Are You Going Gray?

CHIEF EXECUTIVE—CEOs have tremendous power to control the gray market—piracy that robs firms of profits, brand integrity, channel viability and customer satisfaction. Yet few companies aggressively attack “gray market” piracy. This type of piracy is defined as real product leaked inappropriately into a market so that the manufacturer is not paid per the terms of the established value chain partner agreement. No product is immune to it.At its core, gray market leakage results from a lack of discipline over the manufacturer’s end-to-end value chain. Three major causes drive gray market leakage: poor or unstable financial health of network partners; manufacturer operating practices, such as the level of price protection, stock balancing and other allowances; and the business model, including the number of tiers in the value chain, cross border coverage and partner hand-offs needed.

The Alliance for Gray Market and Counterfeit Abatement, an initiative composed of technology companies, reports that “over $40 billion in legitimate IT products move through the gray market channel each year, resulting in $5 billion in lost profits annually to IT manufacturers.” Read article.