Shades of grey

The buying and selling of products outside of a designated territory can create havoc for authorised channels, but just how seriously are vendors taking the matter in the Middle East? positive for the channel.

Tags: Belkin International IncorporationFoxconn Technology GroupGrey marketHPLG ElectronicsWestern Digital Corporation
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Shades of grey Nader Redjeb, Foxconn
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By  Andrew Seymour Published  June 20, 2010

CHANNEL: To what extent does pricing play a role in either encouraging or preventing grey market activity?

Dan Smith: It is the key. A fair and balanced price around the world, secured with a currency-specific buffer should prevent this type of activity. While grey market activity has a number of causes, such as product availability and channel integration, its root is generally associated with large price differentials between markets.

Shashank Sharma: Pricing plays a part, for sure. But the difference has to be big enough for the traders to do transactions and make money. If there is only a small difference there may not be enough bandwidth for the traders to do grey.

Khwaja Saifuddin: In our opinion, pricing represents one of the main reasons behind all major grey market activity and since we believe that the grey market is caused by different pricing among regional markets we follow a very flat pricing structure on a global level, whereby each region is equally priced and delivered to.

Felix Baretto: Pricing is one of the elements that contribute to the grey market, but there are various situations that can lead to it, such as the need for fast cash or to take a risk in an outside market for penetration reasons. Grey market activity may also be caused by a company wanting to have no after-sales service concerns or because it has excess stock availability.

CHANNEL: Have you ever taken action against a grey marketer? What sort of punishment can be administered?

Nader Redjeb: This issue can happen every day, so we deal with it on a case to case basis.

Khwaja Saifuddin: It happened a long time ago and we were able to immediately control the damage with a very strict warning to the source.

Kv Narayanan: HP Middle East has taken action in the past, whereby we have blacklisted resellers in the region and active communication has been relayed to the market. In addition, financial rewards associated with HP’s partner programme have been removed from these partners.

Felix Baretto: In terms of the action taken, there has been blacklisting and stoppage for future supply. The source through which the company gets the products would also get in trouble for its act and jeopardise its future supply of products.

CHANNEL: Are there any situations in which the grey market can ever be good for the channel?

Felix Baretto: From a channel perspective, if there is no presence for a product in a particular territory then such an influx can help the product develop and penetrate, gaining market share.

Kv Narayanan: The grey market is not the solution if the channel wishes to make a positive impact on the region. There are other ways through which there can be a lot of positive work generated to ensure that there is a proper product reach to the consumer.

Youssef El Arif: In cases where the brand is not really represented in the market, the grey market can create demand among resellers and end-users. This may offer a chance for an authorised distribution structure to serve this demand.

Dan Smith: Xerox is committed to offering our partners a valid and long-term business model, as well as ensuring end-customer satisfaction. To this end we do not envisage that the grey market can be positive.

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