The road from typewriter ribbons to PCs may not seem a smooth one atg face-to-face with office supplies as they both move to sell to the same market first sight. But many non-PC companies are now moving into the IT arena and are threatening to take some business away. There is a trend of companies moving into dealing in office supplies, computer consumables and PCs simultaneously.
Lisa Davis, marketing executive at Enta Tech, describes the distributor's recent expansion into office supplies as 'a natural progression'. But a question mark hangs over the advantages of taking this path. Isn't it better to stick to what you know and not expand into too many sectors?
Or is there a bright future for the one-stop-shop where customers can satisfy their every need with one supplier?
John Atherton, Enta Tech general manager, explains that it is the fierce competition and shrinking margins in the PC market that are pushing distributors and dealers to move into the office supplies market, knowing that their initial profits may be low.
Atherton says: 'It's difficult as there are only a few big distribution players for office supplies. But distributors are often willing to take low margins on toners, for example, to grab market share.'
Another distributor, Computer 2000, moved into the office supplies business when it acquired Qudis in 1994. Gillian Rhodes, office supplies manager for distributor Computer 2000, defines office supplies as everything but the PC - toner cartridges, diskettes, electronic office consumables and accessories such as screen filters and mouse mats.
Why are distributors dealing in office supplies? Don't they have enough on their plates with PCs, without having to handle resellers clamouring for folders and paper clips? The number of consumables they have to sell to make the equivalent of one big corporate PC sale is enormous.
But Rhodes explains that it is the ideal opportunity to inspire customer loyalty and keep in contact with the customer base. She says: 'There is enormous potential. A customer doesn't buy a PC every day, but might well buy a box of diskettes every day. What's more, it's a constantly growing business.' She adds that margins are bigger on office supplies than on hardware, and that the market in the UK is currently estimated at #500 million - not to be sneezed at.
Hewlett Packard, which moved into consumables in 1982, predicts that half the homes in the UK will have a PC by the year 2000. It expects the sale of its inkjet cartridges to grow by about 30 per cent this year and sales of office supplies in general to increase by 20 per cent in the next year. Tony Hince, HP UK consumer sales manager, says: 'We didn't realise how big this market could be until about five years ago. That's in spite of the fact that usage of things like inkjet cartridges is decreasing as the number of home users grows.'
Distributor Ingram Micro is also getting involved. Nick Tomey, sales manager of Ingram's supplies division, says the company pioneered the move towards office supplies when it began focusing on this market in September 1995. 'Most of the hardware distributors are now waking up to the possibilities of selling peripherals and following Ingram's lead,' he says.
Meanwhile, the tide is also flowing the other way and some resellers are moving into the hardware and software sector from office supplies.
But with margins decreasing, why bother with PCs?
Mike Coxall, Dudley Stationers general manager for the business machines and consumables division, says there are wider benefits. The company, founded in 1946 as a stationery supplier, moved into PCs in 1993 because customers wanted to buy from a single source.
He says: 'It's customer driven. Businesses have been coming to us since the 1980s asking for a total package. The benefits for us lie in what we make on accessories and in customer loyalty, not in margins on PC sales.'
Action Computer Supplies also started out in 1981 as an office supplier, selling typewriter ribbons. It moved into hardware the following year because it believed the market was prepared to buy off-the-page.
Alistair Cowling, Action marketing manager, agrees that customers want the convenience and reassurance of a one-stop-shop. He adds that it wasn't too difficult for Action to move over from stationery to consumables and then hardware, including PCs, because the company was fairly new.
Action now contracts out services like installation to a third party.
Cowling says: 'It's less hassle. It may be more expensive in the short term, but in the long term it it is best for the customer.'
Tomey says offering a complete package helps prevent the customer going to other resellers. He adds that a big argument, which many resellers overlook, is that margins on accessories are better than on the hardware.
'In a printer's lifespan of three years, the profit on the price of the printer can be made seven times over on its supplies,' he claims.
Office supplies wholesaler Kingfield says it can see the necessity of moving into PC sales. Simon Rogers, Kingfield business manager for consumables, says: 'As yet, we don't have the in-depth knowledge base. There is often a split between office supplies and PCs, but I can see them converging in the future.'
Some resellers are discouraged from moving into office supplies because of the need for storage space. Peter Crane, PSM Micro Computers marketing manager, explains: 'The necessity to bulk buy and have a large warehouse - at least 20,000 sq ft - often means it isn't worthwhile for smaller providers. We thought it was best to stick to selling PCs.'
Tomey says one way round the problem is for the distributor to store the equipment until it is needed by the reseller.
Nicky Brown, business manager for consumables and accessories at Micro Warehouse, says dealers often go into office supplies, not just because of the better margins but also because it makes life simpler. You don't have to worry about installation, or whether to set up a support department as you do for PCs.
Atherton agrees. 'We're trying to educate the PC resellers to get involved,' he says. 'If they sell a fax machine, they don't have to worry about the warranty as it's usually covered by the manufacturer.'
FOCUS ON PROJECTORS
In Focus, founded in 1986, makes multimedia projection systems which it sells through the AV or PC channels. Based in Wilsonville, Oregon, with European headquarters in the Netherlands, it makes personal, conference room and fixed installation projectors for business or sales presentations, meetings, interactive workgroups, software demonstrations and training sessions.
The company's revenues for 1997 stand at $315.8 million, with a net profit of $20.5million for the the financial year ended 31 December. It employs 600 staff, had a 19.9 per cent share of the world market in 1997 and is listed on Nasdaq.
In the UK it is selling into the PC channel through Steljes/In Focus UK, dividing the product range to suit each channel's needs - some products are designed specifically for the PC/laptop user.
The company will be focusing on the UK, in particular, in 1998, saying there is plenty of potential in this relatively new market.
Henk de Groot, general manager for Europe, the Middle East and Africa, says manufacturers are getting into niches and segmenting the market.
'Dealers and distributors have to decide if they are going to specialise in it and provide good services.' He adds that selling products like projectors is an easy step for companies which have dealt with PCs and peripherals and that there are good margins to be made.
The company sees sales of projectors taking off as businesses realise the advantages of digital presentations.
De Groot says: 'It's going to escalate. Someone sees a projector in a presentation and thinks they must get one because their own slides don't look as professional. If 20 or 30 people see it in a presentation and think the same thing, it becomes very fashionable.'
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