How to Sell Peripherals - Part 2

Users need good quality peripherals that are easy to use and more affordable than ever before, but resellers face a fragmented and shapeless market that isn't always easy to define.

The computer peripherals sector is fragmented, shapeless and difficult to define. For example, the printer market is a law unto itself. It is set apart from other types of peripherals such as scanners, projectors, digital cameras, video and multimedia accessories, where most of the opportunities to make money lie.

The key players in the printer market - Hewlett Packard (HP), Epson, Canon, Lexmark, Xerox, Oki, Brother and Kyocera - are easy to identify.

While all of these companies use the channel as their main route to market, it is hard to make money out of standard inkjet and laser printers. And while vendors try hard to convince us otherwise, most of the time they are a necessary part of the package. Everyone needs a printer.

However, scanners, projectors, webcams and other peripherals have relatively low levels of market penetration. They are not familiar items to most users and they are usually sold for a specific purpose or as part of a defined solution. In the scanner market, names such as Fujitsu, Bell & Howell, Kodak, Genius & UmaxEpson, Canon, ADI, Mustek, Microtek and Visioneer are all competing for space.

There's an assortment of vendors from very different backgrounds in the video camera market. Companies such as 3Com compete alongside Philips, Canon, Agfa and a host of far-eastern manufacturers.

Projection is a fast-growing and competitive sector and falls between being a true peripheral and a stand-alone market. Many systems work as add-ons to PCs or laptops, and many others work as separate units. Key players in this area include Philips, Epson, Video Logic, InFocus, NEC, Fujitsu, Pioneer, NEC and Sanyo.

In addition, there are numerous far-eastern manufacturers that make a wide range of peripherals, such as Acer, Umax and Sanyo. They sell them either under their own brands or under original equipment manufacturer contracts.

In distribution, the mainstream printer market is dominated by the big guns: Computer 2000 (C2000), Ingram Micro, Northamber Midwich and Westcoast.

These firms also stock a wide range of smaller peripheral products. However, in areas such as scanners there are also specialist players like Headway and Dicom, and in video and multimedia Imago Micro, Pinnacle and others are strong specialist competitors. Others, including Portable Add-Ons, offer a number of peripheral products but home in on a specific corner of the market.

It is complex and competitive, said Simon Hill, commercial director at distributor C2000, but peripherals remains a good market for the company.

"Like most markets, peripherals are extremely competitive. You have to offer the very best choice, availability, logistics and value. You also need to know the products and the market in some depth. We have a focused business unit dedicated to this market. To succeed and grow, that degree of commitment is essential," he explained.

He added that a lot of peripheral products are basic or commodity items which can be bought online. Peripheral products are among the most widely purchased through C2000's InTouch online licensing service.

Printed large

In the printer market, the story has not changed much over the past year. The major vendors dominate the mass market and others compete in the specialist large-format and high-definition colour markets.

Today, routes to market and partnerships are as important as market share. Moira Powley, a partner at online printer information provider theprinterdatabase.com, said that the volume market is dominated by price, and there is no question about where volume printer sales are heading.

"Vendors are moving gently and secretly towards direct web-enabled sales models and are trying to not annoy their current channel," she said. "Our advice is to pick the best ones and involve them in the 'direct' sale, as vendors cannot support end-users successfully without a geographic spread of resellers to help them."

The problem, she added, is that resellers come in many flavours: some are very poor technically and others are excellent. "There is no way a vendor or a buyer can spot the duff ones up front. They have to work with the channel - all 35,000 resellers - to find some good ones. It takes time, but it should be a constant focus for vendors," she explained.

Ashley Ford, UK sales director at Xerox Office Printing Business, thinks that routes to market may become more confused as a number of manufacturers 'experiment' with direct sales over the internet in an effort to improve margins.

