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RSS feedsThe reseller channel remains the principal route to market for UK printer manufacturers, but resellers now have to focus their sales very carefully, and the rise of direct sales is inevitable. Hewlett Packard (HP) already sells via the web - as do many of its resellers - and with some deskjet products selling for about £70, there is little or no value in the sale, even for retailers. Like the vendors, they also want the consumable sales.
It seems resellers can do little or nothing about this development which, for simple commodity inkjets, has always been coming. But they may be more excited - or alarmed - by the initiatives now being planned by the market's leading vendor. HP is planning a move into the managed print services sector, adding a new dimension to an already complicated market and possibly opening up fresh opportunities for resellers.
Darren Wall, marketing manager for HP LaserJet products, said: "The technologies are pretty well-shaped now. At the business end, the push is on colour. Outside that, the focus is on usability and availability issues and the internet is going to drive a lot of that."
HP is planning to introduce managed services for printing over the internet. Users will be able to manage print output using third-party output providers or centrally located resources. A local printer may print, collate, bind and deliver a report overnight, and a business centre will print and mount a series of pages or collate documents and post them to a list of contacts.
The reason HP is addressing this market is simple, said Wall. "We need to bring in revenue. What we want is for our products to be preferred over any others. But we will also offer consulting services, directly and through the channel."
Clearly, if this is to be the next area of opportunity in the printer market, resellers will need to embrace it quickly. But that challenge lies ahead. It seems that most resellers today have little choice when it comes to printers. They have to respond to customer demands and, where there is little or no margin available, go with the flow.
Wearing the badge
But in the higher reaches of the market, where printers can be networked and can offer multiple functions with colour output, there is more reason to wear a vendor's badge and try to sell a product into customer accounts. But getting resellers to do that is hard work, according to Phil Murphy, general manager at Kyocera.
He claims that there is one corporate company in the UK that was standardised on HP printers a few months ago and today uses 5000 Kyocera printers worth about £2m. It was all sold by a salesman at one reseller who happily accepted the commission fees. But what did he do for it?
"His contribution was that he did not tell HP that we were selling into the account," said Murphy. Kyocera's major accounts team had persuaded the customer to switch to its products and closed the deal. For this particular salesman then, it was very easy money. But no-one seemed to notice. "That guy sits in a fairly big sales office, but not one of his colleagues has asked him to look at their accounts."
For most reseller sales staff, it is much easier to respond to the customer's instructions on printers, which Murphy said is quite understandable. "One of the reasons HP is the number one is that most reseller salesfolk don't understand printers, and more importantly, the connectivity issues with printers. Why should they? They are relationship managers. When printers come up in the conversation they recommend the market leader because they know it will work."
Playing it safe
Resellers, like corporate IT managers, are often happy to play it safe, even when there is very little risk in venturing off the beaten HP track. From the user point of view, there is more money to be saved; from the reseller perspective, there is more potential profit in the sale. As they are so widely available, prices offered on HP products have to be competitive and there is no guarantee of follow-on sales.
It is, however, increasingly difficult to make profit on any vendor's printers. Unit sales continue to rise but prices are still falling, although laser printer turnover is much stronger than it has been for some time. The total sales through the channel increased by more than 10 per cent last year, according to market analyst Romtec Gfk.
It is even difficult to make money from a specialist area. Apple printer specialist GCC has recently ventured out to attack the corporate market. Dermot Heggarty, UK operations manager at GCC, admits that he is unsure of what the company is taking on. "We'll continue to focus on the graphics and pre-press market and the Apple market is growing fast. The margins have been good, but I'm a little bit apprehensive about the corporate market."
GCC says it will attack the HP product range, highlighting the superior performance and processing power of its machines. Heggarty thinks this will work, but he admits there is very little differentiation. GCC's reputation as a high-end graphics printer vendor may take it far, especially now that printer purchasing habits seem to be changing in the corporate market.
Murderous competition
Graham Salmons, marketing director of the business printer division at Lexmark, said: "Buying dynamics in the commercial market have changed from a straight hardware purchase to a much more comprehensive purchase of services, in particular cost reduction, outsourcing and management."
Part of the reason for this change is what he describes as "murderous competition", which is forcing resellers to look for profit opportunity and differentiation, and partly because "newer, more aggressive competitors such as Lexmark have chipped away at HP's position as a marketing or brand-led company, by claiming to offer improved service and quality".
