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HP terminates Rectron

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Hewlett-Packard SA has terminated its distribution agreement for Imaging and Printing Group (IPG) products with Rectron, despite a five-year relationship which saw the distributor achieve revenues of around R100-million a year for HP printers.

According to reliable sources, though, HP will not consolidate its channel among its two remaining distributors – Tarsus and Drive Control – and is expected to appoint Axiz as its third IPG distributor within weeks.
The news of Rectron's termination sent shockwaves through the distributor community, but HP's SPO country manager, Mark Perry, was at great pains to point out that the decision was "purely for business reasons".
"It's quite simple," Perry says. "We review all our partners, both distributors and resellers, on a regular basis. Every partner has targets – what we call exhibits – with bigger partners having multiple exhibits and we look and see how they perform against these.
"We have our criteria and we make decisions on a half-yearly basis based on these numbers," he says. "We then make the appropriate business decision based on this. We review and re-evaluate the landscape and make decisions on what we have to do for certain countries and territories. This is a process that is conducted on an ongoing basis, and a process that we have had in place for many years."
Perry refused to be drawn on the appointment of Axiz despite the fact that the two companies have been in negotiation since November last year.
"That information is incorrect," Perry says. "We are looking at a number of distributors in terms of the IPG business. We are talking to Axiz, among other distributors, but no decision has been made.
"We haven't finalised anything and are still conducting feasibility studies," he says. "And an announcement will be made in the near future – in the next few weeks."
In a statement released by Rectron, sales director Zandre Rudolph was philosophical about the end of the relationship.
“In the five years of working with HP, we’ve given our full commitment to the HP brand, and the company has been key to Rectron’s growth,” Rudolph says. “But in recent months it became more and more clear that Rectron’s business model is incompatible with HP’s business model."
According to Rudolph, as a “one-stop shop”, which focuses on providing its customer base with a complete solution, Rectron is today the biggest components distributor in southern Africa, dealing with small to medium businesses (SMBs), channel retailers, value-added resellers (VARs) and systems builders.
“Rectron’s focus is on product quality and service, providing resellers and their clients a wide range of products at the right price point, as well as the freedom to choose from top-quality brands,” he states.
Despite its “one-stop shop” strategy, Rectron has only had access to one slice of the vast HP product portfolio: the HP range of printers.
“Since it would have gone against our business model to become a complete HP house – distributing mainly HP products — we were not granted access to any other HP products, including the lucrative printer consumables segment,” Rudolph says. “It is therefore quite clear that our two businesses are growing in completely different directions.”
Rudolph also points out that the situation has been exacerbated by the fact that HP deals directly in the retail environment. This runs contrary to Rectron’s indirect sales model, which sees it exclusively marketing and selling through its 5 000 resellers.
“Our core customers just can’t compete with these retailers, especially when the latter receive special deals and pricing from HP that we can’t provide,” he states.
“Going forward, we are currently working in establishing ties with other leading printer vendors," he says. "Our major concern is ensuring that we offer our clients a complete solution, with the highest levels of top quality after-sales service and support.”