Thursday, July 26, 2012

BETWEEN THE BLACK AND THE WHITE

The grey market can be converted into a full-fledged industry!

The enduring legacy of Gaffar Market in Delhi’s Karol Bagh area is well-known to not only residents of Delhi but even to the people outside Delhi. It’s a grey market per se that stands for mobile phones, cameras, television sets, accessories and garments at a much cheaper rate than that available at the authorised shops. One should drop the notion that the products in Gaffar market are backdated; in fact, when iPhone was launched, it reached the market months before it was available at Apple’s stores! Nikon, Microsoft, Olympus, Tag Heuer – you name it – it’s all dumped in the grey markets of India at much less cost and there by attracting shopping bonanza. The electronics companies are clueless on how to beat the grey market, as it is continuously eating away their market share pushing down their sales through authorised dealers. Apart from slashing prices and rolling out value added services, the producers also trying to rope in shops in other grey markets like in Delhi’s Palika Bazaar, Mumbai’s Heera Panna or Kolkata’s Fancy Market.

The products sold at grey markets are often illegally imported from places like China, Japan, Singapore, Hong Kong and Nepal; with huge margins which are so high that even after visiting those places and bringing in the products, the retailers are still left with decent profits! The premium watches, gaming consoles and digital cameras are the main product categories that flood the grey markets. The market share for premium watches through grey markets are almost 50 per cent of total market size of Rs.1,000 crores, in console gaming it is 30 per cent of the full size Rs.400 crore market, and 25 per cent of Rs.2,000 crore digital camera market. The excessively high tax and import duties have a cascading effect on the prices creating differentials between authorised and grey markets. For instance, Sony’s console gaming costs Rs.19000 plus at legal retailers while it is sold at around Rs.16,000 in grey market outlets. For digital cameras, a mammoth 40 per cent import duties, 5.5 per cent Octroi (applicable in Mumbai) and 4 per cent sales tax; only boost the retail crisis and is a shot in the arms for grey markets. According to KPMG estimates, the grey markets in India accounts for 20 per cent of Color Televisions, 30 per cent of GSM mobiles, 90 per cent of VCD and DVD players and 70 per cent of car stereos. In premium watch industry, grey market accounts for a bigger market share than the organised market, selling 13 to 15 million units a year compared to 12 million units by organised players. While organised industry is facing stagnation over last few years in watch industry, the grey market though progressed with 5-10 per cent annual increase.

The grey market is no longer stuck with shady or used products sold at half the price especially meant for cost sensitive consumers. The quality of the products is no longer subject to deep suspicion that it will be a piece of junk in a few days’ time. These are indications that grey market is moving closer to organised markets, albeit at lower cost of the products. With no signs of cooling, grey market can further accelerate its growth by arranging electronic fares like the Singapore or Hong Kong electronic fares. Th is will pick up the grey market emergence velocity and establish it into genuine electronic and consumer durables hubs and polite knock on the door of the organised players to get ready! And above all, make it an tourist hub too in the lines of Sim Lim square of Singapore.

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  1. Telecom Minister Kapil Sibal is learnt to have approved levying of Rs 650crore penalty on BHARTI AIRTEL for violating roaming norms in 13 service areas between 2003 and 2005. An internal committee of Department of Telecom had alleged that Bharti Airtel had continued to route national and international calls as local calls (SLD) under a scheme till 2005 despite being told to stop it in 2003.
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