HP Direct meets sceptical response

HP Direct meets sceptical response

Resellers continue to reject repeated assurances by Hewlett-Packard that its Australian channel will remain unaffected by a new direct business initiative rolled out by HP in the US.

The vendor last week announced the launch of its online store HP Direct, a fully owned subsidiary, in a bid to compete with the e-commerce and direct online selling initiatives of the likes of Dell, Gateway, Compaq and IBM.

HP Direct is a revised version of the company's online Shopping Village and will move to sell over 70 products online. The initial pilot program will begin in the US and Britain in June, followed by Sweden in the third quarter, eventually targeting other European countries in 2000.

According to Rebekah O'Flaherty, HP's Australian marketing manager, the strategy will be restricted to the northern hemisphere. "This is a US announcement and we have no plans in Australia to follow it. There have been a number of announcements from HP in America over the last 18 months which run counter to our local strategy. Take for example the US Shopping Village.

"HP has been running a direct consumer online store for nearly a year now. We have no plans to emulate this."

Despite these assurances, resellers contacted by ARN believe the US changes will eventually take effect in Australia. "I think that whatever happens in America will happen in Australia in two to three years," claims John Zhang, sales manager of Queensland reseller Also Technology. "HP is just trying to keep us happy in the meantime because it wants us to sell its product."

Zhang is predicting dire consequences for the channel. "The wholesale industry in the next five years will simply close down. Manufacturers will finish each other off and only one or two will survive that will make good margins by going direct."

The only ray of light Zhang can see is that resellers have enough time to transfer their core competencies to become service companies.

Euan Hills, managing director of Computerland Tasmania, also remains incredulous about HP's claims that the Australian market will remain immune from the US direct philosophy. "It can only be a short period of time before [the US channel model] comes out here," he said. "Vendors are following the Dell model because they are scared of it."

When it comes to developing e-commerce systems, Hill said it was time for vendors to "practice what they preach, instead of hiding behind a concrete wall", by continually implying that Australia would not adopt direct systems similar to those in the US. Mike Neistat, managing director of Victorian reseller SKAI Computer Systems, is a little more optimistic about the future of the HP reseller in Australia. "As I understand it, HP is going to have its Internet business go through its resellers. They put a lot of value into their reseller channel and have always been pretty straight with us. I would be very surprised if they went direct," he said.

Analysts concur with Neistat's opinion of a channel-friendly HP, but caution that the vendor will soon awaken from its slumber and assume that resellers are more of a hindrance than a help in the age of Internet commerce, high costs and low margins. "HP has a strong history with the channel and has been cautious not to tread on its resellers toes," explained Van Baker, a senior analyst with Dataquest, referring to HP's slow uptake of e-commerce initiatives.

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