Taking the shade out of grey gets even tougher

Taking the shade out of grey gets even tougher

The Alliance for Grey Market and Counterfeit Abatement (AGMA) claims that the grey market accounts for more than $US40 billion in revenue each year, costing IT manufacturers about $US5 billion in profits.

And the problem has the potential to get worse for locals.

The strength of the Australian dollar has made purchasing terms from overseas more favourable for grey marketers/parallel importers, affecting unit shipment growth in original printer consumables, according to IDC.

The grey market — defined as discounted product obtained deceitfully from manufacturers by resellers, as well as product obtained legitimately and sold across borders to take advantage of currency swings — could be fought on several fronts, Lexmark A/NZ channel business manager for enterprise, corporate and government, Tim Champion, said.

Lexmark, HP and Epson are expected to lower prices per cartridge for ink and laser toner in 2004 with prices dropping by 18 per cent and 8 per cent respectively.

Champion said the company had a four-pronged strategy to help combat the problem.

“We maintain parity on a worldwide basis to keep on par with worldwide pricing trends,” he said.

Over the last year, Lexmark has seen prices fall 30 per cent in response to four or five worldwide pricing shifts.

Other moves involve educating resellers about the company’s wide range of offerings and prices, and keeping resellers up to snuff on the company’s return and recycling program (resellers get upfront discounts for recycling); along with a host of supplies and partner programs.

“We believe people will go overseas if we can’t provide the right mix of programs and rebates. We want to ensure doing business with Lexmark is a positive experience,” Champion said. “Through the platinum program, we offer partners the appropriate pricing support to maintain a presence in a customer site.”

Making matters worse, he said the grey market angst was compounded by the fact that it’s tricky to separate this activity from counterfeit moves.

“Counterfeiters are becoming so good at what they do, it’s difficult to determine what is and isn’t counterfeit and where the grey market fits in,” Champion said. Counterfeit product was often thrown in the mix when purchasing product from non-authorised distribution channels, he said.

This opened up a can of worms involving customer issues and warranty implications.

Champion said the inkjet consumables market was the one to watch for counterfeit activity.

“Inkjets rather than lasers are more prone to the transactional shipping model because they are so small,” he said. “You can pack a mighty number into a container. And this signifies more value for dealers. It’s more lucrative because you can deliver higher revenue.”

But most Australian dealers were above board, Champion said.

“Most authorised supplies dealers don’t go and deliberately find counterfeit products, but it’s difficult to determine what’s grey and what’s counterfeit,” he said. “There’s a real risk to the business — and to customer satisfaction — when you get involved in this shady area.”

Epson’s Mike Pleasants agreed the grey market conundrum — which has increased dramatically over the past 12 months and is on the company’s radar screen — was complicated by counterfeit activity.

“Resellers need to be careful about it, because what appears to be genuine product may be counterfeit gear coming from overseas,” he said.

The grey market surge was affecting global revenues as resellers turned away from authorised dealers to get better deals, Pleasants said.

“The activity is impacting revenue and is being driven by exchange rate movements,” he said. “Lower price — that’s what turns people on.”

In addition to price reductions, the company is pitching its authorised dealer, the gold seal program, to resellers. “Under the program, the product is known and guaranteed to dealers and end-users so dealers are not driven to buy risky and unknown stock, either from the grey market or counterfeit means,” he said.

But grey marketers aren’t the only group taking a chunk out of the original printer consumables pie. In the competitive cartridge world, printer vendors are also battling it out with compatible vendors.

“We do not consider their product as compatible,” Pleasants said.

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