SPC spells trouble for vendors and channels

SPC or special price clearance is an oft-used term amongst channel partners
dealing with corporates. As the term suggests, SPC is the practice of procuring
goods under specially discounted rates for making bulk deals to corporates under
special conditions.

However, the practice of SPC has taken an ugly proportion right under the
nose of most vendors. But this time, it is the vendors' own sales
representative who are betraying them by misusing the loopholes in the concept.
As a result, it is also spoiling the market dynamics in the channel community.

According to market sources, the sales representative of some major IT
product companies like Samsung, HP, LG and its likes, have been misusing the SPC
concept by joining hands with channel partners on a regular basis. The modus
operandi is such that there is no way the vendor's headquarters will even get
a inkling of the entire scam.

It all starts with the vendor's sales representative, who usually under
pressure of completing their sales target, approach dealers to pick up stock
from the company even if there is no requirement for the same.

When the dealer refuse to take the stock the sales representative offers the
dealer to use the 'notorious' SPC method to their advantage.

First the dealer is asked to produce a fake enquiry of a large requirement in
the name of any large corporate. This enquiry is then forwarded by

the sales representative to the headquarter requesting for a special discounted
price citing competitive quotes from competing brands. The headquarters quickly
clears the special price, which is usually much lower than the fake competitive
price provided.

Since the sales representative is the person who is supposed to verify the
authenticity of the claim, the officials at the headquarters rarely bothers to
further verify the request. The dealer gets the goods at heavily discounted
price, which is then floated in the market at a price much below the MOP
(marketing operating price). This creates unhealthy competition among the
channel community. Meanwhile, the sales representative manages to meet his
target.

According to market sources, the practice is most prevalent in brands like
Samsung, HP, LG and many others. A dealer who has availed of SPC using the above
method said on condition of anonymity, “Such deals work out best in high-end
products where the margins are very high. It is far too difficult to get such
arrangements done on fast moving and lower margin products. Such deals are often
initiated by the area managers of the vendor.”

Very often, high end-laser printers and large LCD monitors are the products
that have moved through such means. Some of the dealers who have come to know of
this scam have compared such deals equal to 'criminal' activities. “Both
the dealers and the sales representative should be held responsible in this
criminal act and should be severely dealt with,” said a dealer.

Many of the big dealers, involved or not in this act, are in knowledge of the
SPC scam, but have remained tight-lipped about this. While most refused to talk
at length on this topic all agreed to the existence of such practices.

R Manikandan, GM-Sales and Marketing (IT Products), LG Electronics
confirmed the practice of giving SPC, and was aware of the irregularities done
under the shadow of SPC. But he claimed that LG gives SPC in a controlled
manner, and in large deals the company verifies the authenticity with the
customer.

HP refused to give an official statement on the issue. Despite repeated
attempts, the concerned person for corporate deals in Samsung was not available
for comments citing busy schedule. This report is a warning for all those
vendors, who may have become a victim of the SPC scam, to review its processes
before this scam takes larger proportion.