For GCC, or any other printer specialist, the corporate or higher end SME and small office/home office markets are really the only available targets. The consumer market is just too difficult to penetrate now. Here, a rising demand for photo-printing and a drive for quality and performance at a low price is driving strong sales of the latest inkjet technologies, said Salmons. Therefore "those manufacturers that own their own technology and can control their costs, will be the winners. It's also looking increasingly difficult for new vendors to try and break into the market."
However, Mat Keep, printer product manager at Ricoh UK, said buyers are looking for more than a brand name. "IT managers increasingly see printing as crucial to their business and will begin to consider factors other than brand in their purchasing decisions. They want to be able to install it and forget about it."
Most of the opportunities are in the higher end of the market, but the picture is complicated. Three developments are dictating vendor policies: the switch from copying to printing technologies; the debate over centralised versus distributed print environments; and the impact of the change to colour from monochrome.
Print convergence
Kyocera's Murphy believes the key issue now is the convergence of printers and photocopiers. "It will take all the mystique out of printing. In three years, there will be very little difference between those products, and users won't think of them as printers or photocopiers. They are the parents of tomorrow's technologies," he said. But the melding will take some time, said HP's Wall. "There will be convergence, but it will be driven by users and by the politics of purchasing in the corporate market."
Recent figures from market researcher Dataquest show that more than 90 per cent of all fax devices bought in the US last year were multifunctional, and Wall expects to see further growth in multifunctional sales on this side of the Atlantic. "We definitely see that trend in the UK. It's being pushed forward by colour workers and home workers. It is also finding its way back into the corporate market where users want to go back to having their own personal device."
Graham Lowes, marketing manager at Oki, also sees converged printers being used where there is a need for shared resources. There will be plenty of room for all kinds of these devices, he said. "It's just a natural progression. We will see various combinations coming out, but it is not an area that is clear-cut and there will still be a need for specialised units in other areas."
He added that the importance of the colour laser should not be underestimated, but it is going to be some time before that market can develop. "With lasers, this is the next major shift, but speed is a prohibiting factor. If you look at network printers today, they are running at 16ppm in monochrome. Use colour and it drops to 4ppm."
But in the multifunction area vendors are having to wait for the market to decide what kind of technology it prefers.
Meanwhile, as prices continue to tumble, they are doing their utmost to capture market share. So much depends on consumable sales. To achieve this, you need a lot of printers being used day in and day out. "The after-sales market is a good opportunity for everyone and that's where you go after market share," said Wall.
Prices for inkjets cannot get much lower, he added, but the technology can deliver better value and open up the market to more users, and eventual buyers of inkjet cartridges, paper and accessories.
This is now a massively important aspect of the market for manufacturers, said Ricoh's Keep. "Vendors are completely dependent on the consumables market because margins have virtually disappeared on the hardware. The reality for the printer-only manufacturers is that there are only two or three printer makers that are truly turning in a profit on sales of hardware."
Achieving a high sales volume is very important. It is all-or-nothing for the vendors. "There isn't much of a future for those companies that are purely printer manufacturers. Last year saw major consolidation in the printer business. With ever-increasing pressures on margins, coupled with the massive opportunities and threats that ebusiness presents, consolidation is more than likely to continue," said Keep.
Competition set to intensify
The intense competition is certainly unlikely to ease. Although there has been consolidation, some companies are trying to drive their volumes up. Samsung, which entered the UK market just over a year ago, has delivered with very low prices and claims to be close to taking two per cent of the monochrome laser market.
Samsung is also set to attack the colour printing market and is looking to build a corporate market presence. So far its successes have mostly been through retail channels and Dixons outlets. But a project with a supermarket chain is also on the cards, according to Nigel Collard, product marketing manager at Samsung.
There is no outlet, it seems, through which printers cannot be sold. If the trends continue, managed services may be the only route to take for resellers that want to make a profit from printers.
- Managed print services will start to develop this year. This could be a major opportunity for resellers, but vendors such as HP will also offer services.
- Colour lasers are the next major growth area, but the technology needs to deliver faster output before the market can really take off.
- Sales of multifunctional devices continue to grow, and more modular devices that cater for a variety of needs will appear.
- Monochrome printer sales are moving away from lasers and towards inkjets, with more products likely to be sold through the retail channel as prices fall further still.
- Consumable sales are becoming even more vital to vendors, raising the stakes in the global market and, along with photocopier and printer convergence, making further consolidation a certainty.
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