Samsung requested a random audit of 20:20 Mobile’s stock two weeks ago, leading to the discovery of 10 suspect chargers, later proven to be counterfeit.
It prompted the immediate removal of 20:20’s Samsung accessories distribution contract.
The manufacturer is understood to be alleging that 20:20 was passing off counterfeit products as genuine. 20:20 is robustly asserting it was not knowingly involved in any such activity.
The distributor is now trying to protect its name among its other suppliers and major retail customers, arguing that its stock had been contaminated in a ‘returns loop’ from a rogue dealer and is not indicative of a systematic failure in its business.
20:20’s UK managing director, James Browning (pictured, above), said: ‘20:20 Mobile has strict procedures in place to ensure products sent to customers are authentic – this includes certification, batch tracking and testing.’
A similar embarrassment in April 2006 doesn’t help 20:20’s cause; the distributor was terminated by Nokia over fake accessories, but later won the licence back. One senior 20:20 source said: ‘It is a completely new management team here, compared with when the Nokia stuff happened.’
The distributor has now said it will continue to trade in Samsung products but on the grey market.
Samsung would like to prevent 20:20 from such activity, but it is perfectly within the law for 20:20 to buy and sell Samsung products within the EU, as part of EU free trade rules, without the manufacturer’s approval. Legally, Samsung has to honour the warranties, even though it considers the products unauthorised as long as the products are from the EU.
Samsung sensationally struck 20:20 off as a distributor of handsets in March 2008, after finding it was selling non-UK stock through the Samsung online store, which 20:20 managed.
At the time, Samsung’s UK chief, Mark Mitchinson (pictured, near left), vowed ‘the door was closed’ on 20:20 getting back its distribution licence. 20:20 responded by advertising that it was selling cheaper Samsung handsets than the manufacturer’s official distributors, which inevitably further riled the UK management.
However, Samsung gave 20:20 an accessories supply licence along with Brightstar and Kondor in November last year, seen as a stepping stone to a return to a full Samsung distribution licence. That hope now appears to be shattered.
Retailers and manufacturers reviewing future plans
The emergence of a possible ‘contamination’ of fake stock in 20:20’s inventory has alarmed some retailers, leading to product recalls and briefings to call centres on potential customer complaints.
It has also prompted other manufacturers to suspect their stock at 20:20. A senior executive at one of Samsung’s rivals said this week: ‘If they [20:20] have non-genuine Samsung chargers, we have to wonder if they also have any non-genuine products for our stock.’
Two other manufacturers have also said they are reviewing the rights they give 20:20 to repackage their products with customised packaging.
The source added: ‘We’ve been squeamish about letting distributors open our boxes, specifically because of the risk [of contamination], but retailers such as Tesco and Asda want customised boxes, and there are often exclusives which mean there is a need for customisation. We are now weighing up the risk.’
Manufacturers and retailers have declared concerns about authorised UK boxes being contaminated by non-genuine accessories. This has not been proven at any distributor in this recent case.
Manufacturers also allow distributors to buy unboxed accessories in bulk and repackage them for retailers’ differing shelves and colours.
Manufacturers said they may also be reviewing that, in light of the latest revelations.
One source at 20:20 said: ‘Our marketing is exceptionally robust. We have a strong heritage on stock that hangs right on the shelves of stores like Tesco, and that is something that manufacturers simply cannot do themselves.’
20:20 will now attempt to salvage its reputation from customers and suppliers, after what it believes is an unfair and disproportional response from Samsung.
Samsung, for its part, will want to use the opportunity to tighten up practices from its distributors, and will hope the loss of 20:20 doesn’t adversely affect its sales.