BLOG: The grey market is unsafe and unacceptable

Seagate’s director for Northern and Central Europe, Henk Van Den Berg, says grey stock has a negative impact on the IT channel.

The grey market is fundamentally an unsafe and unacceptable practice, and has long been an issue for the channel. By undermining authorised distribution channels, it poses significant financial and security risks to authorised resellers, and ultimately consumers, from the outset.

Let’s imagine your colleague is buying a new car. He sees a salesman on the side of the road with a couple of cars for sale, for less than the ones he saw on the garage forecourt. The salesman says that since the cars have come from abroad, he can do a good deal. Your colleague thinks it’s too good to be true but can’t argue with the cost, so he makes the purchase.

Weeks later, the car breaks down and should be under warranty, but the salesman is nowhere to be found. The manufacturer is unable to help as the car is not covered by its in-country warranty. Your colleague ends up spending more on repairs than the car is worth – and the authorised salesman has lost out on a legitimate sale.

The financial implications of this example are clear and ring true throughout the entirety of the grey market.

The price tag on grey goods may be lower initially but many customers will pay far more in the long run since the product will not be covered by the correct warranty. In addition, the channel is greatly affected, with distributors feeling the biggest impact. They are forced to lower their price in order to compete with the grey market – or risk losing sales.

So how can resellers be dissuaded from using the grey market? Serial numbers can be tracked from manufacturer to reseller, which allows for identification throughout the supply chain. Manufacturers can also opt not to honour cross-regional warranties in order to prevent the growth of the grey market, as Seagate did in May 2013. It’s also vital that resellers are educated on the impact that grey goods have on the channel, such as the erosion of franchise.

Seagate has invested time and money into ensuring our partners are committed to selling a broad range of officially distributed products. We have implemented regional warranty provisions and enforced market integrity policies, including tighter reporting requirements, fines and withholding sales programme funds.

These robust policies are just another step in our diligent and aggressive battle against the grey market, which ultimately aims to safeguard and protect the channel’s franchise and value.

Read more about the grey market in PCR’s feature.

About the author

Henk Van Den Berg is Seagate’s director for Northern and Central Europe.