Grey market trading is an ongoing issue for the technology industry, as organisations continue to sell products via unauthorised or unofficial distribution channels.
It is not only electronic items that are affected, but also luxury goods, automobiles and pharmaceuticals that face this ongoing battle. All manufacturers have to compete with grey-market players as they expand into emerging markets in Eastern Europe, the Middle East and Africa specifically, and grey market devices are no longer just ultra-low cost models, but higher-end models are also affected.
According to a report published by KPMG, an accounting and advisory firm, some years ago, IT technology manufacturers were losing up to R38 billion in profit annually to the grey market worldwide, with as much as R304 billion of computer-related products passing through the grey market each year.
We have witnessed that vendors and resellers alike have both 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 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 brands 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.
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 South Africa and Southern Africa. 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 benefit from: 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 such as these that the end-user benefits from when dealing with authorised partners however, consumers or businesses are often lured to purchase grey market products because they supply cheap products, but these do not come with the total 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 are 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.
By Reon Coetzee, Toshiba Regional Sales Manager, Southern Africa
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