This kind of situation in HP's calculator market is what put dealers like
HandiCalc out of business.  The person who ran HandiCalc, Jim Lawson, was a
great guy.  Jim loved to talk about calculators and would stay on the phone with
you as long as you wanted.  He gave out tons of information and advice to anyone
who called, whether they placed an order or not.  Then, when HP started selling
to discount stores (who often could sell below Jim's wholesale cost) and doing
direct sales from their Web site, he couldn't keep up.  More and more of his
calls were from people who wanted free support for calculators they'd bought
from stores that knew nothing about them. Others wanted the benefit of Jim's
experience and knowledge about particular models so they could buy them
elsewhere for $10 less.  Some of these freeloaders were referred to Jim when
they called HP for support!  Talk about adding insult to injury!  Jim hung on as
long as he could, but he finally had to close up shop a few months ago.  Now I
feel guilty that I didn't give him more business when I had the chance.  More
and more of the smaller dealers are meeting Jim's fate, and it's getting harder
to find a dealer who knows what they're selling.  Try asking a clerk at Wal-Mart
if a calculator uses RPN or algebraic notation, or how many stack levels it has,
if you want to see a real deer-in-the-headlights stare.

Wayne





John Painter <[log in to unmask]> on 05/22/2000 09:42:17 AM

Please respond to John Painter <[log in to unmask]>

To:   [log in to unmask]
cc:    (bcc: Wayne Brown/Corporate/Altec)

Subject:  Re: HP pricing



Steve:

I've read all the replies to this thread-- and everyone has it wrong.
This makes for an interesting story, though. Since we are an HP reseller
(though not the one that quoted you) let me explain the real deal.

The HP reseller channel, like a lot of other channels, has some real
problems. You must understand that HP3000s are sold through one simple
channel.  HP Netservers, PCs, and Laser Printers are sold through a
complicated host of other channels, including a two tier distribution
model, mail order, and direct from HP over the web. It's even more
complicated than that, but that will suffice for our purposes here.

The HP3000 distribution model is basically clear cut-- there is one
distributor and a small number of resellers. The pricing to the reseller
is based on volume and it varies relatively little. The pricing to the
end user is based on competition and how little profit the reseller can
live on.

The Netserver/PC/LaserJet models are very different. Volume discounts to
resellers vary widely. Mail order, direct web sales, and reseller sales
all compete and they all purchase from dozens of sources. However, there
is a definite "street" price. That price is determined by a very
efficient market that seeks the lowest price for these commodity items.
Since the high-volume sellers get the best price to begin with, their
selling price usually sets the "street" price. If you purchase a
LaserJet from a big mail order catalog or a national computer chain,
their margin on a $1200.00 printer is likely under $10.00. That's TEN
DOLLARS.

Now, if the reseller that quoted you your printer sold you that same
$1200.00 LaserJet, his margin would be zero or a negative number. The
big mail order catalog sells thousands of these printers a day, your
little reseller sells two a month.

I suspect the printer you were trying to purchase was a LaserJet 8500 or
something like that. Your reseller was telling you the truth that the
Direct from HP web price is the same as his price. I have even seen that
the direct from HP price or Big Catalog price to the end user is lower
than my distributor's cost! In fact, your reseller stopped making money
selling hardware about three or four years ago. Today, he must sell
software, services or staff augmentation in order to stay in business.
He sells hardware as a favor or as a way to provide turn-key products
and services to his customers. In two years he won't sell hardware at
all.

The bottom line? If you like your reseller's personal service, then pay
the 10% premium for that service. Otherwise, go buy the printer from the
web-- your reseller won't lose any sleep over that sale. There is a
certain $1400.00 printer we sell to our customers where our profit is
three dollars. Our profit on the printer cable is nine dollars. I tell
our customers this right up front. Some buy from us, some buy from a
catalog. Either way, our business relationship is focused on the
software and services that go along with the hardware. That's where we
can actually make money.


John Painter
Computer Solutions, Inc.
http://www.internetcsi.com

----------------------------------------------------


Steve Hammond wrote:
>
> Help, I realize asking someone to explain HP pricing to me is like asking my
13-year-old to explain nuclear fusion to me, but...
>
> I am looking for a printer to replace a C30D in the computer room. I checked
the HP web site and found a printer that seems to suit our needs.
>
> I contact our HP sales rep, who directs me to Client Services. Client Services
directs me to an East Coast VAR (whom I will not name). I get a quote from the
VAR and the price of the printer is about 10% higher than the price HP quotes on
its web site. When I questioned the VAR about this, I was told that HP quotes
'street' prices on the web pages and the price on the web page is almost exactly
what HP charges them for the printer.
>
> Now why is it that I can't buy the printer from HP (unless I want to put it on
my credit card via the web site), I have to buy it from a VAR and I have to pay
more for the printer from the VAR.
>
> To paraphrase Ricky Ricardo, "HP, you got a lot of 'splaining to do!"
>
> steve hammond
> washington dc