Net tightens gray-market retail vise

(continued from previous page)

markets," company spokesman Hanni Durzi said. "And there are inefficiencies in geographical differences. Ultimately, it's the consumer's decision."

That's cold comfort to companies like HP, which has been at the forefront of organizing a response to the gray market. Last week, the company sponsored a meeting in the United Kingdom aimed at educating companies and drumming up support for industrywide countermeasures through the Alliance for Gray Market and Counterfeit Abatement (AGMA), a trade group formed in 2001 to combat the problem.

"The Internet is where the gray-market problem really exploded," said Marla Briscoe, a member of HP's brand protection team and vice president of AGMA. "With the Internet, we virtually created a borderless distribution system that makes it a lot easier for unauthorized dealers to advertise products, to buy and resell, and makes it more difficult for manufacturers to track down who exactly is selling these products. This is a worldwide issue."

The problem of gray-market goods is hardly new for manufacturers. Urban commercial strips like Canal Street in New York have long been famous for their storefronts crammed with low-price consumer electronics and other products with reputable brands that have strayed from normal distribution channels.

"The Internet is where the gray-market problem really exploded."

--Marla Briscoe, AGMA, vice president

But online bargain hunting, fueled by increasingly sophisticated price comparison sites, has turned the whole Internet into Canal Street writ large.

According to a KPMG study commissioned by AGMA, the IT industry loses $5 billion annually to the $40 billion gray-market economy. Gray-market watchers estimate that the problem has only worsened in the two years since the study.

Products reach the gray market through a variety of channels, some grayer than others.

Some gray-market distributors fraudulently obtain charitable or educational discounts from companies like HP, then sell the goods below market price. Some legitimate distributors illegitimately hand off inventory to friends and associates, who sell it on the gray market.

Manufacturers routinely sell products for cheap in countries where there is no service infrastructure to support warranties, and the gray-market steers that merchandise back to the United States at bargain basement prices.

Sometimes gray-market goods, sold as new, are used or reconditioned. Sometimes they've fallen off a truck.

In addition to evaporating margins, the gray market potentially poses even more vexing problems for manufacturers.

Take that camera sold without a warranty in Mexico, where the manufacturer doesn't have a widespread service network. When the camera pops up on Canal Street, eBay or a fly-by-night Internet storefront, the buyer may not realize that the product has no warranty. If the

[203129769353146603573853850462]

Simple Really

Once manufactured all serial #'s for a batch are sold specifically to a distributor. Once that distributor has sold the products, that distributor updates their list of the resellers it sold too. Then just before it hits the retail market you can work back up the chain to see where it made it to the gray market in the first place. Manage your product and retain control.

Business 101

[fhowden]

use existing law for 90+% of issues

1) A company that sells for less than cost overseas is "dumping" under the current trade laws. They get what they deserve.
2) Someone who orders things for a charitable or educational discount they don't deserve (legally) is committing fraud and should be prosecuted.
3) Persons who buy 'Rolexs' in Times Square @ $50/ea are stupid and maybe get what they deserve. [http://The real mentally retarded are the exception. They need a better social worker.|http://The real mentally retarded are the exception. They need a better social worker.]
4) Persons who sell 'reconditioned' items as new are committing fraud and should be prosecutted.
5) PERHAPS it would be wise for manufacturers who sell items without warrantee to labled [etched] items "NO MANUFACTURER's WARRANTEE." This might 'hurt' business; but if they fail to do so, they have only themselves to blame.
fhowden

[jachamp]

boo-hoo

let me understand this...i'm supposed to feel sorry for retailers and manufacturers because they want to inflate the price of their products and people sidestep that?

i don't feel sorry for them one bit.

they ship the manufacturing jobs overseas, they ship the tech support jobs overseas, they do everything possible to maximize profit and have government in their corner and the instant the consumer starts to get a foot in the door...the companies start looking for axes.

[Joelieb1234]

they deserve it

Why can the companies sell their electronics, film, inkjets, toners etc to China for cheap USA for a bit more and Europe for even more expensive. If they can sell in China for a price they should be able to sell in the whole world for that same price. Once the company legally sold it worldwide why shouldn't anyone be able to buy and resell wherever they want. (Is it also illegal for me to fly to China and purchase whatever I want for whatever price.) Can the company tell me what to do with things I legally bought. Do the goods remain in their possesion after I paid my hard earned money on them.

Don't tell me this nonesense about higher costs to cover warranties etc. I don't pay for the warranty when I buy something. I buy an item that is free of "manufacturers defects" (that's what it says on all the warranties) I don't get anything more than that. Why should I get less no matter where it was bought. Are the companies allowed to sell goods with more defects in China than/and in USA than Europe.

Why are the corrupt governments supporting these mighty companies arguments. Isn't it in their interest to lower prices not higher them, or are they getting $$$$$ from these mighty rich companies and we the peaple suffer.

[John Kuzak]

getting $$$$$

http://www.analogstereo.com/nakamichi/nakamichi_rx505_service_manual.htm

[UtahJed]

Gray is free trade vs Mfr Greed

What is going on with News.com? Towing the Corporate line for their advertisers? This reads like Trade Show stump speech.

The key concepts supported in the article are the phrases "Gray Market", "Manufacturer Control", Education" and "$5 Billion". The gray market is not illegal(or even immoral), not mis-represented, not stolen, not racketeering and not counterfeit. These things would be labeled Black Market, the manufacturers in cahoots with the Gray Market Alliance know it!! If its Black Market, theere are appropriate laws to address the issue. But this article isnt labeled '...Black Market Retial Vise'. We are speaking only about the Gray Market which is the Legal Free Trade market outside the "Manufacturers Control". These profit-mongers can only suggest illegal activity through their "education" efforts, but cannot ever actually say it.

Everyone in the industry knows the following as true - the manufacturers buy all their products from overseas contractors and sell the exact same products overseas for alot less than in the USA. A parallel to the Pharm Makers. Their left hand purposely dumps excess product into the Legal Free Trade Market at deep discounts before stock earnings reports come out, and then try to combat it with their right hand. They want the cash, but do not want that same product to impact their Full-Price-Market-Share. The problem manufacturers have is ordering too large of quantities from the Asian contractors to get a lower price, then they have excess product. If they would order only what their estimates show the market will bear, then this wouldnt be an issue. Their would be no elasticity problem. Or if they hold onto the excess product during quarterly revenue reports they will take a hit on their stock prices, but eliminate the excess Gray Market. But, instead they want it both ways - the build-order discount, the boosted earning reposrt and the tight market.

This is simple Business 101. Too much product lowers market price. The manufacturers want to have their cake and sell it too. Greed, Greed, Greed and it will cost them another $5 Billion.