Feeds

Hurrah for grey trading

Isn't this how the single market is supposed to work?

  • alert
  • submit to reddit

The Essential Guide to IT Transformation

Opinion This article first appeared in September 1998 Multinational vendors are uncommonly fond of restrictive distribution practices. By dictating who can sell what to whom, vendors can exploit price differentials in different markets and maximise their profits. Although restrictive distribution is supposed to be banned by the European Commission, a recent daft court ruling has given manufacturers the right to ban grey imports from outside the EU. Never mind that the manufacturers are exploiting laws designed to stamp out counterfeiting, rather than grey imports. Let's hope the Parallel Traders' Association succeeds in its attempt to get this ruling overturned. Hats off in the meantime to Ideal Hardware for cocking a snook at restrictive distribution practices. It has beefed up its overseas business, by setting up its first distribution facility in mainland Europe. Based in Rotterdam, the warehouse opens for business on 1 October. The company says delivery times will speed up, and distribution costs will go down. Ideal sells its volume storage products to resellers anywhere in Europe - a Rotterdam warehouse will enable next-day delivery. Restrictive clauses, of course, do not exist in the EC (how could they, when they are illegal?), but it is a brave wholesaler that breaks out of its allotted territory or country. Ideal does not care a fig for such niceties. It already sells into Europe in a fairly big way. In the past half year, Continental European sales advanced from #1.9 million to #21.8 million. However, gross margins were much worse than in the UK (3.2 per cent against 14.3 per cent). So Ideal is probably losing money on Europe. Instead of acquiring Continental disties, Ideal employs native salespeople, working from home in their own countries. Fulfilment is managed from the UK and now Rotterdam. What Ideal does not do is buy other distributors, as managing director James Wickes told me recently. 'It is very difficult to talk on this subject without sounding arrogant, but why buy distributors in Europe when I already do better than them?' Distribution margins do not justify paying for expensive subsidiaries all over the place, he believes. 'Today's haulage infrastructure means you can sell from anywhere - Dell proves that. And as far as suppliers are concerned, credibility and credit-worthiness are far more important than where you ship from.' Commissioned vendor salespeople based outside the UK may not agree with this sentiment. European data storage distributors on the Continent are also probably not very happy about this brash newcomer on its doorstep. Ideal can get away with trading across Europe, because its balance sheet is stronger than its competitors. But isn't this the way the single market is supposed to work? And grey trading will make the market work even better. ®

Boost IT visibility and business value

More from The Register

next story
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Amazon says Hachette should lower ebook prices, pay authors more
Oh yeah ... and a 30% cut for Amazon to seal the deal
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Feel free to BONK on the TUBE, says Transport for London
Plus: Almost NOBODY uses pay-by-bonk on buses - Visa
Twitch rich as Google flicks $1bn hitch switch, claims snitch
Gameplay streaming biz and search king refuse to deny fresh gobble rumors
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Backing up Big Data
Solving backup challenges and “protect everything from everywhere,” as we move into the era of big data management and the adoption of BYOD.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.