HP print boss claims local distribution too expensive
- 22 October, 2006 09:05
HP will take more of its retail business out of distribution because the cost is too high, according to local print boss, Christoph Schell.
While praising the job being done by its distributors in SMB and enterprise, he said the vendor needed to improve efficiencies in retail due to tough market conditions.
"The retail market is down, not just for IT but across the board, and the HP go-to-market strategy is not ideal," he said. "Where retailers are buying through distribution, a lot of margin is lost between HP and the retailer.
"Some retailers are working with one account manager from HP and another within the distributor. We need a black and white approach - either we manage the account or the distributor does."
HP currently sells direct to Harvey Norman, Dick Smith and Officeworks.
These stores account for 70 per cent of its retail business but Schell is planning to take more accounts out of distribution.
Distributors servicing the remainder of the market will then be rewarded according to strengths in sales, facilitating credit and logistics.
Schell hopes this more granular approach will help lower the cost of distribution. He warned HP would not be paying for all three services from any one partner.
"Coming from Europe, I am not used to distributors adding as high a cost percentage as they do in Australia," he said.
"I understand the cost has to be slightly higher here but I believe some distributors are not cost effective.
"Australian distribution has been a closed market for a long time and there is a very low threat of being attacked because it is not a logical expansion for many overseas players.
"That is why the cost structure is so different but the retail market is very tough right now and every point counts. Other vendors like Microsoft and Intel are in the same boat."
Schell said distributors had done an extremely good job with products sold into SMB and enterprise during the past six months. But if changes made to its retail strategy were effective, they would also be implemented in these areas.