In the first part of an in-depth interview with ARN's BRIAN CORRIGAN, Kyocera Mita's local managing director, David Finn, predicts major changes ahead for the print channel.
The printer market is highly competitive. How do you expect it to evolve in the next couple of years?
It is very competitive and I think we will eventually see two channels - one with sub-$299 machines sold as cash and carry through mass market retailers like Harvey Norman and Domayne; the other focused on entry-level multi-function devices, high-end solutions or integrated packages that tie document management together. Soon there will be no room for resellers to be box-shifters because they will not be able to compete. Five years ago, an entry-level laser printer would do 6 pages per minute (ppm) or 10ppm mono for about $1000. Next year we will launch an entry-level 28ppm laser for about the same price. How fast do you want these things to print? Even the entry-level colour will be 10-15ppm with a black component at 20-25ppm. They will retail for $600-$900. Anything in that zone is still reseller land because 10 per cent of $500 is $50 and you would want to make at least that on a transaction. If you get down to $300, 10 per cent isn't worth the hassle so you will get this divergence of channels. Resellers have to be more creative and add value because speeds and feeds will not be the issue.
How quickly do you see this market split happening?
We are seeing it now. Kyocera is not in mass market because we don't have a product but Ingram [Micro] is already telling us how that split is occurring. There's a Domayne around the corner and they have a range of printers from inkjets through to mid-range lasers and multi-functions up to about $500. You can buy a dinner set, Hi-Fi, vacuum cleaner and hand over your credit card. That's the modern way of shopping. Nobody is going to buy a printer from a small shop on the corner when they know they are going to pay a premium. And this isn't just consumers; it's SMBs as well. Most government departments now have a credit card and can buy from Myers. They don't have to go to a reseller. If they buy in bulk, they buy off a vendor so that space is getting compressed. The printer market is going to be very tough.
Do you expect to see significant consolidation in the number of print resellers?
Yes, I think some will just decide it is too hard and turn their attentions somewhere else. If you go back 4-5 years ago, every corner shop was a PC reseller but where are they now? The friendly PC shop on the corner has just gone. I don't know where half these resellers are anymore. Some of them are consultancies but the shop-front reseller won't be around shortly. Some resellers will get bigger by focusing on document solutions and adding value. How do you help a customer reduce their number of prints, how do you reduce their costs and what is the environmental impact? That is what they want to hear.
If we do see such a profound split in the print channel, what will it mean for the vendors?
DF: We are a company that acquires other companies so we will be fine. I don't know what the ultimate game plan of our competitors is but I think you have to look at anybody who is not 100 per cent focused on the print market and think they could be at risk of not continuing. The only exception is HP because printers are a major part of their business and it's the profitable part. Without naming names, some others will find it tough - particularly in the inkjet market. We will survive because we go to market with a highly sustainable competitive advantage. Our environmental credentials offer a benefit to the user that translates into a benefit for the planet. We can help companies become carbon neutral and that has a bearing on purchasing decisions.
What will this split in the printer market mean for local distribution?
They have to justify their position in the value channel because a lot of logistics companies can do just as good a job and everyone can connect to resellers via the Internet. If it is just simply box-moving, where does the distributor come into play? As a vendor we can do it just as easily. That is not the model right now but there's nothing to say it won't be in five years. Distribution companies may decide that box-moving printers or other commodity products might not fit their model because they can't add value. The notion of distributors now is often wrong because they were originally formed by overseas companies to represent their product in a market where they didn't have a presence. They took a lot of responsibility for credit, marketing and product stewardship but we have migrated well past that because every vendor is here. IT distributors should now be referred to as wholesalers. If you look at the motor vehicle parts industry, they are all wholesalers that connect a number of manufacturers with a whole bunch of carry yards and repair shops. There's no value except it connects a small number of larger companies with lots of smaller ones. Do we need the number [of distributors] we have today? No. Ingram is always going to be a winner but the smaller ones can only survive by having niche products and offering niche value. They can't add value to something that's a commodity - it's just not possible. If a reseller can buy from Distributor A for $100, he is not going to buy from Distributor B for $110 no matter how much he likes that company. We will see distributors rationalise or specialise. We work with Alloys in Melbourne, which tries to add value in print solutions and charges a premium for that. That's a good example of where it is difficult to carve out a value-add but they've done it by putting showrooms in and holding dealer nights. They can command a couple of extra points and a bit of loyalty.