In the cutthroat supplies business, no distribution channel has had a bloodier year than that of HP’s Image and Printing Group. But IPG general manager Rebekah O’Flaherty, who has overseen the paring down of its distribution this year, is confident that the “surgery” will have IPG fighting fit for 2004.
But 2003 was about much more than distribution changes for IPG. It also had a boom year for new products.
This year, HP got serious about establishing itself as a consumer brand for products such as digital cameras. Its tilt at the home entertainment convergence market saw it release 200 new products in the last 18 months.
With seven years at HP under her belt, Rebekah O’Flaherty has overseen HP’s image and printing group since the merger with Compaq 18 months ago.
While she admits that the post-Compaq merger IPG was overdistributed, some of the changes to the IPG distribution landscape haven’t all been at the vendor’s behest, with shifting business priorities - and one business failure - seeing some distributors fall by the way side.
The first to go was Daisytek Australia, which followed its US parent company into voluntary administration in May. HP cut the cord on Daisytek in June, and followed it with Digiland in September.
Further changes came in September when stationery specialist, Dynamic Supplies, announced it was relinquishing its authorised HP distributorship, blaming a value squeeze.
Down to two distributors – Dynamic Supplies and Tech Pacific, O’Flaherty brought IPG hardware distributor, Synnex, online for the full IPG range in September. The portfolio was rounded out with the addition of Phoenix Toner in October.
"As an observation, when HP and Compaq merged, I felt we had too many distributors and didn’t necessarily make complementary decisions,” O’Flaherty said.
While some distributors were shed through natural attrition, the year also saw O’Flaherty conduct a lengthy review of IPG distribution which focused on minimising customer overlap between different distributor partners.
“You need to start from the customer back and look at which customers you’re serving,” she said.
The new structure reflected the “immense” change in hardware and supplies, and the rising importance of the consumer and retail sector, O'Flaherty said.
With one HP-focused partner going out of business in 2003 (Daisytek), and another leaving the field citing unprofitability of HP’s supplies business (Dynamic Supplies), the spotlight has fallen on the value proposition which IPG presents for distributors.
But O’Flaherty refutes the suggestion that the value has gone:
“I don’t support the idea that profitability drove anybody out of the market," she said. "Profitability with HP has stablished and grown.”
The supplies business was about getting the right mix of volume and price, O'Flaherty said. And by leading with new technologies such as multi- function printers, HP was creating new opportunities for the channel.
“We’re very serious about the new industry of digital entertainment," she said. "By 2006 it will be larger than consumer electronics and consumer IT combined.”
The field of digital photography was one example.
In 2004 the number of digital camera images would outnumber the traditional SLR photos, she claimed.
HP has been making big investments in building a consumer brand, and recently kicked off a TV campaign in Australia which leads with digital photography.
The morphing of the traditional computing technology with home entertainment was necessarily impacting on the sales channel for these converged devices, O’Flaherty said.
IPG’s retailers were beginning to be affected by trends such as the convergence of television and computing, and the moving of traditionally office equipment such as projectors into the home, she said.
But while HP expected the course of the next couple of years to be charted by digital devices which hadn’t even been imagined yet, O’Flaherty remained pragmatic about its existing channel.
While new channels were being born, O’Flaherty had a hunch that existing channels were also morphing to keep pace with the changing industry and customer demand.
For example, audio specialists were beginning to offer smart home design and installation of hardware.
“While we love new market opportunities, you can never lose sight of what generates sales for you now,” she said. “This year and next year we’re going to be selling a lot of boxes. We’ve just got to do both.”