Going for the HP experience

HP's Steve Sakumoto reveals the details behind the manufacturer's new 'authorized partner' channel strategy in the US for Original HP supplies.

Steve Sakumoto is a familiar face to many in the US OP industry. He is VP and General Manager of HP’s US Supplies Sales Organization, Printing and Personal Systems, and is responsible for all field sales operations for HP’s supplies sales in the US.

This includes office product superstores, general retail accounts, commercial distribution, independent resellers/VARs and corporate account sales, and revenues for his department exceed $5 billion in annual shipments.

During his 33-year career at HP, Sakumoto has also held various sales, marketing and product management positions, including responsibility for all field sales operations for the office product superstores channel.

Earlier this year, HP announced a major change to its channel strategy for supplies in the US, as it looks to establish a more formal relationship with its channel partners. This product classification change involves HP Inkjet print cartridges, LaserJet print cartridges and large-format ink and affects the entire US reseller community.

This new channel relationship formally came into being on 1 November and OPI caught up with Sakumoto shortly prior to this date for an exclusive interview in which he gives his reasons for this new strategy and what it means for HP’s distributors, resellers and customers.

OPI: You’re introducing this new channel program on 1 November. Talk me through what you’re doing and why.

Steve Sakumoto: What we’re really doing is we’re moving from what HP terms an ‘open’ distribution system to an ‘authorized’ distribution system. Therefore, we’re basically asking all of our reseller partners just to register with HP so we can know who they are. That means we can have and develop a direct relationship with them and we’ll be able to support them directly. Not from a distribution and logistics standpoint – we will still rely on our distribution partners to manage all that business for us and we have no intent of taking these customers direct – but we want to have a direct sales touch with the resellers so they can better serve the end-consumers.

OPI: So, just to clarify, the previous situation was that you had your major distributors – United Stationers, SP Richards and Supplies Network, for example – selling to resellers, and it’s now those resellers that you are requiring to be authorized?

SS: Correct.

OPI: What does the authorization process entail?
SS: The authorization process involves going to an HP website and applying online by providing pretty standard business information. Then it goes through our authorization review process and once approved, we send the partner a welcome package.

To go back to your question on why we’re doing this, our belief is that when we touch resellers directly and we’re able to communicate directly with them and provide them support, they, in turn, will be able to provide a superior level of service and customer experience to our joint end-user customers.

So the idea is not to interfere with the supply chain, but to provide a direct touch to the resellers that will enable us to better support them and in turn they will be able to better support our mutual customers with a superior HP-branded experience. So that’s the overall strategy.

OPI: So why are you doing this now?
SS: Let’s take the example of outlets such as Starbucks, the Apple Store, or a McDonald’s. Whenever you walk into one of these, there is a certain branded experience that you have come to appreciate and you have come to expect.

And, wherever you are in the US or elsewhere in the world, you will be treated to a very similar, consistent and familiar brand experience. What HP wants – even though we don’t have dedicated HP resellers, but office products resellers that sell a multitude of different products – is that when a customer walks into a store, calls or faxes a reseller, or goes online looking for HP products they receive a consistent branded HP experience.

That encompasses a number of areas such as making sure that the reseller has the appropriate selection and the products are properly presented; that if there are any questions the reseller can address them promptly; the customer’s confident that when they buy an HP original that it is an HP original and not a remanufactured or a clone product; and the customer is getting what they paid for, and if something goes wrong then they’re supported by HP.

When we don’t have direct touch to the broad dealer base we can’t do that as effectively. When we touch and support the resellers directly we can more effectively drive that experience through the entire dealer base. So that’s the ultimate desire. And, as the market gets more and more competitive, customers are looking for reasons why they should buy HP and we want to make sure that part of that – on top of delivering great products and quality and reliable devices – is that the experience they get when they buy HP is what they expect.

OPI: Presumably you’ve run some numbers and you estimate that not everybody that is selling HP products will sign up to get the authorisation. Do you forecast that?
SS: Right now we have approximate numbers well in excess of 15,000 various types of resellers in the US. We anticipate that a large portion of them will sign up and become authorized partners and we also anticipate a portion of them will, for whatever reason, choose not to. So there will be some change, but we don’t expect it to be significant.

OPI: From what I’ve heard, you could be walking away from a significant amount of business. Is that correct?
SS: Well, from HP’s perspective we don’t believe so. At the end of the day, we believe that the customers are the folks that choose to buy HP. Whether they can buy it from more than 15,000 resellers today versus x thousand resellers tomorrow, we believe the business will still continue to flow through the whole reseller base and we don’t believe there’s going to be any change. If a customer wants HP they’ll find it.

OPI: I take your point, but it does 
seem that you’re actually limiting or reducing choice.
SS: I wouldn’t say ‘limiting’. If you look at our distribution status today, any customer has a multitude of choices – and I would say in some cases an overwhelming number of choices – where to buy HP supplies from. In future, they’ll still have a wide number of options, but our intent is to make sure that they buy from an authorized HP outlet, where we feel they will then receive better service, a better purchase experience and just an overall better and superior branded experience from HP.

OPI: To what extent is this decision impacted or influenced by fakes, counterfeit products and imported clones? Is that an issue for you that you think this will help to eliminate?
SS: Well, whether it’s fake or counterfeit or clones, that problem has existed for a long while. This move is not intended to change that or impact that at all. We have different avenues for addressing that class of product.

This is really focused around how we work with a very broad and diverse dealer base and the creation of a process where HP can know who our resellers are, provides an authorization and some level of qualification to them and provides a level of superior support.

Then, when the customers buy from this vast distribution base, they know they’re buying from an authorized HP reseller and they can feel confident that they’re going to get a quality HP product, supported by HP.

OPI: Will you be providing independent resellers with a badge that says they’re HP authorized?
SS: We will be creating a new program in the spring of next year called the Preferred Partner Program and for that we will be developing a set of standards – service and delivery standards, for example – that if a reseller chooses to participate in they can become recognized as a Preferred Partner. There will be some kind of logo or badge for that, but that’s still to be finalized.

OPI: If an authorized partner purchases product from a distributor and then decides, for whatever reason, to resell 
it to a non-authorized reseller, would that technically invalidate their status with you?
SS: Yes. The partner agreement that the reseller will be signing with HP requires that they buy only from HP-authorized distributors and then sell direct to the end-user. We will not allow subsequent 
resale to other resellers.

OPI: As we speak, I’ve been told anecdotally that there’s a bit of a backlog with getting authorizations. Are you confident that you’ll have this all in place by beginning of November?
SS: Yes, we’re confident we’ll have most of the backlog worked through and, as you know, there are thousands of resellers that are already authorized so we’re really looking at the tail edge of the channel.

OPI: What’s been the response from your big distribution partners and other channel partners like the dealer groups?
SS: I think there’s some degree of uncertainty – obviously any type of change creates uncertainty. We’ve been working directly with each of the big major distributors to explain the program and understand their concerns and, thus far, we’ve been able to address practically all of the concerns. There are a few ‘what ifs’ that we may have to address at some stage, but we’re confident that we have 99.9% of the t’s crossed and the i’s dotted. 

OPI: My understanding is that this is a US only program at the moment.

SS: That’s correct.

OPI: Why is it not being rolled out elsewhere?
SS: The other regions are looking at it and, depending on their market conditions or their business, they may or may not do it. HP manages marketing and our go-to-market structures on a country-by-country basis, and each country manager will figure that out on their own. We do share what we learn in the US across the globe, but that’s really going to be a local decision.