"The difficulty with this strategy is offering a total solution to the customer. We maintain that the best route to market is via a two-tier distribution strategy whereby our expertise is focused on supporting the distributors and resellers which are better equipped to offer a complete solution to our customers," he said.

However, some believe the die is already cast for the printer market. "Printers have moved from a reseller's product to a box-shifter's product because end-users are happy to buy and install themselves," said Lloyd Wilmot, UK operations manager at GCC Printers. "Box-shifters are now by far the dominant force in the market and are currently trying to convert customers to buying from websites to further reduce the cost of sale."

According to Tom Primett, product manager at Ricoh UK, margin pressure is compelling even vendors with specialist products to seek new routes to market. If not, they will have to close channel partnerships.

"Resellers must look carefully at strategic partners that specifically target this market. As the price points reduce, resellers are diversifying into new sales markets to strengthen their overall product portfolio and be perceived as 'one-stop shopping' for many end-users," he said.

Flexibility gains friends

For companies such as Ricoh, focus and flexibility are the keys to success in the printer market. Primett claims a broadline sales approach to taking products to market would dilute the brand awareness in that sales company and reduce the focus on customers.

"We are not so arrogant to believe that our strategy will work for every reseller. We will always be as accommodating as possible," he explained.

As far as product development goes, the printer segment is now very polarised. Clear niche areas have developed alongside the volume sectors. However, all vendors now have their eyes on the multifunctional market.

HP, Lexmark and Xerox are the leaders here, but just about all major printer vendors are now vying for the laser printer/fax cross-over market. There are some very powerful products available, some of which have internet capabilities allowing them to send and receive output across the web.

Ford believes that product development is being guided by what users want. "Customers need printers that are easy to use, fast, good quality, cleaner and more affordable. Speed and less user intervention is necessary for busy office environments," he said.

Development will also focus on web-based tools and remote administration, printers with more finishing capabilities for the office, such as stapling and punching, and consistency across a range of products.

According to Powley, the key areas of development are in multi-function devices for small to medium sized enterprises and in colour for all users. The competition, however, is too cut-throat for anyone to get a proper grip.

"Multi-function devices are great except when a single component breaks down and the whole device goes offline," she said. "Users need great quality, extended warranty and excellent support in the field. That is not likely to happen for a while, however, so they will struggle on with lousy service and frustration."

Rather than fight on too many fronts, more printer makers are merging or scaling down to focus on particular areas of the market. Xerox has a massive portfolio of products, but with the acquisition of the colour arm of Tektronix, it has become increasingly focused on colour.

It is also important to focus on other parts of the peripherals market. Steve Muttram, managing director of Portable Add-Ons, said that, while peripherals are mostly basic hardware items and margins are thin, resellers that add value can continue to make good money out of them if they get the emphasis right.

"There will always be a role for resellers who put together peripheral product solutions. The mobile market is a good place to be at present as all companies are looking at deploying more mobile devices," he said.

According to Muttram, the handheld market grew by 111 per cent last year, with only 14 per cent of these sales going through resellers. "These devices are becoming enterprise productivity tools. The number sold via these channels will increase dramatically and the high growth shown last year is set to continue," he said.

Sony has already developed a range of special add-on devices for its Clie range of personal digital assistants, including digital cameras, simple scanners and fingerprint readers.

Projecting the future

Portability has also become more important in the projector market. Size, weight and price are all coming down. However, according to Jolanda Medendorp, senior marketing and communications manager at InFocus Corporation, projectors are still good business for the channel and this should continue to be the case.

"The products have become smaller and smaller," she said. "At 1.3kg you can now get a full-featured projector for the mobile professional. The technological developments still continue and the next steps are wireless applications and networking the projectors.

"Manufacturers are getting wiser about pulling costs out of the products, so profitability in this market will stay, even though prices go down. Simpler, more efficient designs are bringing excellent products to market at outstanding prices."

