INDUSTRY VIEWPOINT - Resellers: accept no substitute

Last month, Tesco was accused by trendy US clothes label Tommy Hilfiger of selling pirated goods.

The supermarket, which denies the charges, faces legal action because it sourced the clothes outside Tommy Hilfiger's official distribution network.

The company is, in other words, a grey importer. Tesco, the UK's biggest supermarket chain, is also the country's most prominent champion of grey imports. It sells #100 million worth of grey market products a year.

Tesco has condemned the selective distribution policy of clothes labels that refuse to let it stock their products. This system is designed to restrict supplies and maintain high prices, Tesco argues.

But how can it be so sure that its Tommy Hilfiger clothes are not fakes?

As Tom Blackett, of the branding consultancy Interbrand, pointed out to the Financial Times, food retailers are playing with fire as questions of authenticity could harm their own brands.

'It could be that Tesco's source of supply is bona fide, but that the supplier himself may have been duped,' he argued. 'The only way to make certain the goods are genuinely authentic is to buy from the genuine source.'

Unlike the clothes and perfume sector, there is no selective distribution policy in the IT industry. Every reseller is free to buy Intel or Microsoft or Creative Labs or Diamond. And unlike say, the UK electrical goods market, where prices are remarkably similar across the leading retailers, there's true competition in the sector.

The aim of selective distribution policies is to maintain high prices and high margins. In the computer sector - with rare exceptions such as DRam in times of shortage - prices and margins only go down.

You may find cheaper prices in the grey market than in the official distribution channel. But this is only the headline price. Buying cheaper doesn't mean you're buying better. How do you know the product is genuine? Are you sure the DRam consignment isn't part of a fly-by-night VAT scam? Where's the quality control, the returns policy, the support?

If you're offered a deal that's too good to be true, it's more than likely to be counterfeit. The only way you can be sure you're buying the genuine article is to get it from an authorised distributor.

This message should ring loud and clear for computer resellers and PC builders. The traditional grey market for IT goods, fed by big OEMs dumping their overstocks, isn't what it was.

Grey market spot prices are hardly ever more expensive than prices quoted by the official distribution channels these days. This is because there are fewer shortages of leading component lines.

Wade into today's grey market and you risk getting lumbered with out-and-out counterfeit goods. Everyone knows about Microsoft bootleg software and mice.

Selling a remarked Pentium is like taking a 1.1 litre Ford Fiesta, dressing it up as an RS Cosworth, and selling it as the latter. The profits for the fraudster are huge.

The risks for the unwitting reseller are equally clear. If you resell a PC with an overclocked chip, you're the one who will risk prosecution by the increasingly active Trading Standards. Ignorance is no defence and never mind the damage it could do to your standing with your customers.

Tesco can afford to play PR games with its grey market goods, which may or may not be counterfeit. But can you?

Mark Davison is business manager at Datrontech.