Grey goods remain a serious threat

This is according to shop-sa, the Southern African Association for Stationery, Home and Office Products. “While dealing in grey products is not always illegal, it is a highly undesirable practice. It places consumers at risk and threatens the distribution and marketing infrastructures of official distributors who have invested millions to provide competitive service levels to resellers and consumers,” says Davy Ivins, Executive Director of shop-sa.

What are grey goods?

Grey goods are genuine products that have been parallel imported without the legal sanction of the manufacturer or their authorised distributors. “Typically, parallel importers enter markets where demand has already been stimulated by the official licensee and as a result share in the gains without making any contribution - they are parasites that piggy back on official marketing campaigns and brand awareness while avoiding the obligations (and costs) of the official distributor,” says Ivins.

While these units are sold cheaper into the trade there is seldom any real price benefit for the end user. Moreover, these companies do not offer the crucial back-end that protects consumers and supports thousands of resellers and SMMEs in Southern Africa. Consequently the law obliges sellers of parallel/ grey goods to alert consumers, corporate and government buyers that they are not an authorised distributor, and that authorised distributors are not obliged to honour manufactures' warranties/guarantees or to provide after-sales support. Failure to do so is a criminal offence punishable by imprisonment and a R200,000 fine.

Grey goods are generally obtained from unknown sources and far from cutting down middlemen, actually increase the number of people in the supply chain. The possibility of these goods having been obtained illegally by misappropriation cannot be discounted. Also, many imported grey products are discontinued or old items that are already obsolete by the time they are offered for sale in Southern Africa.

Protecting resellers

“The shop-sa policy on grey products protects independent resellers in particular. shop-sa has found that companies that sell grey imported products are invariably unsustainable as the service and goods returned costs eventually destroy their profitability.

Parallel importers lure unsuspecting resellers with attractive pricing, but fail to disclose the associated risks. Without a doubt large scale conversion to grey products would lead to the demise of the very distributors who fund advertising, marketing promotions, beneficial payment terms, free deliveries, comprehensive stockholding and product support. Without them, independent resellers would be at substantial risk from competitors that have the resources to provide these services themselves,” explains Ivins. Official distributors are also increasingly acquiring copyright and trademark rights from their international principals, which gives them effective legal recourse against anyone who deals in their products in southern Africa.

Camouflaging counterfeits

Recent events have also demonstrated that grey imports are a convenient camouflage for stolen and counterfeit products. The packaging of some counterfeits is so good that it is virtually impossible to tell the difference between the legitimate and illegal products. But substandard product quality leads to more consumer complaints and returns,not to mention that resellers will find themselves in hot water with an increasingly vigilant Police and Revenue Services.

“Because of the long term damage that grey products do to the industry and to our reseller members in particular, the ongoing problem of stolen and counterfeit products, and the lack of any compelling benefit to consumers, shop-sa has formalised its position that dealers in grey products are ineligible for membership of the association,” says Ivins. He adds that educating resellers about the risks of grey products is core to the policy, which aims to encourage stationery and office products dealers to maintain their membership by stopping this undesirable practice.

For more information on shop-sa, visit: http://www.shop-sa.co.za