Better channel management needed to stem grey

Vendors have been told to get a grip on their channel management policies

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By  Andrew Seymour Published  July 22, 2008

Vendors have been told to get a grip on their channel management policies after the value of IT goods traded through the global grey market reached a colossal US$58 billion last year.

The revelation comes from a combined study carried out by the Alliance for Gray Market and Counterfeit Abatement (AGMA) and tax advisory firm KPMG, which reveals that grey market products accounted for as much as 30% of overall technology sales in 2007.

With industry profits impacted by between US$8 billion and US$10 billion as a result of grey market trading, AGMA and KPMG have urged manufacturers to form tighter partnerships with reputable distributors and resellers, and implement stronger business incentives to foster long-term relationships.

"Today, there are strategic measures that IT companies can take to reduce the risks of grey market behaviour by properly devising and implementing strong channel partnership programmes with proper checks and balances," counselled Tom Lamoureux, global advisory sector leader for electronics, software and services at KPMG.

"The good news for IT companies is that by establishing tighter management policies and more effectively monitoring compliance among their business partners, the non-compliant behaviour that is feeding the grey market problem can be greatly reduced," he added.

Although the results of the study fail to shed any light on the extent of the issue regionally, Middle East IT suppliers have long struggled to contain the unauthorised reselling of branded products to third parties and the open market.

AGMA and KPMG argue that despite vendors talking up their anti-grey market strategies, there is still a lack of provisions are in place to ensure that channel adheres to resale policies. They also insist that while IT manufacturers offer channel incentives that are serial number-dependent, they either lack the means or do not check serial numbers when processing incentives.

The pair warns vendors that even if they have bolstered their management of channel partnerships, they now need to adopt a "comprehensive" approach of channel management to stem the flow of product into the grey market.

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