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 user 2007-02-14 at 11:12:00 am Views: 37
  • #17483

    Rivals Say HP Is Using Hardball Tactics
    Printer industry and retailing executives contend the company has offered chain stores incentives to stop selling store-brand cartridgesCheaper store-brand inkjet printer cartridges have come on strong recently and now make up about a quarter of the market for replacement cartridges in the U.S. That poses a serious threat to Hewlett-Packard (HPQ), the worldwide leader in consumer printers. Now, according to printer industry and retailing executives, HP is fighting back.Those executives say the company has approached chain stores that sell store-brand cartridges compatible with its printers and offered them incentives if they end the practice. Since those replacement cartridges typically sell for 10% to 15% less than HP’s, consumers could be the big losers if a lot of retailers take the printer giant up on its offer, they say. “HP has a huge share and market power. By limiting the alternatives a consumer has, it’s a tough strategy,” says one executive in the ink cartridge remanufacturing business. (The independent and store brands sell recycled cartridges that they refill.) None of BusinessWeek’s sources would allow their names to be used because they didn’t want to damage their relationships with the industry leader.

    “Best Customer Experience”
    Asked to respond to the complaints, an executive for HP says it provides incentives to retailers so they will aggressively market its products. But the executive, Pradeep Jotwani, head of supplies for the HP Imaging & Printing Group, wouldn’t provide details of those marketing programs. “We don’t try to stop the availability of non-HP supplies,” Jotwani says. He adds that the Palo Alto (Calif.) company has the customers’ interests in mind, and purchasers will get the best results if they use all HP-original technology and supplies. “We want to provide the best customer experience,” he says.Staples (SPLS), the country’s largest seller of replacement ink, confirmed to BusinessWeek it plans on phasing out sales of store-brand inks for HP printers, but won’t say whether the electronics giant asked it to make the move. It says HP has invested heavily in optimizing its printers, ink, and paper, so the two work well together. “We’ll focus on HP-original technology,” says Scott Rankin, vice-president for technology merchandising at Staples. “Selling that system is going to enable us to offer our customers the best solution.”Yet Staples will continue to sell store-brand replacements for cartridges from Epson, Canon , and Lexmark International . Rankin says customers still have opportunities to save on HP-compatible ink purchases by buying multicartridge packages and getting $3 each for recycling cartridges.

    Workers Feel the Pain
    Jotwani says he’s experimenting with programs that would make for more efficient cartridge recycling and would also boost the volume of returns. HP takes the cartridges and separates the materials for recycling, rather than refilling them like remanufacturers do. He denied the company is trying to deprive remanufacturers of the cartridges they need to do business.Industry analysts are watching the action closely. “The speculation is that [Staples] reached a deal with HP and got increased margin and soft money for marketing,” says Charles Brewer, managing editor of The Hard Copy Supplies Journal, a trade publication that first wrote about Staples’ move. “That line is selling very well for Staples. They wouldn’t drop it without compensation.”Staples’ move has already had reverberations. InkCycle, a Lexena (Kan.) company known to supply ink cartridges that Staples sells under its store brand, has reduced its workforce from nearly 800 last summer to 400 today. InkCycle officials would not comment on HP or their relationship with Staples.

    Not Black and White
    Other retailers, including Best Buy (BBY) and Office Depot (ODP), say they will continue to sell store-brand HP-compatible ink. “We carry what the customers ask for,” says Scott Koerner, senior vice-president for merchandising at Office Depot. “As long as the customers continue to ask for it, we intend to continue to carry it. This is about providing customer choice.” Asked if the industry behemoth approached Office Depot and asked it to stop carrying store-brand ink, Koerner said: “I can’t comment on any conversations with HP one way or the other.”Executives in the ink cartridge remanufacturing industry say they are discussing whether to complain to regulators about the moves, which the executives say may harm consumers. Do these alleged tactics raise antitrust questions? “Antitrust law would only be violated if HP does something that significantly eliminates alternatives from the market and gives it enhanced market power as a result,” according to Steven C. Salop, professor of economics and law at Georgetown University Law Center. “Right now, there are alternatives being sold at other office superstores, and other printer brands are being sold at Staples.”

        *   JB  Feb 11, 2007 7:20 PM GMT I work at Staples and in a recent store meeting the general manager of the store said that the ONLY reason we were going to stop carrying HP compatible ink was due to the microchip technology on the new 02 series of inks. But of course that is silly when you consider how many of the 45, 78, 56, 57 & 58 cartridges we sold on a weekly basis. We could have continued to sell those ink cartridges for years to come. And let’s not ignore the HP compatible laser toner cartridges that we no longer carry. My opinion? HP is buying us out. There has GOT to be cash or margin involved.

        * workaholicz Feb 11, 2007 8:57 AM GMT Please, HP, you are one of biggest companies in the world. So help the small-medium enterprises make some business with your printers (refill, recycle cartridge). This requires some social corporate responsibility (for comparing, you should read Fortune Magazine tells about ‘social business enterprises’ the next big thing idea from Muhammad Yunus, Nobel prize winner). So economy will develop, ok? Especially in my country, Indonesia. Your enterprises should not care just for profitability, but sustainability with your social effort, for us, for the better world, and make trade fair.

        * Kevin Feb 10, 2007 5:40 PM GMT HP’s dirty secret (reporters: wake up!) is that its “technology leadership” in printing is mostly a fallacy. HP has been reselling Canon’s printer engines since the very first HP LaserJet!