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Grey products: Undermining channel legitimacy

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The prime ingredient in effective mission critical processes is that business transactions are conducted with integrity, writes Jacques Malherbe, CEO of Weston SA. This virtue allows a relationship based on trust to form between distributors, vendors and customers and contributes to organisational growth and prosperity.

Resellers are encouraged to purchase through legal channels. This enables channel growth, provisions of legitimate warranty, guarantees documentation and also accessibility to an advisory and support platform. When they decide not to purchase through these legal channels they support the gray market product import channel, which affects the essence of channel dynamics.
Grey-market products are branded products diverted from an authorised distribution channel or imported into another nation without a manufacturer's consent.
Customers are reliant and entrust a faith of goodwill that the products they are purchasing derive from an authorised and supported source. When products are mission critical, it is imperative that customers can rest assured they are buying top quality products. Knowing whether or not they are genuine products should be at the forefront of the customers’ decision-making process.
Products sourced from outside authorised channels are not guaranteed by the distributor. These products may pass through many hands before they make their way to the customer.
Distributors should not offer any assurance as to how these products have been handled, stored or shipped. Such shipments may also include second hand, third party or even counterfeit products. Not only can these products function poorly in any network, they may also have invalid warranty and software licenses, no support entitlement or incorrect configurations.
If customers want to minimise the risk of getting caught on the wrong side of the product purchasing process they should ask their IT supplier a few simple questions to validate the origin and originality of the product.
Questions such as: Is the product new? Does the product come with a guarantee of genuine components? Can I see the software licence? Customers should also ensure that the warranty is enclosed and they should take note of the packaging they receive the goods in. Sub-standard packaging could indicate grey product.
Grey marketing impacts the financial health of manufacturers and distribution channels through price destabilisation and it could also eventually impact the ability of manufacturers to make investments in future technologies.
To ensure channel growth, distributors, vendors, resellers and customers should educate themselves on the dangers of illegitimate purchases. Without this educational awareness, customers can place their entire organisations at risk.