HP caused some ripples in the US supplies reseller channel last year when it moved from an open to an authorised distribution model. Now, from 1 November, HP is requiring its resellers to conform to a stricter set of “customer-centric” reseller criteria to achieve ‘Qualified’ status. Only resellers that are qualified will be able to continue to sell HP’s ink and toner supplies in the US.
In the latest in a series of interviews with OPI, Steve Sakumoto, HP’s VP and General Manager, US Supplies Sales Organization, shares his thoughts on this major development.
OPI: How many resellers have made it past the authorized stage to achieve qualified status?
Steve Sakumoto: I would say out of the approximately 8,000-10,000 authorized resellers we currently have we’ll probably end up with about 5,000-6,000 qualified partners. That’s still a very large number, but you can see that many did not meet the qualifications.
OPI: That’s a big drop and a pretty substantial change to the way HP operates with the channel. Why do you see this program as so beneficial to your channel partners?
SS: When you go from 20,000 resellers – which is where we were three years ago – down to 5,000-6,000 resellers, we believe those remaining are the ones that will have the capabilities, the financial resources and the will to properly present the HP brand to the customers. We’re of the strategic belief that a more qualified channel with fewer, high quality reseller partners will enable HP to provide a superior customer solution to their end users who will actually buy and use our products.
We believe that is what our customers want; they don’t need more choice. There still is a lot of choice with 5,000-6,000 qualified resellers, but the ones that are available are of a superior quality to where we were two years ago.
One thing I do want to highlight is the qualified program was designed with the customer at the center. Reseller partners will be requalified every year based on HP’s customers’ needs and how we continue to make the customer purchase experience better.
OPI: You’ll recall that there were some delays and backlog when you implemented the authorized program. How is this transition going to qualified? Did you learn any lessons from that previous process?
SS: Yes, this time around we actually started the process months in advance and we have been in the process of qualifying all of the resellers that have requested to continue in our programs; we are going through that and we have pretty much completed that assessment.
OPI: So by the time this interview is published, are you confident that any authorized reseller that meets the criteria to become a qualified partner will have done so and will have that medallion on their website?
SS: Yes, if a reseller has been in part of the process from when we started in May of this year and has gone through the normal qualification process and has fully met all the criteria, they will be qualified by 1 November. We decided to issue Qualified Partner medallions to those resellers that have met our program criteria. We will be telling our customers to look for this ‘seal of approval’ and we’re encouraging resellers to place their medallion on their website to help drive differentiation and program awareness. The rollout of qualified medallions has started and we expect that to be completed in January.
There is a discrete set of resellers that applied but did not meet the criteria and were rejected. As part of our process they’re allowed to reapply after they have made the proper changes to their business models and practices. Many of those may not be fully qualified by 1 November because of the time it takes to process their applications, but we’ll get to them over the coming weeks and months as we move into the new cycle.
OPI: Is reporting end-user data a requirement for qualified resellers?
SS: The new US Qualified Reseller Program requirements supersede the standard HP Authorized Reseller Program requirements for HP’s supplies product lines. As such, end-user reporting data is not a requirement for US supplies qualified resellers.
OPI: Let’s talk about your distributors. I understand some of your tier one distributors have seen substantial declines in revenue for HP supplies. What’s your take on that?
SS: At the same time we went from the open to authorized program in November 2013 we also eliminated a second tier of distribution. When we did that, we had anticipated that revenue would have flowed back into the first tier. We have recovered most of it but there was some bleed off to other parts of the channel; we believe that could be from these former tier two distributors either buying indirect from tier one distributors or purchasing from the gray market – and these are two areas we are working hard on to ensure compliance.
You can’t fully shut all of those things off just like that, but we have dedicated resources both within the US – so that our channels are properly aligned with our program and our policies – and external of the US to try and manage incoming gray market products. It’s an ongoing process; we’re constantly getting leads and tracking them down, sending out notifications to cease and desist and following up with legal action.
