Even if you’re only a casual reader of the technology sites, you can’t help but come across the expression ‘grey market’. When there were hundreds of suppliers in the market for systems and components, then it was such a complex issue that no one really tried to tackle it. Now the market is becoming clearer, we’re hearing some pretty strong words spoken against it. KitGuru caught up with some of the guys at UK-based, performance system builder YOYOTech. They’re pretty clear on the subject. They’re not happy.
“What would you do if you bought a CPU or hard drive, had a problem and were refused an exchange when you took it back?”. That’s the kind of question that the staff in this London store want you to ask yourself.
“It would never happen with product purchased from YOYOTech, because it is all 100% legitimate, purchased from official channels”.
So what is this ‘grey product’ that we hear so much about? Well, it can come from a number of sources, but most often it has been built and/or distributed without authorisation.
The guys we spoke to were clear, “Purchasing unauthorised product is bad for customers, no argument”, said YOYOTech’s staff.
“I’ve seen it many times in the computer and camera market”, one staff member explained. “Product seems to be an unbelievable bargain and the customer goes for it – even though the product does not seem to be available at that price from anywhere else”.
“It could be that the product itself is a fake or, more subtle, that it has been brought to the UK market through dodgy channels or as part of a large VAT fraud”. This all sounds very serious, but are there any real consequences?
“If it is a fake, then the problems are obvious”, they explain. “But even if it seems real, there may be no manufacturer support on the product. That problem will make itself known if you think you have bought something with a manufacturer warranty that’s at least two years, but the store who sold it to you only offers one year, directly, themselves”.
“Imagine you have a serious problem more than 12 months after purchasing a CPU or hard drive and the manufacturer refuses to support you, will it seem like such a bargain then?”, asks YOYOTech.
They mentioned fraud, so we asked about this, “The government is working hard to close off the loop holes, but for some time people have been engaged in huge frauds relating to the way VAT works on technology and what happens when you export and re-import that technology”, they replied.
“The processes that criminals use are varied and crafty”, they explain. “Let’s say someone has a direct buying relationship with someone like Intel. To help ensure smooth delivery of parts, suppliers might drop a huge shipment of chips into a warehouse, but the reseller only buys them as they are needed – on a month-by-month basis. We call that consignment stock and there’s nothing wrong with that, as long as it is not abused”.
YOYOTech continued, “Now ask yourself what happens if the warehouse owner decides to get tricky”.
“Without Intel knowing, deals could be set up for these chips to be exported, sometimes through a series of companies. Eventually, they might even come back to the original owner. Now what you discovered that the CPUs had never left the original warehouse”, we were told. “Ultimately they get sold directly to customers in the UK. There are many variations, but this kind of scheme is called a carousel and it’s one of the ways dodgy companies can use the 20% that supposed to be paid to the VAT man as profit”.
“Each of these groups have their own techniques, but there’s no doubt that this kind of behaviour contributes to the loss of millions in revenue for the country and creates multiple, non-legitimate channels into the UK market”, they said.
Sounds like a house of cards, does the issue stop there?
“Whenever we see pricing that is too good to be true, we wonder how long those companies will be around before they either decide to run or get arrested”, says YOYOTech. “In either event, customers will get lumbered with unsupported product”.
They carried on, “Not only that, but it puts added pressure on legitimate operations like YOYOTech, because we’re trying to provide a service to the public by having a store that’s packed full of legitimate technology and open 7 days a week. Surely it’s better to have a selection of honest local businesses who are there, long term, to provide support for customers – instead of a nation of grey-market specialists who are ready to run away with their ill-gotten gains the moment there is a police investigation?”
To help combat the grey market, YOYOTech encourages you to check with your suppliers that the components you are buying have been authorised for sale in the UK and that they are not of interest to the various government departments investigating fraud. Sounds like sensible advice.
KitGuru says: This is an interesting issue and one that has the potential to affect all of our readers. Buying product with no technical support or warranty is a bad idea. There’s also the possibility that product which has been illegally imported and part of a wider crime. We will start discussions with major component vendors like Intel and AMD to see what their official positions are and to see if there are clever things you can do to protect yourself against rogue traders.
It’s an interesting one. Comments below or in the KitGuru forums.