Common Myths About the Secondary Market

You’re tired of having to constantly upgrade your switches, routers, line cards and adapters every 12 to 24 months when original equipment manufacturers (OEMs) discontinue products and bring new ones to market. It’s an endless and usually expensive cycle that you’d prefer not to endure, if possible.

As such, you’re considering abandoning the primary market, where products are bought directly from authorized vendors, in favor of engaging with a refurbished technology vendor that operates in the secondary—or gray (as some would call it)—market. In this alternate market, products are bought and resold at a reduced price from Independent resellers who have no partnership obligations to the OEM’s.

Indeed, there are many competitive advantages of shopping the secondary market. However, many enterprises considering doing so tend to wonder: Is it legal or ethical to buy technology equipment on this secondary market? Or, is it safer to buy products directly from authorized vendors, as is protocol?  

In an effort to educate enterprises on the secondary market and buying best practices, let’s separate some common myths from reality:

Myth: The secondary market is illegal and unethical

OEMs and vendors like to maintain that the secondary market is illegal and unethical, largely because they would rather have customers buy products directly from them, at sticker price, in order to increase cash flow. These companies have even been known to use scare tactics in the form of blogs and whitepapers to dissuade customers from buying through unauthorized channels. The truth, however, is that the  secondary market operates legally all around you. Costco, for instance, regularly buys products from the secondary market and sells them to consumers. The wholesale retail giant recently won a major court case, in fact, upholding its practice. Used car companies also operate on the secondary market, and are commonly used by consumers. It’s important to keep in mind that as a customer, you have the decision to buy from whoever you want. The manufacturer has no right to dictate who you buy from.

Myth: Your business can be sued for using secondary market items.

Many business owners shy away from buying products from unauthorized channels for fear of facing legal repercussions from OEMs. To some people, the process feels sneaky, and therefore they feel as though buying directly through an OEM is a better course of action. Keep in mind, however, that unless your business signed an exclusivity contract with a particular vendor, you’re in the clear to use any solution you deem fit and will be safe in the event of an audit.

Myth: secondary market items are riskier to use than new items.

One of the most common warnings concerning the secondary market is that items bought and resold in this space are inherently of lesser quality and, therefore, are less secure than new products delivered by OEMs. In actuality, the opposite is true. OEMs typically only spot check new products before releasing them onto the market for public consumption, meaning not all items are checked for quality and safety. Conversely, resellers are more prone to  thoroughly inspecting each and every one of their products  and, in some cases, even rebuilding them  before selling them back to customers to ensure optimal efficiency and safety.

Myth: The secondary market contains stolen or counterfeit items.

A reliable secondary market equipment provider will thoroughly inspect products for any sign that it is second-rate or stolen before ever reselling it. This includes checking serial numbers, scanning products for authenticity and signs of fraudulent misuse, and consulting public databases for flagged items, for example. At the end of the day, all  illicit practices are taken very seriously in the technology equipment industry; reselling a stolen or counterfeit item can be the death knell for a business.  A truth to this is that the secondary market is in fact created by the very manufactures who despise it.  Secondary market vendors are not manufacturing products.  They are buying them from authorized resellers who are pushing products out to the secondary market for monetary purposes.

Myth: Secondary market hardware is not covered under OEM maintenance contracts.

Most secondary market manufacturers will offer their own hardware replacement warranties and third party maintenance programs. And many times, these maintenance programs are more comprehensive, and more affordable, than the ones that are offered by vendors. They also offer maintenance for products after they reach their end of life (EOL) stage.

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