SPC Spells Trouble

SPC or special price clearance is an oft-used term among 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.

According to market sources, the sales representative of some
major IT product companies like Samsung, HP, LG and the 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 an inkling of the entire scam.

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

When the dealer refuses to take the stock, the sales
representative offers the dealer to use the 'notorious' SPC method to his
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 conditions 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 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 aware
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, business group head, 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.

Nelson Johnny

maildqindia@cybermedia.co.in