
Apple has its major manufacturing bases in China with components made all over the world including Japan, Korea, Taiwan, Czech Republic, Netherlands, France, Italy and the United States.
Half of all Samsung smartphones are made in Vietnam, with other manufacturing sites in China, Brazil, India, Indonesia and of course Korea.
The main 'concern' with purchasing a grey import is not where the device was made, but that the device has not been manufactured specifically for the Australian market.
Smartphones made for the Australian market may be made to different specifications than smartphones which are compatible with Australian networks but were designated for sale elsewhere.
So in reality what difference does it make if the device was not made specifically for the Australian market?
International Model devices usually arrive with a foreign charger, however Kogan provides an Australian compliant generic charger for local use.
- Telecommunications regulatory arrangements in regard to performance requirements (such as accessing emergency services)
- Electromagnetic energy (EME) regulatory arrangements in regard to transmission power levels
- Electromagnetic compatibility (EMC) regulatory arrangements (where the device is capable of operating in modes other than transmission)
- Radiocommunications regulatory arrangements (where the device includes inbuilt Wi-Fi or Bluetooth capability).
2. Condition of the Product
Most reputable suppliers will state clearly if you are purchasing a brand new, never used, sealed device.
However, this is really something that will have to be taken on trust. Most of us wouldn't know how to spot a fake device, or a used device.
Online forums have 'outed' suppliers who have bought up returned devices in bulk, reconditioned them and onsold them as new - even going so far as to 'seal' the box.
One tip - if your local Australian charger is inside the box with (or without) the local foreign charger you can be pretty sure the box has been previously opened, even if it is sealed when you recieve it.
If the online store does NOT state the device is brand new, then it probably isn't!
If a device is not brand new but has been reconditioned there is the chance that it will have local apps pre-installed on it. These can represent a risk to the buyer and are known as bloatware.
"Scrolling through the pre-installed apps on the device, I found a surprising amount of bloatware. Apps like ‘Clean Master’, notorious for containing adware, and some others that I hadn’t previously heard of, such as ‘Magic Photo’, ‘DC Share’, ‘KK Browser’, and ‘Search’. The pre-installed apps were installed as system apps, which meant that they could not be uninstalled, merely ‘disabled’.
"Ironically the “Clean Master” app they pre-install has an “Antivirus”, which when you run, tells you there is malware, which can let “hackers” take control of your phone. The point is that I noticed, but there’s countless others who may not or will not ever notice that their new device contains adware or malware which should not be there."
3. Watch out for those Warranty T&Cs
Yes you will have a warranty but it may not be an Australian warranty or a manufacturer's warranty, it may expire after 12 months, and it may cost you an additional fee.
Australian consumer law requires Australian retailers to provide a 24 month warranty for most mobile phones, but this does not apply to grey imports. In most cases you will receive a 12 month warranty and it is likely to be with the online merchant rather than the manufacturer.
The exception is Apple devices. If you purchase an authentic Apple device, it will come with Apple's 12-month global limited warranty regardless of where it has come from. This is likely to allow you to seek assistance with a claim from a local Apple store.
For other brands the manufacturer's warranty is unlikely to be valid. Kogan on their Samsung Galaxy S7 page state:
This product may contain warranty documents on or inside the packaging provided by the manufacturer of the product. Any such warranty documents are not given by Kogan.com, and are separate from the Kogan.com warranty. Some warranty documents provided by manufacturers of imported goods may not apply in Australia. You should contact the manufacturer identified on the warranty document to determine whether or not the warranty applies to the goods in Australia and if so, how you should go about making a claim under such a warranty.
Online merchants may also offer their own warranty which you may or may not have to pay extra for.
Most often if your device needs to be assessed under warranty the device will need to be returned to the online merchant. Ensure you are aware what the process for a warranty claim is and how long it will take to resolve.
Being without a device for 30-45 days while the refund or replacement is arranged can make life very difficult.
What sort of replacement device will you get?
It is also worth checking what you will get as a replacement device. With Australian retailers, smartphones which are Dead On Arrival (DOA) will be replaced with a brand new device, so long as the fault is reported within a specified number of days, usually 14. After this time a warranty replacement is likely to be a refurbished phone.
CONCLUSION - to buy or not to buy?
50 shades of grey
Okay maybe not 50, but there are definitely shades of grey imports.
Many grey importers are well-established and reputable businesses and they would not be in business for long if they did not meet customers' expectations. The 'risk' in purchasing from these outlets should be considered far less than perhaps purchasing from an untested eBay source.
Where the weight lies
It's a case of weighing up the pros and cons to make a decision.
The question is how much weight you place on saving a couple of hundred dollars versus the security of knowing if the device develops a fault within the first 24 months that you are covered, and can get the device replaced quickly.
Consumers v Corporate - risk factor
For consumers its about weighing the small risk that something will be wrong with the device versus the reward of saving a few dollars. If it all goes wrong and you are without your phone for a few weeks while it gets sorted out, this would be invconvenient but not devastating.
For corporate employers the risks are far higher if something goes wrong - loss of productivity, employee dissatisfaction, IT resource spent on the repair/replacment process, insurance implications. This doesn't bring into play any ethical questions such as buying Australian, paying sales tax or protecting local jobs.