DSLRBodies

(commentary)

Official Import or Gray Market?

There’s another way to look at gray market product here in the US: how much are you willing to pay for NikonUSA customer service and support? 

Yeah, some of you have already gotten to the punch line: ouch.

Let’s take the D750. The price for an officially imported camera is basically US$2000. Gray market models are appearing for US$1500. So the answer to the question in the first paragraph is US$500. 

Yeah, ouch. 

And let’s be clear: if you bought gray market you can still access the NikonUSA Web pages, including the knowledgebase, you can still download the manual and firmware updates, you can still get View NX-i and Capture NX-D for free. The thing you’re paying US$500 for is basically this: NikonUSA honoring the warranty and being willing to repair the camera for a fee should it ever break. 

In essence, buying official import is a US$500 insurance policy of sorts. 

Let’s do some back-of-envelope math for a moment. Let’s say that you think there’s a 80% chance your D750 will never need to go back to Nikon for something. That means you’re paying US$500 for a 20% probability. Moreover, if we’re talking outside of warranty (e.g. after a year or if you drop the camera and it needs repair), you’d still be paying NikonUSA something for that repair. Let’s say US$600 for that repair, on average. 

So you’re effectively paying US$1100 to NikonUSA for that repair (US$500 higher initial cost, US$600 for the repair itself). Meanwhile, you could have just bought another brand new gray market D750 for US$1500 (maybe even less a year from now). So your worst expected case outside of warranty is a US$400 loss (having to buy another gray market body instead of paying NikonUSA for official import and repair). 

So here’s the problem (for NikonUSA): if you have an 80% chance of saving US$500 against a 20% chance of paying US$400, how many of the American public are going to take that bet? Given how big the gambling culture is in the US, I’ll bet (;~) you that if everyone thought the way I just proposed, most would take the gray market bet over the NikonUSA import. 

Which means less revenue comes into NikonUSA and the customer service and support probably gets worse. Which means the bet gets more likely to be taken by the customer. See the problem?

Now I included the words “out of warranty” in my example for a reason. Realistically, warranty is the only thing that NikonUSA has going for it right now. But that’s also the reason why I really balk at things like NikonUSA not picking up the tab for return shipping for the 300mm f/4E firmware problem on D8xx bodies. (As I write this, that’s still the published policy on their Web site.)

I’ve long written that I don’t think that gray market purchasers are worth it except for simpler products, which aren’t likely to have complex issues that might require specific testing equipment or parts. For instance, I’ve bought a few non-AF-S lenses as gray market samples over the years. That’s despite NikonUSA’s four-year warranty extension on lenses. 

So as we see more and more products being sold as gray market or refurbished and at dramatic price reductions, I think I need to alter my suggestions a bit. Here’s how I currently think about your options:

1. Buying an official import has no additional risk to it. Especially with lenses in the US, as there’s even a benefit of getting effectively a five-year warranty. You pay a higher price for “no additional risk.” 
2. Purchasing “refurbished” has some risk to it: the warranty is reduced to 90 days and we still have no clear statement from Nikon as to what they do to refurbish an item. With the D600 and D800 problems, for instance, I saw plenty of examples where “refurbished” samples had the dust/focus problems of those two models (respectively). This made me ask NikonUSA specifically about what tests and checks they did with products they marked as refurbished, but I was never given a clear answer. You pay a lower price, but you get a far shorter warranty.
3. Opting for a gray market product has tangible risk to it:
   1. NikonUSA will not honor the warranty. The company you bought the item from generally either offered an optional warranty from a third party or provided one themselves. The problem with this is simple: with the camera industry in steep contraction, the likelihood of those entities still being in business to honor the warranty down the line is lower. There might not be someone to claim warranty service from. Moreover, there are plenty of stories circulating about people trying to get warranty service that was promised, yet not receiving it, or having a very difficult time getting it. 
   2. NikonUSA will not repair the product, ever (unless policies change; but they haven’t changed in the over two decades I’ve been writing about gray market gear). At the moment, a few independent Authorized Nikon Repair stations will attempt to repair gray market products. There are fewer of them today than there used to be, and given NikonUSA’s policy changes over the years regarding test equipment and parts, I think we can expect that trend to continue. 
   3. When products have major issues out of the gate (e.g. D600 dust, D800 focus, D750 banded flare, etc.), NikonUSA has been somewhat inconsistent about whether gray market is dealt with or not. My guess is that it has to do with whether Nikon corporate decides to reimburse or support the subsidiaries in some way or not. 

As with the stock market, the more risk you take, the higher the possible reward (or punishment). Which brings us back to the big price differentials that are starting to show up here in the US between some gray market and official import products. I’d have to say that in some cases, the rewards are starting to look bigger than the risks for many. That’s going to have impacts all up and down the line. 

There’s risk to NikonUSA now, too. I’ve been watching the implied sales numbers on a lot of these gray market products lately. We’re talking about thousands of purchases of gray market products. So I did another quick back-of-the-envelope calculation: using last year’s CIPA shipment numbers of DSLRs into the US and market shares, something around 10k units makes a 1% difference to NikonUSA. 

Many years ago I suggested several things that Nikon could have done to better differentiate the official import versus gray market product. Yes, it all revolves around customer support and service. But here’s my current concern: if enough gray market product is selling here in the US now to impact NikonUSA’s unit volume by even low single digit percentages, that puts pressure on them to cut support and service, which in turn, makes the risk/reward bet look better to the customer for gray market, which perpetuates the problem. 

I should also note that gray market tends to be Internet-based sales. So the other entity that’s getting hurt by Nikon’s current approach is your local camera dealer, who is going to be suffering from that same decline in product sales as NikonUSA. Given the state of the camera market, dealers don’t need any more pressure than they’re already experiencing. And NikonUSA can’t afford to keep losing dealers, because they act as a buffer for inventory. 

You can’t really micromanage this problem, which seems to be Nikon’s approach. Basically, that approach results in “fires” that have to be put out every day, and also just continually puts pressure on costs. I’d love to see Nikon succeed at bucking the trends, but I think we’re now to the point where they’ll have to do something dramatic in order to do so. Here’s hoping that they do.

In the meantime, make sure that you understand the risk/reward factors if you’re thinking about purchasing gray market product. Both risk and reward are definitely in play, and only you can decide whether one is worth the other.