Feeding the beast

Feeding the beast

It's not all that long ago that the lower-end multifunction device (MFD) was little more than a ‘super fax' with low-quality printing and scanning capabilities thrown in. It was targeted at the SOHO and small business market but the print quality was often so poor that the final printed document looked like a draft and the sheet-fed scanner was only good for scanning to fax.

But the days of the so-called super fax have gone. MFDs are rapidly gaining a new and better image, and with it a bigger slice of the market. The fax functionality is no longer considered a critical part of the consumer MFD; in fact, some manufacturers are dropping it altogether and others are including it as a software option only. The new MFDs are printer/scanner/copiers, designed to save space by combining the printer and the scanner into a single unit. Many are also standalone units that don't require computer connectivity for their scanning and copying function, effectively providing the home consumer with a sub-$500 colour photocopier.

The Australian inkjet MFD market has heated up this year, spurred on by Lexmark slashing the price of its X73 product to $299 and promoting it heavily through a range of outlets, including the TVSN pay TV shopping channel. The campaign helped push Lexmark into second place in the overall MFD market ahead of Brother in August. However, it still accounts for only about 15 per cent of the market, well behind HP, which consistently commands between 50 and 60 per cent.

The good news for Lexmark is that not only is it increasing its market share but the market itself is growing rapidly. According to recent results released by market research firm GfK, the MFD market has grown 62.7 per cent in the 12 months to June 30, and is now the fastest-growing home office product in the Australian retail market, with sales of separate peripherals growing only marginally by comparison.

Katina Goussetis, IDC's peripherals and devices market analyst, says that while inkjet MFD revenues accounted for a little less than 5 per cent of the total printer/MFD market in 2001, they are growing rapidly. Revenues totalled $56.2 million, with just over 90,000 units sold in the Australian market in 2001, but by the end of 2003 she expects the market to total around $75.1 million and by 2006 to return revenues of about $106.2 million.

"We are expecting many vendors to introduce new and improved products in the inkjet MFD space, especially in terms of improved price, speed and performance, over the next 12 months. Aging install bases are expected to be replaced by MFDs that save space and are economically priced for all business sizes. Businesses are starting to realise that inkjet MFDs now offer faster speeds, lower upfront costs and provide a competitive advantage with in-house printing," she says.

But it is not just the business space that is showing demand for MFDs. In fact, two of the four top-selling MFD models in August, according to IT channel research group Inform, were aimed at the home and SOHO markets. The HP PSC 750 and HP PSC 950 are sub-$500 printer/scanner/copiers that are being snapped up by home users.

While HP dominates the MFD market, it has dropped from second to fourth in the inkjet market over the 12 months to the end of August, according to Inform, so it is no surprise it has been developing new strategies centred around MFDs, or all-in-ones as the company has branded its machines.

Guyon Collins, marketing development manager of HP's imaging and printing group, says it has been HP's strategy to drive the all-in-one market to mainstream. "We are trying to converge it into the single-product Deskjet and bring it more into the home. Twelve to 18 months ago, MFDs were looked at as a SOHO business market but today we are looking at them as life-enrichment products in the home."

HP has dropped the Officejet name from its new line in favour of "all-in-one" and it has removed the fax functionality from them, focusing instead on a digital imaging solution by adding digital memory card input to its higher-end all-in-ones.

"A lot of what we have done has been towards making the functions standalone without the need for a PC," says Collins. He cites the functionality of the new PSC 2210, which can accept images from several different memory card formats and print out a proof sheet. The user marks the picture they want prints of and scans the proof sheet on the flatbed scanner, allowing the software to note the pictures that have been selected and print them.

Collins predicts entry-level all-in-ones will be on the market for as little as $199 (compared to the $299 current price for Lexmark's X73 and $399 for HP's PSC 750) by this time next year and they will be making solid inroads into the single-function market.

"It is already cutting into the single-function printer and scanner market," he says. "By the middle of next year, you will see only one or two single-function products from each manufacturer in the standard inkjet printer market. You will see specialist photo printers, but as far as standard printers are concerned, there will only be a few and they will be at the very low end of the market."

HP has already begun bundling its all-in-ones with Compaq and Pavilion PCs and over the next 12 months plans to bundle printers or all-in-ones with 50 per cent of its computers. Collins says that in dollar terms about 60 per cent will be all-in-ones.

Lexmark, which finished August in second place in both inkjet printers and MFDs, sees a lot of potential in the home MFD market for both manufacturers and the channel. Like HP, the company is pushing the concept of the enhanced printer rather than the super fax. While there is fax functionality available in Lexmark's "All-In-One" line, it is a software solution that relies on the PC's modem rather than being built into the device.

