Middle East market fights grey trading

Understanding the complex product flows that characterise the Middle East IT market is vital for vendors with serious aspirations in the region

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By  GITEX Times Staff Published  November 18, 2006

|~||~||~|The extent to which grey market trading is occurring in the Middle East is a topic that continues to split the industry. Having spoken to a range of local channel sources in recent weeks, there appears to be no conclusive answer to the question of whether grey marketing is as fervent as ever. Some are adamant that parallel importing is a phenomenon fast losing momentum; others claim it is actually more prominent than it ever has been. What this difference of opinion does emphasise is that the difficulty faced in assessing and measuring the issue remains one of the biggest drawbacks to tackling it properly. Interestingly, more than 75% of respondents to a recent ITP online poll claimed that the Middle East grey market is more prevalent than this time last year — a figure that doesn’t say a great deal for the many vendors that like to publicise the great job they believe they are doing in restricting grey marketing. Reducing grey market activity comes down to how seriously each individual vendor regards the subject because they are the ones who control the key mechanisms of pricing and availability from the start. It is the responsibility of the vendor to ensure that they get both aspects right. If they over-forecast or stuff the channel then excess product will get dumped into markets it shouldn’t. And if they under-forecast, buyers will source products from the grey market because they can’t procure it from authorised routes. Alongside that is price, which remains the primary cause of grey market trading due largely to vendors operating differential pricing structures and compensation models between channels, countries and regions. Make that element less open to abuse and grey importers lose considerable power. After all, the only thing that encourages a buyer to use the grey market, as opposed to a legitimate channel, is lower price. In fairness, the likes of HP and Microsoft are both cited as vendors that have done a fairly good job in addressing the grey market, although it doesn’t mean they have found the magic formula. Their commonality is that they are both large, global organisations with the ability to pursue the issue aggressively. And as well as possessing huge marketing collateral, they also have the financial resources required to actually follow through with their actions and prosecute offenders, as they have done in markets such as the UK, Germany and Nordics. Grey marketing is a problem that demands manufacturers to stand up and be counted. And in this region, specifically, it reverts back to a point that emerges time and time again: there is nothing wrong with vendors drawing on their global experiences and business models, but to fight it properly they need to develop dedicated tools that address the issue locally. As one UAE distributor argued: “If I have one comment to make to vendors about the grey market, it is not to implement sales and marketing strategies in the Middle East that they use in other regions. The Middle East has a different business mentality, which they have to learn more about.” Grey marketing is a universal dilemma, but that doesn’t mean the ‘square pegs in round holes’ approach is the way to solve it, however hard it is forced. Understanding the unique market dynamics of the Middle East market is a pre-requisite for any vendor that has serious sales aspirations in the region.||**||

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