Grey market threatens CE channel sector

Grey market channels are undermining legitimate routes-to-market for branded consumer electronics products in the Middle East.

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By  Michael Thorne Published  July 5, 2006

Grey market channels are undermining legitimate routes-to-market for branded products in the Middle East, according to some of the leading players in the consumer electronics industry. The ongoing boom in parallel imports is severely impacting existing distribution channels in many countries, with resellers expressing frustration at the lack of self-regulation within the industry. A major issue stems from the thriving re-export trade occurring in Dubai, which is seeing unauthorised goods being sold throughout the region often substantially below recommended wholesale prices. “The re-export channel fosters the grey market and this is something that we are struggling with,” said BenQ Mobile vice president of sales and marketing Najib Ashraf Kazi. “We stopped working with a number of distributors because they were focusing on the re-export market. We now stipulate in our contracts that distributors can only sell goods intended for the market which they have been assigned.” Ahmed Elkalliny, regional sales and marketing manager for bluetooth accessories vendor Jabra MEA, says that grey market distribution severely impacts the mobile channel. “The margins in this region are very slim and the UAE is a very attractive market for grey market activities,” he told ECN. “I have seen Jabra products being sold for prices that we could not guarantee anywhere else worldwide. “We need to work with our partners to ensure they appreciate the value of working directly with manufacturers and not sourcing product from grey market suppliers.” Creative Labs Middle East’s senior marketing specialist, Gibson Varghees, claimed that vendors must play an active role in shutting down grey market channels. “As a vendor, it is vital to understand the mechanics of your distribution channel, and commit to working with ‘brand builders’ rather than ‘box movers’,” he said.

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