Analysis: Why Do Buyers Turn To the Grey Market?

Last month, Xilinx sued Flextronics, alleging that Flextronics is reselling Xilinx parts at a mark-up and dealing in counterfeits.

In a recent blog (“What Every Hardware Startup Should Know About The Electronic Component Landscape“), we mentioned the grey market and how we deal with this at Octopart. Our mission is to open up access to part information in design, sourcing and manufacturing, so to that end we list all known sources — but we have a zero-tolerance policy on counterfeiting. We make the distinction between authorized and independent distributors clear so our users can make discerning decisions. Here’s how a part detail page for a Xilinx PROM looks:

xilinx

To get more context around these decisions, we took a look at Xilinx parts on Octopart listed by both authorized and independent distributors over the last month. Why buy from an independent distributor over an authorized distributor?

    • When authorized distributors have no stock

For over half the parts, authorized distributors were out of stock:

xilinxstock

    • Because independents offer better pricing (maybe)

Independent distributors listed 72% of the parts at discounts:

xilinxpricing

Despite what the data indicates, we’re not convinced on this point. We’ve heard anecdotal evidence that some independent distributors don’t publish pricing, only to reveal much higher pricing when an inquiry comes in. 27% of Xilinx parts listed by independent distributors did not come with a public price tag.

What our data does convincingly suggest is that the risks associated with “unauthorized” sources outweigh these factors. Most of our users still prefer buying from authorized distributors:

xilinxtraffic

What have your experiences been buying parts from independent distributors listed on Octopart? Tell us your story, or get in touch if you’re interested in taking this analysis further.

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