Scott Millington, marketing manager of Lexmark's consumer printing division for Australia and New Zealand, says the retail channel has embraced the concept of selling All-In-Ones. "We are seeing an increasing number of retailers placing them in both the printer and the scanner aisles of their stores with the aim of creating an up-sell from a single-function/standalone product. Mass merchants have also taken this approach, using bulk stacks and creative merchandising in stores to create awareness of the Lexmark multifunction devices. Our alliance partners are also exceeding our expectations by bundling an All-In-One with every PC sold."

Millington says there are extra benefits for the channel in the MFD market. While there is the obvious advantage of a higher price/margin over single-function products, there is a bigger incentive to the channel due to the fact that multifunction devices use 67 per cent more consumables than single-function printers - thus driving future profit stream.

Stephen Waugh, general manager of Lexmark's consumer printing division, says the major benefit for the consumer is that MFDs take up very little desk space. "You are taking up the same space as a printer but there's a flatbed scanner on top."

He says he can see MFDs taking over part of the printer market. "It is the fastest-growing consumer segment. The scanner market fell 4.2 per cent over the past 12 months and printers are only up 7 per cent compared with a 62.7 per cent jump for MFDs. The number of units sold this year is already double that of last year and I would expect it to do the same again next year."

But unlike HP, which sees more price flexibility in the market, Lexmark thinks it has already found the bottom. "I don't think you are going to see the price point go any lower," says Waugh. "They have come down from $899 and Lexmark won't be going below the $299 price. But that is not to say that some other manufacturer won't."

Canon is currently a clear leader in the inkjet printer and scanner markets but does not rate a mention in Inform's MFD market share charts. Helena van der Pluijm, product manager with Canon's consumer imaging products group, says that is about to change.

Canon entered the flatbed multifunction market this year with the launch of its imageCLASS series, which consists of the MPC400 (print, copy, scan), MPC600F (print, copy, scan, fax with auto document feed), D620 (laser copier and printer) and D680 (laser copier, printer, fax with auto document feed), and is now looking to become a notable player in the business.

"We are committed to further expansion in the range in 2002 and 2003. We expect to be a more prominent player in this market, certainly as our range and reputation in this area grows," says van der Pluijm.

Canon's strong presence in the digital camera, bubblejet printer and scanner domains puts the company in an enviable position to take advantage of MFD growth.

"We are also the market leader in copiers and laser faxes and it is these technologies we use to build our multifunction range," she says. "Part of our strategy is to drive home the message that there is no-one better positioned to combine all of these technologies."

Canon will launch a new $499 MFD on November 1 and will be increasing the number of MFDs in its range to seven by the end of the year.

Of the big four in the inkjet printer and scanner markets, only Epson has yet to release an MFD, although it is expected to launch a range in the next few months.

While inkjet-based MFDs have shown spectacular growth, laser-based models have also been attracting interest - several companies are predicting that sub-$1,000 machines will become commonplace in the SOHO market next year. Both Lexmark and HP are gearing up for that market, in which prices for laser-based devices could soon get down to as low as $500.

Sharp, which has long had a presence in the SME MFD space, is also keen to get into the sub-$1,000 laser market. MFD strategy was one of the major items on the agenda for Sharp executives meeting in Japan on October 16 and the results of the convention are expected to start to filter through into the marketplace next year. Sharp is likely to include new products similar to HP's digital imaging solutions and take advantage of Sharp's existing digital camera products.

"At this stage you are getting a standalone laser printer without additional features for less than $1,000, but printer copiers are now starting to move into the price space and once vendors start to offer scanning and fax, either in-built or as an option, it will start to put pressure on the inkjet MFD market," says Joe Constantino, Sharp's general manager of marketing.

"One of the issues with MFDs is that when you have four functions in one, and one of them goes down, you lose your entire office, so it's often better for the customer to rely on quality than price. Vendors also have to find a happy medium between quality and price."

There is also plenty of growth in the sub-$5,000 market as businesses replace copiers with all-in-one devices. IDC is predicting that MFD sales will overtake printer sales by 2004. Worldwide printer sales will be worth $US6 billion, it forecasts, but worldwide multifunction device sales will be worth as much as $US10 billion.

Alan Macdonald, print solutions product manager for Samsung Electronics, says the Australian market for MFDs under $5,000 has gone from 20,000 units in Q1 2001 to 33,000 units in Q2 2002. He expects this strong growth to continue next year.

Sales of both copier and departmental printers continue to slow as customers look more and more to the digital copier/MFD. Martin Ryan, Lexmark's general manager, enterprise, corporate and government, recently predicted the demise of the office photocopier at the hands of the MFD.

If nothing else, the MFD will provide more desk space in the home, more floor space in the office, and give resellers something to look forward to moving into 2003.

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