Grey IT broking worth $40bn a year

The global grey market for IT goods is worth $40bn a year, resulting in lost vendor profits of $5bn a year, a KPMG study reveals.

To the Anti-Gray Market Alliance which, we assume, commissioned the KPMG study, the grey market is defined as:

"Branded products diverted from authorized distribution channels or imported into another country without a manufacturer's consent."

To us, the KPMG figures suggests that customers are paying $5bn a year less than would otherwise have been possible, and that market forces have encouraged a useful mechanism to overcome restrictive distribution practices and to offload excess inventory.

But no: apparently, 60 per cent of end-users pay the same amount as sourcing from official channels. And they get a lot more headaches.

According to the KPMG study, products "traveling through the gray market pose risks to customers, including the sale of obsolete, damaged or counterfeit parts and products delivered without warranty and support....

"Consumers who experience quality problems with gray market products in turn, blame manufacturers for product failures, potentially decreasing the value of the Original Equipment Manufacturers' (OEMs) brands.

Here's a quote from Marie Myers, AGMA chairman. "Without utilizing the proper channels and distributors, consumers take the risk of purchasing damaged or products without warranties -- this not only hurts the consumer, but can threaten a company's reputation with customers and investors."

So who is to blame for all this pain? KPMG points the fingers at rogue disties and brokers who "obtain product to sell to the gray market by violating distribution agreements, misrepresenting customer identity in special discount programs, or using fraudulent documentation". To the tune of $40bn a year? Give us a break. It is difficult to see how such big business could be achieved without the active collusion of manufacturers and "official" disties. ®

Related stories

Vendors seek grey market whistleblowers
Vendors beat up on grey market
This is what Microsoft said about grey imports in 1998