Getting to grips with grey

The trading of grey market goods can be damaging for both vendors and their channel partners. Santosh Varghese, regional general manager of Toshiba Gulf’s computer systems division, outlines some of the new methods that are being taken to put authorised channels back in control.

Tags: Toshiba CorporationUnited Arab Emirates
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Getting to grips with grey Santosh Varghese says it is vital for vendors to empower authorised partners. ((ITP Images))
By  Santosh Varghese Published  April 14, 2010 Channel Middle East Logo

Grey market trading is an ongoing issue for the IT industry as organisations continue to sell products via unauthorised or unofficial distribution channels.

All vendors have to compete with grey-market players as they expand into emerging markets in Asia-Pacific, Eastern Europe, the Middle East and Latin America specifically, and grey market devices are no longer just ultra-low cost models - higher-end models are also affected.

According to a report published by KPMG some years ago, IT manufacturers were losing up to US$5 billion in profits annually to the grey market, with as much as US$40 billion of computer-related products passing through the grey market each year.

Vendors and resellers alike have been fairly outspoken on this matter, with resellers demanding a level playing field to compete against rivals sourcing cheaper grey kit along with stronger action by vendors to police their supply lines. They believe vendor accreditation programmes were losing value because unaccredited resellers sourcing kit from the grey market would always be able to undercut those that played by the rules.

Such grey market activity impacts the brand of the products, results in the loss of profit margins due to reduced grey market products prices and can also affect the customer confidence in the brand.

In addition, it can damage the brand’s relationship with the channel and create a lack of trust in product quality. And finally, the customer can also lose out with the products not being eligible for full warranty.

Stemming the grey tide

In order for the grey market to be addressed, it’s vital that organisations are aware of this activity, review all entities in their distribution channel and have capabilities for serial number tracking. Many IT vendors over the past two years have proactively delivered campaigns to address grey market activity in the Middle East.

Most recently, at Toshiba, we launched our ‘Approved for Sale in EMEA’ stickers that come with all official products to provide all customers with a guarantee that the product has come from an authorised dealer.

This ‘Total Support, Total Peace of Mind’ campaign highlights the full sales services of Toshiba, so any Toshiba laptop with the sticker comes complete with an array of services that customers can avail of: a one year regional warranty, complete coverage against manufacturing defects, a guaranteed response time of four business days for all warranty services and coverage of replacement parts, shipment and labour.

It is advantages like these that end-users benefit from when dealing with authorised partners.

Consumers or businesses are often lured to purchase grey market products because they supply cheap products but these don’t come with the support they need to guarantee a good deal.

By doing so, they run the risk of not having official warranty services and coverage of replacement parts - therefore ultimately paying out of their own pocket to repair their products.

In other markets, Toshiba has sent out letters to distribution partners warning of a growing grey market in its notebooks to try and combat this activity. Other companies have put in a serial number tracking system which enforces dealers to complete all details to be able to sell products.

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