HP Inc is to make significant changes to its channel supplies inventory as it looks to implement consistent pricing globally.

CEO Dion Weisler, CFO Cathie Lesjak and President of Printing Enrique Lores took part in a webcast yesterday as HP provided an update on changes to its Printing division sales model.

HP Inc is to make significant changes to its channel supplies inventory as it looks to implement consistent pricing globally.

CEO Dion Weisler, CFO Cathie Lesjak and President of Printing Enrique Lores took part in a webcast yesterday as HP provided an update on changes to its Printing division sales model.

The changes come following the sale of some of HP’s software assets to Open Text for $315 million announced earlier this week.

HP says it will fully reinvest the gains from this transaction – $245 million in the third quarter of its current fiscal year and $40 million in the fourth quarter – in its Printing business in order to reduce supplies channel inventory and to increase marketing.

 “We are convinced we need to fundamentally change how we run and manage our supplies business,” said Weisler. “To harmonise global pricing and enhance margins over time, we’re going to make a one-time investment to reduce the level of supplies inventory across the channels.”

This reduction in inventory is expected to hit HP’s supplies sales by around $225 million in each of the third and fourth quarters.

Giving some background to this move, the HP Inc CEO said the company had been recognising two key changes in the supplies market globally:

1. The management of the 4 Ps (product, price, promotion and place) is becoming more challenging on a global basis in today’s omnichannel world. Price variability had “created confusion” for HP’s customers and been “disruptive” to partners and the company itself.
2. There has been a decreasing impact from the promotional pricing of supplies and an “ongoing dilution” of HP’s value proposition. In particular, there has been an increased level of inefficiency from first investing promotional dollars to sell supplies into the broader channel network followed by additional funds to push inventory through to end users.

As a result of the inventory reduction, Weisler also said he expected sales through unofficial channels to be minimised and grey market activity to be eliminated.

Explaining the marketing piece, Weisler said HP was moving from a push model to a pull approach driven by market demand.

Providing more details on this, Lores said pricing and promotions of HP original supplies would now be managed centrally and that channel compensation would shift from sell-in to a combination of sell-through and sell-out volumes. There would also be a focus on end-user marketing, he added, in order to demonstrate the value of HP supplies.

Weisler said that HP’s channel partners had “welcomed” the new supplies approach as it gave them more consistent pricing and means they will stock less inventory.

He also confirmed during the Q&A session that pricing would effectively come down “broadly speaking” as HP adopted more of an everyday low price strategy and ran less promotional activity.

Palo Alto (CA), USA

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