HP: We will eradicate the colour grey from our market

Claims $2m clawback, volley of legal bombs ready to burst

HP UK claims to have clawed back some $2m worth of revenues it would have otherwise lost to the grey market by getting litigious with anyone importing and selling boxes from outside of the EU.

The firm told us “preventative” activity increased sevenfold from fiscal ’12 to ’14, that “recoveries of mis-used contra” is up tenfold and legal proceedings which “may” go to court are up threefold, though HP is unable to name and shame those suppliers due to “legal reasons”.

The fight against the multibillion dollar grey market is not specific to HP: most major hardware and software vendors claim to battle it. Last autumn Cisco axed 1,000 suppliers for flouting Ts&Cs and among those companies were floggers of grey gear.

HP reckons the problem hasn’t got any worse, but the company is in belt tightening mode - look at the redundancy programme - and says it wants to “preserve” its and partners’ profitability.

“Our prevention activities have increased,” said John Ansell, UK and Ireland HP Enterprise Group channel director, “It’s about getting back the revenues of organisations that have gone out grey rather than through the standard routes”.

He said the vast majority of channel partners stick to Ts&Cs - but a rogue element exists.

This is a global programme monitored by the standalone Brand Protection unit, that works in conjunction with the legal department and a worldwide investigations team. HP said it looks at end-user verification and tracks spikes in the market.

But to tackle it further, the vendor wants its legion of channel partners to get vocal if they spot unusual activity in the market - a message delivered to folks at a conference this week.

“Together let's stamp out grey, and if they are seeing grey activity or suspect grey activity, pick up the phone to myself or [the PC and printer team], we’ll get investigating and throw our weight behind it”.

Alex Tatham, MD at HP distributor Westcoast, said he is "delighted" that HP is tackling a market that has the potential to suck profits from the authorised channel.

"All vendors need to police the grey market; it is their responsibility to create as level a playing field as possible for resellers," he told us.

Some in the industry will say that the grey market is, at least, partly fuelled by the vendors themselves, whether it be leaky supply chains or the temptation to sell to brokers to make kit disappear amid slow sales.

Another source for the grey market is the so-called Midnight Runs process, when factory workers reset the serial numbers and make another batch of products that had already been produced during the day.

Ansell told us: “This is not a practise that we operate in our organisation”.

The big brands really decided to tackle the grey market, also known as the dark or parallels market, when in 2001 Levi Strauss won a landmark legal dispute with Tesco over the importation of cheaper jeans from outside the European Economic Area.

As well as impacting the sales channel, HP said end-customers that buy grey are dicing with danger; grey kit does not qualify for warranty support and if it fails, there is no safety net. ®

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