The story is very different for the video and multimedia market segments. "As video solutions is still a relatively new sector, margin can be made, especially in completely configured systems," explained Dave Askew, regional manager for northern Europe at video specialist Pinnacle. "Time is needed to train users and this can be charged. With a bit of time for training and increasing demand, resellers can benefit by focusing on video solutions."

Ian Vickerage, managing director of Imago Micro, believes dealers need to be pro-active to sell these products. "Margins are thin only on certain products and, in the area of projection and video, dealers stand to gain by pushing product. Currently, resellers focus on video conferencing and they are technically very strong," he said.

"In the future, the emphasis will be on good marketing rather than technical ability, and customers will shift their allegiances to those resellers that market effectively," he added.

Video remains mainly a consumer oriented market, but few users have the new video editing technology at home, so there is massive potential.

Askew insists that there is still room for the value-added supplier that is prepared to give the products some focus, saying that many resellers are already targeting niche areas and are benefiting as a result.

"A good Pinnacle partner will sell over £100,000 worth a month, maintaining high profitability. This is down to focus," he pointed out.

Pinnacle is looking for more resellers that are prepared to put some focus into the video market, but it acknowledges that a lot of work needs to be done to educate end-users and the channel.

"Video is all around us and will become one of the strongest methods to grow a business. With live video streaming available, coupled with DVD storage, video is becoming the new solution to sell a company's benefits," said Askew.

But Vickerage is optimistic about its prospects. "There will be a move towards more links with the PC from non-PC products," he said. "For example, most video conferencing is currently delivered independently of the PC or the network through an appliance-style set-top box.

"This will change; people are beginning to want more than just 'talking heads' video conferencing, they want to be able to share applications during the conference. This can be done much more easily by putting video conferencing into the PC and making it easy to network."

Nice and easy does it

Making life easier could stimulate growth in other areas as well, and some manufacturers are now adding wireless functionality to their products.

James Turvey, business development manager at Acer Communications & Multimedia, believes that manufacturers which incorporate Bluetooth and other wireless technologies into their products will get ahead of rivals.

"This market should be huge. A wireless office is not just a gimmick, it will increase the flexibility that users expect from their peripherals," he claimed.

Turvey feels that peripherals in general will become smaller, lighter and more attractive to the eye. "The role of the designer will become more and more important. Peripheral equipment obviously needs to fulfil a function, but we're seeing a concerted effort on behalf of all manufacturers to make products more beautiful. In a competitive market, things like that make a difference," he said.

Turvey also believes that the multi-functionality of the printer sector will spread to other peripherals. "Devices that support a variety of functions have been developing for some time now. There will be a continued increase in the level of multi-functionality of peripheral products in the low price bracket, so much so that single-function devices will become obsolete," he explained.

Several vendors are vying for this market space and all sectors are overcrowded at the moment. "Consolidation will always take place as markets develop and grow," said Askew. "It happened with sound, graphics, mice and every other peripheral product. You just need to be in the right place at the right time."

CONCLUSIONS:

• More printers are being sold online and colour is moving into the mainstream
• Multi-functional printers are being held up as fierce competition holds back the development of more reliable products
• Web-enabled peripherals are a new battleground for vendors
• The large broadliners take the lion's share of the simple products, while a group of smaller specialists provide focus on particular sectors
• Portability is a key factor as more manufacturers are developing portable peripherals and add-ons for mobile computing products
• Innovation and good looks are becoming more important and products continue to shrink in size, weight and price
• Further mergers and acquisitions are inevitable across the market, reducing the number of players and adding stability.

Appearing in this article:

Computer 2000 (01256) 463 344
Imago Micro (01635) 294 300
Pinnacle (01895) 442 003
Portable Add-Ons (01256) 396 500
Ricoh UK (020) 8261 4000
theprinterdatabase.com (01932) 881 322
Xerox OPB (01895) 254 095
GCC Printers (020) 8754 6000
Acer Communications & Multimedia (01633) 628 600
InFocus (01628) 666 622