It all started in 2013. In the spring of 2013, distributors including Supplies Network and United Stationers notified their customers that HP was changing the way resellers sourced HP-branded supplies in a very basic way. The OEM reclassified all of its printer consumables including all small- and large-format HP inkjet cartridges and LaserJet cartridges to \u201cauthorized products.\u201d The reclassification would occur on November 1, 2013 after which all resellers had to have signed either a U.S. partner agreement or a U.S. consumer reseller agreement in order to purchase and sell the OEM\u2019s consumables products.<\/p>\n
With over 90 percent of HP supplies in the U.S. moving through resellers and retailers, the reclassification of consumables affected almost all of HP\u2019s channel partners in the region. In addition to establishing requirements, such as resellers must have a fully functional website and a physical address, the U.S. partner agreement or a U.S. consumer reseller agreement further stipulated that resellers could sell supplies only to end users. Authorized resellers were also limited to purchasing supplies exclusively from one of HP\u2019s authorized tier-one distributors (see table below). Prior to the change, resellers were not required to have an HP partner agreement to market supplies, and they enjoyed a degree of latitude concerning how they sourced HP supplies as well as to which customer they sold these products.<\/p>\n
![\"HP-authorized-supplies-distributors\"](\"http:\/\/www.enxmag.com\/twii\/wp-content\/uploads\/2014\/12\/HP-authorized-supplies-distributors-300x107.jpg\")
<\/p>\n
My company, Actionable Intelligence, began following the matter during the first part of 2013. In June of 2013, we reported that in a prepared statement, HP explained it was changing the classification to deepen its \u201crelationship with resellers of our supplies products, and improve the customer shopping experience to help them make informed choices to purchase original HP Supplies.\u201d Reading between the lines we speculated, perhaps, HP might also try to better encourage its resellers to sell less third-party supplies and more of the OEM\u2019s branded products.<\/p>\n
In the run-up to HP\u2019s implementation of its reclassification of supplies products, a number of remanufacturers and companies in the channel express concerns that HP would attempt to stop resellers from selling third-party consumables for HP devices. HP informed Actionable Intelligence, however, that becoming an authorized reseller in no way would preclude channel partners from selling remanufactured or compatible cartridges. Mr. Sakumoto told us categorically last year, \u201cHP has no intent to change or alter or influence what a reseller wants to sell to their customers. We fully support choice in the marketplace.\u201d He went on to explain that nowhere in the partner approval process did it say anything about only selling HP supplies.<\/p>\n
During the spring of this year, word once again began to circulate that HP would implement another round of changes before the end of 2014 related to the distribution of HP-branded supplies. Resellers that successfully began as authorized partners would be required to be \u201cqualified\u201d as of November 1, 2014 in order to continue purchasing and selling HP supplies. The qualified program for reselling supplies included a more stringent set of criteria for resellers to meet (see table below).<\/p>\n
Last year, after HP reclassified its supplies as authorized products, I did not hear much grumbling from the channel, which was surprising given all the angst I heard expressed earlier in the year. The reason no one was complaining was that apparently for many companies the November 1, 2013 deadline came and went and nothing really changed for them. At least that\u2019s what I was hearing from the companies I spoke with subsequent to the 2013 deadline. Some firms even said that they never obtained one of the required agreements and were able to continue to source supplies from various distributors just as they had before supplies were reclassified.<\/p>\n Having heard so many in the channel talk about the reclassification of HP supplies as a non-event, I was startled to learn that the number of independent resellers selling HP-brand consumables actually fell considerably. When discussing the matter with Actionable Intelligence, Mr. Sakumoto indicated that as a result of moving supplies from open distribution to authorized products, the number of resellers marketing HP supplies dropped from between 17,000-20,000 to around 9,000 resellers. After implementing the qualified program in 2014, he says the number of independent resellers fell to the 5,000-6,000 range, which is where it is now. Mr. Sakumoto pointed out that the resellers are in addition to \u201c10,000-plus retail outlets from our major retail distribution partners and of course their dot-com sites.