Consumable society

Many resellers avoid consumables, seeing them as high-overhead, low-return products. But they are missing a great opportunity.

Ask most dealers what they think about consumables and the chances are they will say they are more trouble than they're worth. There is nothing worse than a customer ringing you up at four o'clock on a Friday and saying his toner cartridge has just run out, and could you deliver a new one right away?

What do you do? You could pull out all the stops and deliver the required product as quickly as possible, thereby earning the gratitude of the customer - but nowadays everyone expects a prompt and efficient service as a matter of course.

Or you could take your time and simply post the goods, and risk alienating a potentially valuable customer. Either way you spend time and effort all for the sake of a few pounds of profit.

Consumables such as toner cartridges, ink cartridges, ribbons, diskettes, tape cartridges and recordable CD media are generally seen as low-volume, low-margin, high-overhead and not worth the hassle. In fact they are a vital part of the service resellers can offer their customers.

"The supplying of consumables should be considered an essential part of the overall service [that] resellers provide to their customers," says Graham Warren, UK country manager at CPG International.

"As any organisation that has ever bought a printer knows, deciding where to buy printer consumables from is an issue that many could do without. If resellers offer this as part of the full service, extra exposure to their customers can be achieved in the process."

All part of the service
Selling expensive peripherals is all very well, but most customers will expect you to keep them supplied with the appropriate consumables for the entire life of the kit.

This can pose problems related to stock levels, administrative costs and delivery. Therefore it is not surprising that many dealers simply wash their hands of the problem and advise their customers to buy their consumables elsewhere.

The main problem is that most resellers do not really understand the market. Consumables require different techniques to high-value items such as PCs and networks. Efficiency is the key to success, and you need to have the proper procedures in place to ensure that your overheads are kept to a minimum.

Actually stocking consumable products is often the biggest bugbear. Even the smallest of consumables - such as ink cartridges - need space. An extra headache is the fact that certain products may have a limited shelf life or require controlled conditions to maintain quality. Paper needs to be kept dry, while specialist papers such as glossy photo stock can be even more of a problem to store.

"While you may need to stock a wide range of consumables to support a variety of hardware, you should aim to keep actual stock quantities to a minimum. This is particularly important when dealing with bulky items such as paper, which can incur high storage costs," says Richard Whitehead, general manager of Computer 2000's supplies division.

"Often the best approach is to operate some type of 'just in time' stock rotation procedure. This would allow you to keep your stock levels to a minimum with just sufficient quantities to meet perceived customer demand. However, for this to work without causing you major problems you must ensure that your supplier or distributor is truly reliable and can deliver replenishment stock quickly."

To stock or not to stock
Another approach is to not actually carry any stock yourself. This can be useful when dealing with either high-value consumables, such as colour toner cartridges, or very slow-moving items, such as plotter pens. Some consumable distributors provide a 'call-off' service, whereby goods will be dispatched directly to your customer and then charged to your account.

As far as the customer is concerned the goods have been supplied by you. They are completely unaware that a third party has been involved.

Taking this a stage further, some direct-mail consumable supplies companies can produce special editions of their catalogues designed to look like a catalogue produced by you. This concept is an ideal way of increasing your profile with your customers; it gives the impression that you are a one-stop shop for all their computer supply needs.

Similarly, some peripheral manufacturers will publish consumable catalogues covering their entire range of products that are overprinted with your company details. This can help you market consumables to your customer base. It can also be very useful if you sell the odd printer or tape drive and don't want to have to stock the associated consumables.

Naturally, making use of the services of a distributor in this way means your margin on consumables is likely to be lower than if you carry your own stock and arrange delivery yourself, but it can save you considerable time and effort.

However, according to Stephen Flint, European supplies marketing manager at Xerox, it is far better if resellers maintain a direct supply chain with their customers.

"Resellers should handle the supply of consumables themselves," he says. "Otherwise they lose the profit opportunity and the regular contact with the customer. By building this relationship resellers make it easier for themselves to sell more equipment in the future."

Offer bundled deals
Another approach that resellers may wish to consider is offering complete bundled deals as part of an equipment-leasing arrangement for customers.

For example, someone leasing a printer could have a guaranteed supply of associated consumables included in the package. Such a deal might include ink or toner, fuser units, replacement drums and maybe even supplies of specialist paper.

Tracey Rawling-Church, head of marketing at Kyocera Mita, suggests that such bundles are an ideal way to sell the total cost of ownership (TCO) concept to customers. "Consider leasing printers or multifunction peripherals on a 'click to order' contract that includes consumables as well as hardware and an extended warranty," she says.

This not only maximises the revenue opportunity but can also avoid the need to discount, and it guarantees you will retain all the consumables business for the period of the contract.

Focus your customer on total lifetime costs rather than purchase price.

