In a memo, sighted by CRN, emailed to the distributor's resellers on Friday 5 September, managing director Alex Piccinini said: “As of Tuesday 30 September 2003, Dynamic Supplies will cease its purchasing arrangements with Hewlett-Packard Australia and will no longer be classified as an authorised HP distributor.”
Piccinini said both parties had made “every effort” to find a way to move forward together. “Regrettably, our assessment of the future market conditions necessitated our decision,” he said.
Kerry McKevitt, financial controller at Dynamic Supplies, confirmed that the distributor had decided to limit future involvement with the hardware giant. It will continue to supply lower volumes of HP product.
The companies had been negotiating for “about three months” but had “a little bit of a different view about future conditions in the marketplace” and what the channel would look like, he said.
McKevitt said he could not divulge further detail about the disagreement but admitted that HP had accounted for some 40 percent of Dynamic Supplies' business.
“Without HP, which was fairly significant, we will be looking to invest further in a broader product range, moving to more of a product-based diversification strategy instead of a wholly vendor-based one,” he said.
Dynamic Supplies had been enjoying a 25 percent growth rate this year, McKevitt said, but would now focus on consolidation. Nevertheless, he insisted the change would be positive for Dynamic Supplies and its 1,500 to 2,000 active resellers.
“We're certainly not looking to lose any staff. We will be looking to ensure that the level of business we had will be maintained,” McKevitt said. “HP did change our focus in the vendor-distributor relationship. We had to commit a lot of energy to maximise it appropriately.”
He said that, whereas HP, as part of the “authorised distributor” agreement, had forced Dynamic Supplies to be more vendor-focused, the distributor would now redirect resources to customer needs and supplying the best products relative to those needs. Staff that had worked on the HP account would also be redeployed.
“HP took up a very large chunk of our physical and human resources. We're now going to be able to use those resources in a more positive direction, which we think will strengthen our company,” he said.
McKevitt said he did not think the change reflected a trend in the channel away from HP although the hardware vendor's consumables distribution channel had shrunk by several companies in recent months.
“Our situation is quite different from [those] others in the marketplace,” he said.
McKevitt said he could not confirm whether Dynamic Supplies would be seeking one or several vendors to replace HP's product lines.
Dynamic Supplies' strength had come largely from its lucrative ink and toner ranges, but copier product lines were strengthening in the market and the distributor expected to diversify further in that direction as well, he said.
“[Ink and toner] were around 80 percent of our product but copier product is in expansion mode,” McKevitt said.
Dynamic Supplies has 50 staff spread across Melbourne –- which also serves Adelaide -– Sydney, Brisbane and Perth offices. The distributor has no plans to physically expand, he said.
“We've got extremely good national coverage with that,” McKevitt said.
Another distributor, Digiland, has confirmed it is ending its distribution relationship with HP here when its contract runs out end of October.
Digiland's national marketing manager, James MacBeth, said the change reflected the company's recent deal with eXeed and re-focus on white-box. eXeed wins Digiland's branded vendor distribution contracts, while Digiland scores a major share in eXeed.
He said there was little point having both companies maintaining a contract with HP. "We're not going to make any [other] comment until the review. We have changed our approach to the market and HP is not part of our portfolio as eXeed is going to handle that," MacBeth said.
Meanwhile, HP has appointed Synnex to replace consumables distributor Daisytek Australia, which was liquidated 4 July after its parent company, Daisytek International Corporation, declared bankruptcy in the US.
HP Imaging and Printing Group, which plans to announce results of its distribution review in October, was contacted by CRN but said it did not want to comment until it had put out a press release.