Grey IT product imports have surged in many southern African markets over the past two years, including Botswana, Mozambique, Malawi and Zambia, says Tarsus Distribution general manager, Johannes Groenewald.
Perhaps the single biggest factor in the renewed growth of the grey market is just how easy it has become for resellers and end-users to purchase products from international traders and ecommerce sites.
What’s more, we have seen some vendors restructure their southern African businesses around a central SADC office. With fewer resources in-market in some countries, vendors are not able to monitor and curtail the grey market as effectively as they did in the past. Unauthorised resellers have rapidly filled the gap.
The trend is not surprising against the backdrop of tight economic conditions in some countries, with end-users looking to save a buck where they can and resellers, among others, looking for ways to optimise their margins. But in the longer term, a shift towards more grey product purchases will harm end-users and the channel alike.
Here are three reasons why it’s not wise to sell grey products as an ICT reseller:
- It can be bad for your brand and reputation
If you’re an IT reseller serving business customers or discerning consumers, having the stamp of approval from the vendor or its official distributor gives your customers peace of mind. They know that you have skills in the product you’re reselling and that they can depend on the official channels for support and warranties.
Conversely, grey goods may create the wrong impression. For example, what if the customer finds that the packaging and instructions are in a foreign language because the product was destined for another country? What if you’re accessing old stock that has been dumped or if the customer runs into a technical problem you can’t solve?
2. You don’t have access to vendor support for complex product issues
Supporting and maintaining computer hardware and software might be your bread-and-butter, but it’s always good to know that you can call for second-line support from the vendor if you come across an issue you can’t resolve. You also want to know that you can easily replace a unit if the customer has an out-of-the-box failure, and that you can easily access spares and accessories.
3. No access to vendor partner programmes
Some resellers believe that they can achieve better margins by importing directly or using an unofficial distributor to access stock. But the downside is that they lose out on the benefits of the official vendor partner programmes. Such programmes are generally designed to offer resellers strong incentives to work through the official channels. The perks may include marketing support, access to technical resources and a range of rebates and subsidies.
If you’re an end-user, here are three reasons to avoid grey market purchases:
- You might not get what you expect
If you buy a grey product, you might find that it’s not configured for your region, that it is old stock someone is trying to offload, or that it does not conform to local standards such as approval from the telecom regulator. You might need to put a lot of effort into setting up the product yourself, instead of getting something that is ready for use as soon as you remove the packaging.
2. You lose out on official warranties and support
While some vendors offer international warranties for products such as notebooks bought from an official reseller anywhere in the world, the terms and conditions may vary by country. And if you purchase a product from a completely unofficial source, you may lose out on the warranty or on access to the latest firmware and software updates—in the worst case, you may not be able to use the official support channels at all.
3. Customs, VAT, and clearance costs could wipe out your cost savings
When you see a notebook on an international ecommerce site, it might seem cheap. But remember to add VAT, import duties and delivery to the cost of the machine. Suddenly, it will no longer seem to be quite as much of a bargain. And depending on which country you’re in, you might face a wait of a few days for your product to clear customs when it lands. Official channels take care of this red tape for you and the price you see is the price you will pay.
Grey channels are bad for the industry
Over the longer term, sales of grey technology goods are bad for the IT industry and for domestic economies. Grey imports can sometimes circumvent tax and duties, depriving governments of revenue. What’s more, if grey goods eclipse official channels, this can disincentivise vendors and their official distributors from investing in a market.
This may curtail choice, increase costs and reduce the quality of the skills and support surrounding a vendor’s product. Supporting official channels, on the other hand, helps to develop a vibrant ecosystem that offers more choice, better service, and lower prices—which benefits everyone from the user to the vendor to the channel.
If you’re in doubt about the authenticity of your product or consumable, contact the vendor directly. It’s worth the effort.
[Johannes Groenewald is the general manager of Tarsus Distribution]