Making money out of printers is difficult for resellers. The printer is, for most users and therefore most dealers, a peripheral item in the sale. Sell them in large enough volumes and yes, you may make some sort of margin, but the chances are it will be a small one.
Part of the reason for this is that all printers are now very much alike. There is little to choose between a Hewlett Packard (HP), a Lexmark, a Brother, a Canon, a Xerox and so on. Another reason is HP?s dominance of the market. It can set the pace and because it?s the standard choice, price tends to dominate the purchasing decision. And why not? How can you add value to a printer, after all?
Stuart Finlay, dealer channel manager in the desktop products group at Xerox, concedes it is difficult for dealers to make money. ?If you are looking at leading brand products, they do tend to go out at very low margins and that?s one of the things we use to our advantage. On the kit we sell, the margins tend to hold up higher than with Lexmark or HP.?
It?s an old trick that Xerox is trying to play. It?s providing more features than HP at a slightly lower price and keeping the channel thin. This means the dealers that do take the product can be reasonably sure the prospective customer won?t just go and buy the printer off-the-page as soon as the demonstration is over.
But dealers have to persuade the customer not to buy the standard choice first of all, and that?s not easy. Xerox tries to provide additional features: it provides duplex, PCL 5 and 600dpi as standard. The RRP is lower than the equivalent HP model and Xerox claims dealers will retain more margin on the products.
?You?ve got something to talk about but it is a tough nut to crack,? admits Finlay. ?But if you can offer customers better value for money at a lower price, that?s where you can do some business.?
Resellers don?t think about the printer sale hard enough. ?A lot do blindly supply HP. They know that whatever else they are doing, if the user wants HP printers, they?ll supply them at a very low margin just to keep the business,? he says.
Yet the printer, especially a heavy-duty networked laser printer, can be as expensive an item as the main PC or server now, so there is merit in simply supplying the box, even if it is only at a functional margin.
The problem is adding value. Is it really worth the additional effort of trying to convert a user from one printer brand to another, just for the extra margin? And how much of an additional support burden will that impose on the reseller business? Isn?t it easier to support the standard choice?
It can be, says Loay Lawrence, marketing director at Northamber, and it is easy to sell the product that the user feels most comfortable purchasing. He thinks the lead has to come from the vendors.
?The people who are pro-active and innovative with their products will come through. If you look at Kyocera and what its doing with cost of ownership, and HP with the Mopier initiative, those are the guys who will make people think about what they are buying.?
Companies such as Xerox and Kyocera are trying to deliver some kind of differentiation. Xerox is about to launch an authorisation programme and will be passing on leads, and Kyocera continues to pump the environmental message and is running a hefty marketing campaign to advertise the networking capabilities of its printers.
But being truly innovative and different where it matters is not easy. Users are not easily swayed by the relatively marginal benefits delivered by more environmentally friendly printers or by printers with a duplex feature, additional paper capacity or slightly smarter network connections.
All too often, vendors find themselves following HP?s lead in the market. There is no sign of any breakthrough coming in the printer market either. Even the printer vendors in the pack behind HP don?t really want to see it happen. One said: ?If someone came up with a new technology I think we?d all crap ourselves. But I don?t think that?s going to happen.?
Instead, what we may see is a complete shift in the technology. The recent efforts by HP to market the Mopier, QMS with the ?RIP-once-print-many? concept, and Canon at the low end with its Multipass products, hint at what is to come, says Sarah Weeks, European programmes manager for printers and digital imaging at IDC.
?Multi-function peripherals (MFPs) are starting to blur the lines?, she says. ?Printers are now starting to take some of the copier volume but the copier vendors are now starting to say that if they put a controller on their machine they can take input from the computer.?
Increasingly, the functions of the printer, the copier, the fax machine, scanners and digitisers are being brought together. This will mean a big change in the market over the next few years, with printers becoming more personal devices and multi-function peripherals handling the workload for the office or network.
This will bring new opportunities for everyone as vendors try to find the right mix of functions for the office device and try to make it as reliable as possible. It will be an interesting challenge for the likes of Canon and Xerox if MFPs do take off, as they both have the lion?s share of the copier business.
Vendors in the computer industry will not be concerned with eating into copier business though, and the likes of HP and Lexmark are sure to present a strong challenge.
But will this really happen? It?s all very well for the market researchers to talk about the future but we?ve had MFPs in one form or another for several years. They have never taken off in a major way because they have never delivered the right mix of quality and reliability. But Weeks believes they are close to achieving their aims.
But the figures are not very inspiring as yet. John Ces, senior research analyst at Romtec, says MFPs have been slow to take off. ?It?s the direction the manufacturers want to go in but it?s not really happened as yet. Whether that is due to lack of marketing or a lack of demand is hard to tell, but there are relatively few products out there.?
HP claims to have exceeded expectations with the Mopier but it is also careful to point out that it sees the products as being quite distinct from the standard printer.