\u201d<\/p>\n Although it seems fewer companies were dropped in 2014, I did start hearing howls from the channel after HP put further controls in place on its U.S. supplies in 2014 by implementing the qualified program. While I didn\u2019t hear much chatter before November 1, after the deadline passed the channel became quite vocal. I started to receive emails about the situation and comments began to be posted to the Actionable Intelligence website from companies that could no longer purchase HP-branded supplies.<\/p>\n Many of the disgruntled resellers that I heard from said that they felt that they had met the criteria for being qualified to resell HP supplies but had been dropped from the roster nonetheless. Paul Mervis, for example, executive general manager of Marblehead, MA-based Encore Images, told me that his firm sold approximately $200,000 worth of HP-branded ink and toner cartridges annually. Regardless, he learned from his account representative at a tier-one distributor two days before the November 1 deadline that Encore was on a list of resellers to which the distributor could no longer supply with HP-branded consumables.<\/p>\n Similarly, during an interview for a story about the changes in HP\u2019s distribution, Tony Casillo, president of TTS Business Products in Garden City, NY, told a similar tale. He said that after meeting the requirements to be authorized last year, the firm was not granted qualified status as of November 1. TSS was denied despite the fact that according to Mr. Casillo, TTS carefully tracked sales of its HP-branded supplies and its sales well exceeded the six-month $15,000 minimum.<\/p>\n These are only two examples of the companies that we heard from, but they are indicative of other comments dropped resellers sent to us. Like the two above, most said they exceeded the sales volumes to be qualified. As one can see from the list of criteria, however, it takes more than just meeting HP\u2019s minimum sales threshold to be qualified to sell HP supplies. And while the purchasing requirements are concrete and easy to prove they\u2019ve been met, others, such as presenting the HP supplies portfolio in a certain way or having a fully functional website, seem more nebulous and open to interpretation. Indeed those resellers we heard from who were denied qualified status usually indicated the reason was not sales related but rather had something to do with how the HP brand was presented or the functionality of their websites.<\/p>\n What Can They Do?<\/strong><\/p>\n Dropped resellers have been left to scramble to get HP-branded supplies for their customers since November 1 of this year, as they try to become qualified resellers. One company stated that sales of HP-branded supplies made up roughly half of its annual revenue and said, \u201cWe are NOT going to stop selling HP OEM to our customers.\u201d Although the firm was forced to stop purchasing from its HP tier-one distributor, it claims its \u201ccustomers have seen no disruption in service and our costs have only gone up slightly.\u201d The firm says it continues to look for ways to reapply for qualification but it is being met by \u201ca corporate wall of silence\u201d and its \u201cex-HP rep [says] there is simply nobody to talk to about it.\u201d<\/p>\n Other dropped resellers have commented that they are also met with silence from HP in their bid to be qualified. Mr. Mervis says that the HP team that does the qualifications \u201chas been largely unresponsive,\u201d \u201ca \u201cnameless, faceless team you communicate with via email.\u201d Mr. Casillo agrees, indicating that HP\u2019s Qualified Supplies Partner Program team only communicated by email, never divulged the name of an actual person to contact or call, and was always slow to reply. He says, \u201cAll my communication with HP has been intermittent and cryptic. That\u2019s been consistent,\u201d says Mr. Casillo. Another dropped reseller said, \u201cWe are looking for ways to re-apply for \u2018HP Qualified Supplies Program.\u2019 If any body knows how please let us know.\u201d<\/p>\n Despite hitting what sounds like a brick wall, Mr. Sakumoto suggested that it was not the end of the road for dropped resellers and offered advice as to what they should do next. He emphasized that resellers and tier-one distributors need to work together to get dropped resellers back into the loop. For resellers, he says, \u201cThe first thing to do is go to your tier-one distributor and figure out a plan for working toward meeting our requirements. Once you feel you have a track record of showing you meet these requirements, you are welcome to reapply.\u201d<\/p>\n Risky Business?<\/strong><\/p>\n Of course, it behooves HP to bring its resellers back into the fold or risk losing sales of HP-branded supplies to third-party vendors. Mr. Casillo told Actionable Intelligence that he was not concerned finding product because of the availability of non-HP alternatives. \u201cIt\u2019s not a problem. There\u2019s plenty of product out there.\u201d He told us, \u201cI never pushed that stuff [third-party cartridges] before. Now I have no choice.\u201d Mr. Mervis indicated the same was true for Encore Imaging. \u201cIf you can\u2019t supply OEM,\u201d he explained, \u201cyou are going to find another way to meet customer needs.