Grey market for hardware worth £25bn annually

The worldwide "grey" market for IT hardware is worth £25 billion, according to a new study.

The worldwide "grey" market for IT hardware is worth £25bn annually, according to a study from professional services firm KPMG.

Suppliers are losing up to £3.1bn each year to the grey market - when products are diverted from an authorised distribution channel or imported into another country, the study also found.

In addition to the financial costs, which are expected to continue to grow year on year, the survey - conducted in partnership with the Anti-Grey Market Alliance (AGMA) - also found that electronics products sold on the grey market may pose a risk to consumers as well.

Products that travel through the grey market may be sold to unwitting consumers who find out, only after they have made the purchase, that the product is obsolete or without warranty or support.

"Until now this has been a largely unexamined problem but clearly the grey market is thriving," said Dick Vincent, head of KPMG’s European electronics practice.

"Manufacturers need to understand its impact on their profits and brand integrity, and scrutinise their internal and external controls. If they want to gain control over grey market activities and improve profits, they need to improve relationships at all levels of the distribution channel. Those that do stand to gain significantly."

The study surveyed high-ranking executives at 63 leading IT original equipment manufacturers (OEMs), distributors and brokers. It found that distributors and brokers may often violate distribution agreements, some by using deceit, including misrepresenting end users’ identities in special discount programmes, or using fraudulent documentation to acquire goods from authorised sources to sell to the grey market.

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