?It?s a grey area?, says John Yelland, UK hard copy business manager for HP. ?You?ve got to forget about printers and think about hard copy. People are using printers to do multiple original prints.?
The Mopier concept puts a different spin on the printer business but does it really help resellers? Yelland thinks it does. ?It?s a good opportunity for dealers because there is a certain amount of configuration and networking, it takes it out of the ?box? area.?
But customers will not expect to pay over the odds for products that perform basic functions such as fax and hard copy output. They may attach some extra value to scanning but how complex can a mopier installation become? Certainly it should be no more complicated than a networked laser.
Even if the Mopier does become very popular and starts to replace the desktop or office printer, the bandwagon will soon start to roll and prices will come down again. The HP Mopier, the Laserjet 5Si, sells for just under #7,000 and it does handle collation and stapling as well as copying. This product can justify the tag of a high-value product but how much value can be added to it is another matter.
Prices will fall of course and lower cost inkjet options are already with us. The HP Officejet Pro combines the inkjet printer with a scanner and a digital copier and retails for under #700.
Canon certainly thinks that the products should be easy to install and have universal appeal. Its Multipass product is sold through Dixons and PC World and at under #600 is within the reach of just about every small business as well as a percentage of the consumer market.
But as Rachel Ivens, marketing manager in the computer products group at Canon, points out, there is still a wide gap in the pricing. A Canon 240 colour inkjet costs only #240 at retail.
Despite the clear differences between the products, both HP and Canon see the multi-function product as the future. Yelland says: ?It is very much the way we see it going and we are very much involved in all the areas. That?s where we are investing and where our R&D spending is going?.
Canon does not see HP as a threat to its traditional areas of business. Ivens points out that the copying functions on the current multi-function products are very limited. Users buy for the printer functionality first and additional functions are seen as a bonus.
This may be the case today, but when there are more combined network printers with large paper capacities, low running costs and additional scanning and faxing capability, the story might be different.
Although HP sells the 5Si product as an extended and enhanced network printer and actively says that it is not a copier replacement, HP does intend to challenge the copier makers with MFP products.
Yelland claims that HP has already seen a huge reaction from office equipment suppliers. If the multi-function market does develop as the mainstream, it will certainly be competitive.
But that won?t be anything new to anyone in this market. It is crowded and even having only a small percentage share seems to be worthwhile. Exits from the printer market are unusual, and even those who do leave ? IBM for example ? have a tendency to return.
As with all markets, there is a high end in the printer market and a few specialist niches. But these are dominated by specialist resellers ? office equipment or large systems dealers, solutions houses that specialise in systems that need high capacity impact printing for cheque and payroll runs and other jobs requiring multi-part forms, and colour specialists.
This sector is mainly focused on the pre-press business where the need for accurate colour reproduction means that alternative technologies are required. Apple resellers and any dealer addressing this market will always be looking to sell either a Tektronix or a Mitsubishi printer.
Colour lasers, thermal wax and dye-sublimation printers carry higher prices and there is more money to be made per unit. But the volumes are not there and good quality colour is getting cheaper all the time.
A good quality colour laser will fetch about #5,000 at present and carries about 15 per cent gross margin. Compared with the standard sub-five per cent mark-up we see on ?standard? lasers, that?s a king?s ransom. But this is set to change.
According to IDC, while colour lasers will claim no more than a fraction of the market over the next five years, prices are set to fall dramatically (by an average of about 20 per cent every year until 2001).
As Weeks points out, the printer market has a tendency to regenerate business and to swing from the personal to the network printer and back again. The original rise of the network printer was met with a swing back to personal printing led by low-cost inkjets. Executives who needed their output there and then, caught on to the low-cost, high-quality laser.
Now, higher duty cycles, better paper handling, improved management and concern over cost have led to a resurgence of the network printer. Companies such as Kyocera are pushing this aspect of the business very hard with the Ecosys III range of printers.
?There is definitely a move towards the high-end printers and that?s part of the general trend in networked solutions. It?s much easier now for even small companies to have a networked office and an inkjet or a low-end laser is not really good enough for that environment any more,? says Weeks.
Kyocera says it is making good progress with the networked Ecosys products which it promotes by stacking up the features. Kyocera is offering 600dpi, memory of up to 66Mb and 18ppm, along with both SNMP and monitoring software.
The high-end, heavy-duty printer market can be extremely lucrative. Laser printers expected to deal with 250,000 pages or more a month cost up to #20,000. Companies such as Xerox, QMS and ATI address this market, sometimes they sell direct but most of the business goes through channels.
There is serious money in this sector. Xerox, for example, has tied up business worth #2 million with Sanderson Electronics, but such printers only sell in relatively low numbers. This year, according to Xerox, the market for high-grade printers is about 18,000 units in the UK, in the 20 to 39 ppm market
But it is in this high end that the most money can be made selling and even supporting printers. As the IDC projections show us, inkjet is a commodity market, but the highly functional laser should retain its value and, hopefully, allow dealers to make some money as well.
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