\u201d<\/p>\n We asked Mr. Sakumoto if he was concerned that resellers without qualified status might source products from suppliers they had not used before, including third-party supplies vendors or other alternative suppliers. He said they worried about that a lot but listed three reasons why the risks were manageable. First, the size of the business represented by the lost resellers was \u201clow in terms of dollars,\u201d he said. Second, the overall availability of HP cartridges mitigated against any risk. \u201cIf the customer has 17 different ways to buy toner and loses one or two choices,\u201d he explained, \u201cthat customer still has a lot of options available.\u201d Third, HP has always had to compete with remans and other alternatives. \u201cThose alternatives were already available. If customers had a propensity to choose reman, they would have done it a long time ago.\u201d He summarizes that from HP\u2019s perspective the focus is on the customer, and customers still have many options for purchasing genuine HP cartridges.<\/p>\n Even after the new programs have been implemented, Mr. Sakumoto concludes that HP supplies are still over-distributed in the United States, a remark that some in HP\u2019s U.S. supplies channel may find unsettling. Although he did not entertain any suggestions that HP\u2019s independent resellers may be further pruned, he did leave the door open to dropping distributors. Since reclassifying its supplies, HP has dropped Wynit from the above list released in 2013. When asked if HP has plans to further thin its tier-one distributors in the United States, Mr. Sakumoto says HP has not made any final decisions but is reviewing the matter. \u201cThe question is, do you need eight tier-one distributors? There are reasons why we could continue to maintain eight and there are reasons why we might not. We just have not made a decision on that yet.\u201d<\/p>\n HP\u2019s move leaves a lot of other questions unanswered too. Is HP indeed right in its estimation that its supplies revenue will be relatively unaffected by cutting off the end of what Mr. Sakumoto sees as its \u201clong tail\u201d of supplies resellers? And what will that do to supplies sales going forward? After all, even with its full complement of U.S. resellers, the company has struggled to maintain its supplies business since the recession. Is HP\u2019s assessment correct that customers who were willing to try third-party product have probably already done so? Moreover, will HP supplies customers be more willing to explore alternatives if the disenfranchised resellers begin to promote more non-OEM product? And, is this the end of HP\u2019s supplies channel changes, or will we see a further reduction in either the number of tier-one distributors or resellers? Rest assured, Actionable Intelligence and ENX will be following all this very closely in the months ahead.<\/p>\n","protected":false},"excerpt":{"rendered":" Over the past year or so, Hewlett-Packard has been fundamentally changing the way it distributes supplies in the United States. Beginning last year, the company implemented steps to move from an open model of supplies acquisition to a program that provides HP with more control concerning the resale of its branded consumables. From a channel perspective, the changes have been dramatic. Currently, only about one-third of the resellers that once sold HP supplies under open distribution remain \u201cqualified\u201d to continue selling the OEM\u2019s branded consumables. HP, on the other hand, maintains that it has done what was needed to do to protect the brand and the experience customers have when purchasing HP consumables. HP\u2019s Steve Sakumoto, VP and general manager of HP\u2019s U.S. supplies sales organization, explains that the reason for implementing its channel changes were practical and necessary. \u201cWhen you have open distribution you have zero ability to manage the customer experience and brand representation for HP. Our objective is to shape that brand experience. We believe when you do that you will get a better customer experience, which leads to brand loyalty, which leads to more repeat business and revenue.\u201d Mr. Sakumoto is convinced that HP\u2019s remaining resellers will be those \u201cthat have the right skills and capabilities to do all that.\u201d Moving From Open To Qualified It all started in 2013. In the spring of 2013, distributors including Supplies Network and United Stationers notified their customers that HP was changing the way resellers sourced HP-branded supplies in a very basic way. The OEM reclassified all of its printer consumables including all small- and large-format HP inkjet cartridges and LaserJet cartridges to \u201cauthorized products.