HP Consermer products Business Organization:Distributing printers via the internet.
Executive Summary
The existing HP product distribution comprises of 3 major and 4 minor channels, plus an online refurbished-product unit. Even though these channels cover a wide range of consumers in the U.S., HP has not fulfilled customers' needs efficiently and conveniently via the internet. The internet channel today is one of the most important commercial channels in the US as there are 46 million Internet users in 1997, and this number is expected to grow to 150 million by 2000. Therefore, buying behavior of the U.S. population has increasingly been shifted from traditional brick-and-mortar store shopping toward e-shopping. In meeting this new buying behavior, HP needs to add this new important channel effectively as soon as possible. This means providing complete product information, obtaining customers' feedback, and selling all HP products directly to consumers.
Currently, large retail accounts represent 90% of HP's printer sales, both via physical channel and e-channel. Therefore, an important consideration in implementing direct online shopping strategy will be to ensure that conflict with retailers is minimized. Since our plan is to offer all products on our official website, actions must be taken to maintain relationship with retailers by various means.
1) Why has HP set up such a complicated distribution system?
HP's existing distribution system currently consists of multiple channels which are geared or designed to focus and concentrate on different market segments (Selective distribution). (See exhibit 1). The major distribution channels represent the bulk of the sales and is clearly defined and segmented by various variables. The main one being customer purchasing behaviors. Such a complicated system has allowed HP to capture a larger customer base through better market segmentation (based on demographics, psychographic, customer purchasing behavioral models), without the need to focus in detail on individual customers. To do this HP has
The existing HP product distribution comprises of 3 major and 4 minor channels, plus an online refurbished-product unit. Even though these channels cover a wide range of consumers in the U.S., HP has not fulfilled customers' needs efficiently and conveniently via the internet. The internet channel today is one of the most important commercial channels in the US as there are 46 million Internet users in 1997, and this number is expected to grow to 150 million by 2000. Therefore, buying behavior of the U.S. population has increasingly been shifted from traditional brick-and-mortar store shopping toward e-shopping. In meeting this new buying behavior, HP needs to add this new important channel effectively as soon as possible. This means providing complete product information, obtaining customers' feedback, and selling all HP products directly to consumers.
Currently, large retail accounts represent 90% of HP's printer sales, both via physical channel and e-channel. Therefore, an important consideration in implementing direct online shopping strategy will be to ensure that conflict with retailers is minimized. Since our plan is to offer all products on our official website, actions must be taken to maintain relationship with retailers by various means.
1) Why has HP set up such a complicated distribution system?
HP's existing distribution system currently consists of multiple channels which are geared or designed to focus and concentrate on different market segments (Selective distribution). (See exhibit 1). The major distribution channels represent the bulk of the sales and is clearly defined and segmented by various variables. The main one being customer purchasing behaviors. Such a complicated system has allowed HP to capture a larger customer base through better market segmentation (based on demographics, psychographic, customer purchasing behavioral models), without the need to focus in detail on individual customers. To do this HP has