'Some people believe they can represent themselves as HP, which is a violation of trademark, copyright and our intellectual property.' –Paul Anthony, Business Manager, HP, Asia Pacific

Paul Anthony is Business Manager, Peripherals Supplies, Hewlett-Packard, Asia Pacific. Paul’s role involves driving the supplies and consumables business related to HP’s hardcopy solutions in the region. One of the key challenges of Paul’s role is driving the educational campaign to increase channel and customer awareness of the disadvantages of using counterfeit supplies such as re-fill and re-manufactured products. 

In India recently, he spoke to DATAQUEST, about HP’s strategies and programs to check counterfeit supplies
of consumables in India, including the Corporate Engagement Program.

Why
does counterfeit supply of consumables happen in the first place and is there a
way to prevent it?

Essentially, the supplies market
is fairly large and widespread as you can well imagine. We have a huge installed
base of printers, and when you take into account the installed base of Canon and
Epson, it’s a very huge after market out there. I think lots of people are
very opportunistic, in certain countries only. So this problem is very specific
to India, China, the Philippines and to some extent Thailand and Malaysia. But
it’s almost non-existent in the rest of the world, except for a few countries
in Latin America. The reason being that everyone is looking for market share and
an opportunity to make an easy buck. They tend to target software piracy and

counterfeiting of our products.

Some people believe they can
represent themselves as HP, which is a violation of trademark, copyright and our
intellectual property. So we are looking at strengthening our legal structure in
India, taking these people to court if necessary, monitoring the market for
incidence of counterfeit and protecting our customers. So we are going to set up
of hotlines for large customers for being given an assurance that they are
buying genuine products. We will also introduce new technologies in our
packaging to differentiate our products We are fully committed and have also
talked to other printer vendors.

Is there some
way you can ensure that you can prevent counterfeit itself?

My answer to that question will
be no because whatever measures we take, there will still be people out there
looking at ways and means and loop holes to work around. But it’s certainly
possible to restrict it to a small part of the business.

You mentioned
that counterfeit of products happens in certain markets or specific countries
only. What are the reasons why it happens only in these markets?

It’s certainly a function of
the players, the channel members involved in the market place and their openness
to indulge in what essentially amounts to criminal activity. It’s also a
function of the level of IP protection in countries. If you look at China and
India, India certainly has a fairly impressive record, its not as strong as say
a place like Australia or Singapore. So people feel that intellectual property
can be violated and that’s another reason why it’s happening in these
countries. It could also be that the customers are price sensitive and are
asking for alternatives. So opportunistic people are offering them products.

How does it
affect your business, in terms of revenue loss and reputation?

Yes, the most obvious one is
revenue loss. Because people believe they are buying HP when, in fact, they are
not. So we lose revenues there.

Can you
substantiate this revenue loss with actual figures or data to indicate its
impact on your business?

We don’t have any specific data
to corroborate how much we have lost. In my mind it’s significant and that’s
why we plan to do something about it. The other thing is what it does is to the
reputation of the product. People believe that the HP products they bought is of
low quality. Sometimes they think it’s a problem with the printer, because the
printer can also get damaged in case the cartridge leaks or does not perform its
function. So they come to the warranty center. At times they are also forced to
pay a cost because the damage has been attributed to a non-original product.

The channel, I think, is impacted
because there is uncertainty at times. Am I buying genuine products? Am I buying
counterfeit products? And so there could be a loss of confidence.

How long have
you been tackling this problem at HP?

I would say we were made aware of
this problem during the end of 1997 or early 1998. It cropped up in Thailand and
in China, and started to crop up in India, Philippines and Malaysia in 1998. So
it’s been about 2-3 years.

Have you
evolved a strategy or program to go about it in a methodical way?

In countries where there is a
legal recourse, we have employed the best legal advice to set up a strategy for
identifying counterfeits, making jack purchases, and prosecuting them in courts.
In addition, we are also focusing on our customers who might be victims of
counterfeit and are going to evolve programs and hotlines to reassure customers
that they are buying genuine products. Some of the large corporates are
protected through our Corporate Engagement Program (CEP). So we will do audits
of their products to ensure they are genuine. We’ll also audit the channel as
much as we can to make sure their stocks are all genuine.