\u201d The reclassification would occur on November 1, 2013 after which all resellers had to have signed either a U.S. partner agreement or a U.S. consumer reseller agreement in order to purchase and sell the OEM\u2019s consumables products. With over 90 percent of HP supplies in the U.S. moving through resellers and retailers, the reclassification of consumables affected almost all of HP\u2019s channel partners in the region. In addition to establishing requirements, such as resellers must have a fully functional website and a physical address, the U.S. partner agreement or a U.S. consumer reseller agreement further stipulated that resellers could sell supplies only to end users. Authorized resellers were also limited to purchasing supplies exclusively from one of HP\u2019s authorized tier-one distributors (see table below). Prior to the change, resellers were not required to have an HP partner agreement to market supplies, and they enjoyed a degree of latitude concerning how they sourced HP supplies as well as to which customer they sold these products. My company, Actionable Intelligence, began following the matter during the first part of 2013. In June of 2013, we reported that in a prepared statement, HP explained it was changing the classification to deepen its \u201crelationship with resellers of our supplies products, and improve the customer shopping experience to help them make informed choices to purchase original HP Supplies.\u201d Reading between the lines we speculated, perhaps, HP might also try to better encourage its resellers to sell less third-party supplies and more of the OEM\u2019s branded products. In the run-up to HP\u2019s implementation of its reclassification of supplies products, a number of remanufacturers and companies in the channel express concerns that HP would attempt to stop resellers from selling third-party consumables for HP devices. HP informed Actionable Intelligence, however, that becoming an authorized reseller in no way would preclude channel partners from selling remanufactured or compatible cartridges. Mr. Sakumoto told us categorically last year, \u201cHP has no intent to change or alter or influence what a reseller wants to sell to their customers. We fully support choice in the marketplace.\u201d He went on to explain that nowhere in the partner approval process did it say anything about only selling HP supplies. During the spring of this year, word once again began to circulate that HP would implement another round of changes before the end of 2014 related to the distribution of HP-branded supplies. Resellers that successfully began as authorized partners would be required to be \u201cqualified\u201d as of November 1, 2014 in order to continue purchasing and selling HP supplies. The qualified program for reselling supplies included a more stringent set of criteria for resellers to meet (see table below). After the Changes Last year, after HP reclassified its supplies as authorized products, I did not hear much grumbling from the channel, which was surprising given all the angst I heard expressed earlier in the year. The reason no one was complaining was that apparently for many companies the November 1, 2013 deadline came and went and nothing really changed for them. At least that\u2019s what I was hearing from the companies I spoke with subsequent to the 2013 deadline. Some firms even said that they never obtained one of the required agreements and were able to continue to source supplies from various distributors just as they had before supplies were reclassified. Having heard so many in the channel talk about the reclassification of HP supplies as a non-event, I was startled to learn that the number of independent resellers selling HP-brand consumables actually fell considerably. When discussing the matter with Actionable Intelligence, Mr. Sakumoto indicated that as a result of moving supplies from open distribution to authorized products, the number of resellers marketing HP supplies dropped from between 17,000-20,000 to around 9,000 resellers. After implementing the qualified program in 2014, he says the number of independent resellers fell to the 5,000-6,000 range, which is where it is now. Mr. Sakumoto pointed out that the resellers are in addition to \u201c10,000-plus retail outlets from our major retail distribution partners and of course their dot-com sites.\u201d Although it seems fewer companies were dropped in 2014, I did start hearing howls from the channel after HP put further controls in place on its U.S. supplies in 2014 by implementing the qualified program. While I didn\u2019t hear much chatter before November 1, after […]<\/p>\n","protected":false},"author":58,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1642],"tags":[],"_links":{"self":[{"href":"http:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/10873"}],"collection":[{"href":"http:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/users\/58"}],"replies":[{"embeddable":true,"href":"http:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/comments?post=10873"}],"version-history":[{"count":1,"href":"http:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/10873\/revisions"}],"predecessor-version":[{"id":10876,"href":"http:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/10873\/revisions\/10876"}],"wp:attachment":[{"href":"http:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/media?parent=10873"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/categories?post=10873"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/tags?post=10873"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"Hp-Quaified-criteria-12-4-14\"](\"http:\/\/www.enxmag.com\/twii\/wp-content\/uploads\/2014\/12\/Hp-Quaified-criteria-12-4-14-300x169.jpg\")
After the Changes<\/strong><\/p>\n