With an unprecedented economic crisis slamming the biggest economies in the world and drastically impacting others such as Australia, questions have to be asked about the feasibility of doing business in industries that were already under the pump. While there are always opportunities for those willing to put in the hard yakka and position themselves strategically, there are also increased risks from postponed spending, decreasing margins as a result of cut throat competition and falling confidence. In the Australian IT world, the populous SOHO printer market is one that fits this description.
According to the most recent Australian Bureau of Statistics (ABS) figures at June 2007, there were 620,037 sole proprietors operating in Australia; 31 per cent of the total 2,011,770 companies. Additionally, between 2003-2007, 20 per cent of all businesses ceasing to trade and 22 per cent of all new companies were sole proprietors. By any metric that is a considerable turnover.
When you also factor in the hundreds of thousands of small businesses that employ less than 10 staff – the generally accepted definition of SOHO – then the potential printer market size is appealing. While not every one of these sole proprietors and SOHO outfits will need a printing device, you can be sure that the vast majority will.
Yet the opportunities for the channel are mixed and those that do decide to play in this space must proceed prudently.
For obvious reasons, vendors that operate in the SOHO space want to avoid talking on record about the challenges and risks inherent in this market segment. But when things are as tough in the economy as they are now, it would be remiss to baulk at the issues.
The first challenges to address are the continual price decreases and competition from the consumer shops. Ever since the big retailers – Harvey Norman, Dick Smith, JB HiFi – got into selling printer devices, prices have gone down to almost unsustainable levels. Sure, the prices were already dropping, as are pretty much all hardware devices. But with the added pressure of the volume approach of many retail stores, margins have plummeted; some would say to the point where the machines are going below cost.
“For manufacturers in particular, it is probably the negative end of the market; we are probably losing money on all the boxes we sell into that end of the market,” Fuji Xerox Printers marketing manager, Tom Lewis, said.
Add to this recent pressure from the cheap Australian dollar – it has fallen 25 per cent against the US greenback and 30 per cent against the Japanese Yen in the past six months – on imported devices (which means pretty much everything), and the outlook for better margins in the SOHO space is gloomy. So much so, that some question why you would enter the market at all, even with the potential consumables business.