Soaring dollar turns the channel to grey

Soaring dollar turns the channel to grey

Senior channel figure sees recent incease in grey import activity

Due to the soaring Australian dollar and what many consider to be continually steep vendor prices, some resellers are allegedly turning to grey importing goods, risking vendor/reseller agreements.

A senior channel figure, who wished to remain anonymous, told ARN that grey marketing was a well-known concern in the channel and had increased recently with the strength of the Australian dollar.

And while grey importing is legal, the goods are sold outside normal distribution channels by companies which may have no relationship with the producer of the goods. With analysts tipping the dollar to stay high for the short-to-medium term, what are the implications for the IT channel?

Dicker Data managing director, David Dicker, shuns the grey market activity, but said there wasn’t much distributors could do – it’s in the vendors’ hands.

“I do think the Australian dollar will stay up where it is, for a while. Obviously, we are not going to be involved in any grey importation, under any circumstances, but the recent GST on sub $1000 sales has highlighted the fact that prices are generally pretty high in Australia,” Dicker said. “But action on that will obviously have to come from vendors.

“It’s completely out of our control.”

The issue of grey importing comes as many retailers are up in arms over imported online goods not being taxed the same as traditional retail markets. Harvey Norman chairman, Gerry Harvey, sounded alarm bells, claiming many retailers will perish unless immediate action is taken to add GST onto Internet transactions of under $1000.

ARN contacted a handful of vendors for feedback on the pricing situation and impact of the soaring dollar. Many declined to comment, however, some were willing to make statements.

Big Blue offered up its two cents on the soaring dollar and vendor pricing.

IBM has not changed its product pricing,” IBM A/NZ director, business partner organisation, Phil Cameron, said in a statement. “We’re committed to setting prices on products that are competitive and regularly monitor the marketplace. Our practice is to avoid frequent price changes due to currency fluctuations, providing pricing predictability in local currency for our business partners and clients.”

Acer marketing manager, Robin Tang, said the company reviews its channel pricing regularly.

“We typically time our pricing revisions bi-monthly. As a global vendor, we have an established process to accurately estimate our forward pricing [beyond 30 days] to remain competitive,” Tang said.

“Hardware vendors like ourselves are subjected to inventory and logistics which take a little longer to incorporate cost changes. Acer has reduced some models of our products in the recent pricebook update. In other cases, we also improve the specifications to remain cost-competitive.”

Cisco A/NZ senior PR manager, Linda Horiuchi, said the company “continually reviews its pricing and makes changes accordingly.”

“Our latest price change was made in November 2010 when we informed our partner community that effective from Monday, November 8, 2010, Cisco Australia is reducing the list price of its products and technical services by 11.08 per cent.”

Cloud players big winners

InfraServe managing director, Roy Pater, said the soaring dollar is good for his cloud business.

“Being a cloud-only distributor, it doesn’t affect us,” he said. “The top dollar is good news for us – our equipment costs are cheaper and vendor costs are cheaper, so we can remain price competitive. We’ve been largely unaffected. You have a better buy price at a cloud-level.”

It does, however, force the company to be more cost competitive on a global scale. Pater cautioned resellers to avoid grey market activity.

“Being in distribution for a long time, the pricing highs and lows come and go. It is a storm in a teacup – some guys will take advantage of it and do grey market activity, but then realise that in the long-term the vendor relationship gets destroyed,” he said. “Why risk breaking down the relationship with a vendor for some short-term gain?”

Channel Dynamics director, Moheb Moses, agreed the benefits of grey marketing are short-lived and could have nasty long-term ramifications.

“In the end, the question every partner needs to ask is, ‘Is the short-term gain worth the impact it has on the relationship with the vendor and supplier and overall profitability?’” asked Moses.

He said grey importers ran the risk of a lack of support – a situation that would see them shut out of the vendor support infrastructure.

IDC Asia-Pacific channels program director, Kerstin Baxter, said this isn’t a new issue for the community.

“Whenever there’s a huge fluctuation we hear more and more chatter in the channel about grey importing,” she said. “Over the last five to six years all vendors have developed much stronger strategies and how to deal with price.”

Baxter said it’s a fine balancing act, noting vendors need to make sure they stay competitive, and that any price adjustments don’t stall sales or lead to channel offshoring. Many vendor strategies involve enablement programs and promotions, along with deals on inventory in a bid to deal with competitive pressure.

“We’ve seen some vendors slow with readjustments because of the fiscal year end. Many are waiting to see if the Australian dollar stabilises.”

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Tags acerciscoIDCDicker DataHarvey NormanChannel DynamicsPhil CameronRoy PaterInfraServeDavid DickerGerry harveygrey marketing

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