By calculating TCO, including hardware, maintenance and consumables, you can reduce the focus on hardware price and protect your margins. Also, a consultative approach is likely to improve customer loyalty and increase your chances of securing further associated business."

Jamie Gryce, sales and marketing director at Hewlett Packard's (HP's) Imaging and Printing Group, says consumables form part of a "golden triangle" within the peripherals market.

"Selling a printer is just the start; the ink or toner and the media for printed output are the other two sides of the triangle," he says. "VARs need to add value wherever they can, and supplying consumables is the best way to offer a complete service."

Like many other original equipment manufacturers (OEMs), HP provides resellers with a wealth of assistance in promoting consumable products. "Not only do we provide training but we encourage resellers to market our consumables by supplying them with point-of-sales material, literature, print samples and compatibility charts," says Gryce.

"Successfully selling consumables is not just supplying customers with a few ink cartridges but providing customers with advice on how to get the most from their printers. Resellers need to ask customers what they are using their printers for and determine what they are trying to achieve.

"That way they can often suggest better high-quality consumable products that can give the customer better-quality results. With the whole of the IT industry suffering from depressed sales at the moment anything that can be used to increase a reseller's turnover and ultimately their profits must be welcomed."

Consumables are the lifeblood of any industry, says Warren, whether petrol for cars, soap powder for washing machines or batteries for Walkmans.

"Channels to market are therefore vital for any vendor," he says. "The most important thing for VARs is to make sure consumables are available and priced competitively. By failing to achieve this resellers may well inhibit sales of the capital equipment."

SUMMARY

• Consumables are often overlooked by resellers. Many cannot be bothered to sell them.
• However, selling consumables is an excellent way of maintaining an ongoing relationship with your customers.
• There are several ways to tackle the problem of selling consumables. Online ordering is an ideal approach to take.
• Efficiency is the key to making a decent profit and 'just in time' ordering can help.
• Remember that many peripherals can provide several years of steady income if you are prepared to keep the customer supplied.
• Always be wary of consumables being offered at a knockdown price as they could be counterfeit.

COUNTERFEIT CONSUMABLES - ZERO TOLERANCE
One of the biggest problems affecting the consumables market is the issue of counterfeit products - not compatible products that are perfectly legal, but forgeries that masquerade as genuine items from OEMs.

Counterfeit consumables have a serious impact on computer wholesalers' reputations as well as creating severe quality and maintenance problems for end-users.

The Imaging Consumables Coalition of Europe (ICCE) is a trade association set up by OKI, Hewlett-Packard, Epson, Tally, Canon, Ricoh, Xerox and Lexmark whose primary goals are to promote awareness of counterfeiting and the means of combating counterfeiting, to assist members in identifying and taking action against counterfeiters and to publicise those practices.

Jag Gill, secretary of the organisation, says: "Being caught with counterfeit consumables is worse for a reseller than having counterfeit money. If a wholesaler has fake consumables in his warehouse, he is not only likely to lose out financially, he risks damaging his reputation with his customers. He is also likely to have all his goods seized - even his genuine stock."

As well as helping ICCE members to identify counterfeiters, the ICCE devotes time to alerting resellers across Europe about doubtful sources, encouraging them to purchase consumables from safe suppliers.

"Counterfeiting is one of the core activities of organised crime and everyone is losing out," says Gill.

"End-users lose out because of the poor quality of counterfeit consumables, as well as the potential health and safety risks that can occur. Resellers lose out because of the damage to their reputations, the cost of having stock seized and the time lost resolving consumer complaints and assisting with legal investigations. And society loses out because of the loss of tax revenue."

The ICCE is actively educating distributors and consumers in ways to protect themselves from becoming victims of telemarketing fraud and counterfeit products, and provides a Check It Out service to help identify counterfeit goods.

The ICCE also provides a forum for the exchange of information, compiling a database of those companies proven to have knowingly dealt with or manufactured counterfeit products. The ICCE liaises with enforcement agencies to promote better upholding of laws and has established links with the Imaging Supplies Coalition, which has headquarters in the US.

"Setting up ICCE is a major step in the fight against counterfeiting and a demonstration of commitment from the member companies," Gill says. "I fully expect it to have a significant and long-lasting effect on the level of counterfeit activity. The message to these criminals is clear: we will tolerate you no longer."

CONTACTS
Computer 2000 (0870) 060 3344
www.computer2000.co.uk

Imaging Consumables Coalition of Europe
www.icce.net

CPG International (01252) 357 841
www.genicom.co.uk

Xerox UK (01895) 251 133
www.xerox.com

Kyocera Mita (0118) 923 0720
www.kyoceramita.co.uk

Hewlett-Packard (08745) 474 747
www.hp.co.uk