Can you
describe CEP in a nutshell?

Our distribution model goes
through the first tier. Godrej, Redington and Kores, in the case of supplies.
And they are free to sell to anyone. However, HP certifies a certain set of
dealers with whom we do a lot of work and so are partners. In case the guy is a
corporate reseller, the company will facilitate him with corporate enclosures
and so on. This is how the program works.

Essentially in the CEP, a couple
of things are important. One is, customers prefer to buy products at fixed
prices. So HP would like to guarantee, a fixed local currency price in Indian
rupees which they feel is beneficial. And so we will put in place a system where
they can call up and verify products. We’ll ensure that our dealers are well
stocked and give quick delivery.

Are you also
in the process of introducing a program for channels or supplies?

We have identified channels. This
is about certifying the channel. The supplies business in India is pretty
unorganized and most vendors do not have an authorized channel. So HP, for the
first time, is working on that and we are the first vendors to do so. On the
first of November 1999, we announced a list of authorized dealers across the
country. We have focused activities which we have planned for this channel.
Partners have been identified based on customer segments.

What’s been
your experience in the last one year?

The channel certification
happened in the last quarter of the last year. But CEP has actually come into
place this year. And we have environment-friendly programs like Planet Partners
which we are ready to launch.

In the CEP program, the last
element is about educating customers. People under-estimate how much down time
there can be in case a toner product leaks or spoils your printer.

We are one of the largest supply
vendors in the world, have huge share in the LaserJets on a worldwide basis. And
so we have been concerned about all the toners and ink cartridges we are going
to use and get thrown. So we have actually launched the Planet Program across
APAC including India, where we will take back empty cartridges after use and
send them for recycling. We will recycle 95% of content and this will come back
to the manufacturing stream. We already recycled 1.4 million cartridges, that’s
almost 78 million pounds of waste.

What are
technological advantages you will bring to Indian customers?

In the long term, we want to make
sure that consumers will become smarter. On a micro-chip we will allow the
customer to clearly identify a genuine product, how much he’s using, who used
what and what type of pages are printed. At this point in time, we don’t have
the technology, but we are working on it. And it will be rolled out in all our
future products, starting from 2000.

Can you give a
peak into the future in terms of features we can see in HP products?

One of the features, is the
microchip. There’s going to be a micro chip in every print cartridge, and as
soon as you load it into your machine, it will be able to identify itself and
say that I am a genuine HP product, giving a few tips about how to print and
maintain your machine. And then as you print, it will keep track of how much
toner is there in the toner cartridge and warn you that you are low on print
cartridge and you can go only for so many more pages. It will also give you a
profile of what kind of pages were printed, how many pages, how many were black,
how many were color, what kind of density, how much text and how much graphics.
More importantly, these products will, in the future, be linked directly to the
channel via the internet. So the laser printer as it goes low in toner, will
automatically send a message through the internet to the channel partner asking
him to restock the customer. So there will be no human intervention. The person
can come, re-stock the cartridge, change it, take away the old cartridge and all
this will happen automatically.

So are you
talking of extranet and intranet support for your channels?

Yes, the CEP is done only with a
few select resellers whose emphasis will be to engage in these technologies,
like in a massive extranet where they are linked to HP and the customer. They
will have to give certain service levels for the same. We will involve the
channel to enable these technologies.

All vendors
are faced with this problem of counterfeit supplies and today it is an industry
problem. Are you working with other vendors to collectively minimize the
problem?

We are working with the industry.
For lasers we’d like to evolve a standard page which will help you as a
customer to measure cost per page. Now unfortunately, HP has it’s own standard
page, Lexmark, Xerox and Canon have their own standard pages and so the
customers are confused. What we are trying to do is endorse a page standard
which HP has and we’ve asked the industry–Lexmark and Xerox to endorse this
page standard. When this standard will be released publicly, on the internet,
you can download it in any format and do your own testing to see what’s your
true cost per page. What we are trying to tell customers is that its not that
substantial given the benefits that you get from a printed page. That’s
because of HP technology, the HP consumables.

Akila
Subramaniam

in Chennai