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HP distributors raise prices to counter rebate loss

Paul Kunert

Hewlett-Packard distributors will raise prices across the volume lines by a minimum of 1% from the start of next month after it emerged that the vendor plans to withdraw some back-end rebates for wholesale partners.

The US heavyweight is making a number of channel changes that kick off on 1 May, including shelving partner development funds for resellers and moving to a discretionary model and consolidating channels SKUs to reduce inventory levels.

However, the vendor also plans to remove key sales objectives (KSO) rebates for distributors leading to suggestions that prices rises will rise by at least 1% as those companies try to make up the money at the front end.

Talking to MicroScope, Andy Gass, managing director at Computer 2000, agreed it would need to “change pricing” as a result of HP’s actions.

“However we welcome the simplification of rebates and anything that makes returns more predictable and allows us to focus on demand generation for HP and our resellers is a good thing,” he said.

Julian Klein, UK managing director at Ingram Micro, said the changes HP planned “would almost certainly result in price changes but we have to see where we are at the beginning of May”.

It was a case of simple mathematics for Alex Tatham, sales and marketing director at Westcoast, “If HP is taking away compensation at the back-end we need to make it up at the front-end.”

“We are using the age old sales model of cost plus to make money, ,” he added.

The rebalancing from back-end to front-end compensation will provide more predictability for distributors, said Dave Poskett, HP director of the solutions partner organisation for the UK and Ireland.

“HP is working closely with partners throughout the implementation of the changes. However [our] partners make their own business decisions to balance back-end and front-end margins according to how they run their business,” he said.

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