Scanning for opportunity: which way to profit land?

Scanning for opportunity: which way to profit land?

With no independent research on scanners, there are many misconceptions about how much opportunity exists in this market. As Tamara Plakalo discovered, not only are there reasonable profit margins, there is also the opportunity to capitalise on follow-up sales.

To sell or not to sell - that is the question you have to ask when your livelihood depends on making the right decision in choosing products to resell or add value to. It is also a question that has a potential to become even more "hamletesque" and existentialist - in its consequences that is.

For instance, consider what would happen if, once you've embarked on selling a product, the ill-spirited market decides that you will "not be" whatever it is that you wanted to be to that market in the first place.

When it comes to identifying opportunities for earning a living in the scanner market, "to sell or not to sell" appears to be a question with a strong tendency to irritate the Hamlet out of a reseller, as no one seems to agree on even the most basic market facts. Is the scanner market booming, as some say? Or has it gone for a siesta, mimicking the design of its flagship product range that opts for a "thin flat line"? Are the money making opportunities at the high end? Or can you squeeze that extra dollar out of the mum, dad and 2.3 kids market segment?

Forced to confront these questions, you would want to look beyond glam-looking sales brochures that your vendor (which, by the way, probably never used its own scanner to digitise the product photos featured in the brochure) eagerly dispatched to your door together with your prospective and sweet-talking account manager. Alas, the vendor has played another trick on you!

You see, it seems that no research on the scanner market has been done by research groups such as International Data Corporation (IDC), and the Gartner and Meta Groups, and there are no official analyses or statistics to rely on while "scanning" this market for profit opportunities. And that, Graham Penn, IDC's general manager for research, points out, should tell you a lot.

To interpret Penn's cryptic warning, the lack of available figures and other statistical goodies implies that vendors do not consider the scanner market important enough to warrant an analytical peep into its dynamics. That means that either the market is not dynamic enough or it doesn't make enough money for the vendor's shareholders. Whether this should also tell you that scanners won't make enough money for your business is arguable.

Market contradictions. The widespread notion about the scanner market being SOHO-exclusive is (luckily for value-added resellers) wide of the mark. Perhaps some of the blame for the more negative perceptions about the opportunities in selling this "satellite peripheral" can be assigned to this misconception, for most vendors and distributors agree that the scanner market is "booming" at all levels.

"Hewlett-Packard, which is the market leader, expects to sell over 100,000 scanners in Australia this calendar year. Now this tells you that the market is becoming quite large," reflects Chris Franklin, managing director of Sydney-based Performance Software and a reseller of Caere Corporation scanner software.

Franklin sees scanners as an important part of the desktop-publishing revolution package that includes a PC, an inkjet printer, a modem, some publishing software and now also a scanner.

"You can compare it with the rise of the modem market seven or eight years ago, when people started getting into it and now everybody has a modem. It will get to the point soon where most people will have access to a scanner."

On the other hand, knowing that the ratio of printer sales to scanner sales still favours the former by 10 to one is enough to make one sceptical that the scanner is the next shining star in the dollar-starved universe of peripherals.

"It is a relatively low value market in terms of total dollars, but in some parts, such as retail, it is a very active market," IDC's Penn says, attempting to explain the contradiction.

"Harvey Norman, for example, sells a lot of those products as complementary peripherals to PCs."

An ARN survey of several randomly selected electronic retail stores in Sydney has revealed that "a lot" amounts to app-roximately four or five scanners a week, the figure given by both OfficeWorks and Chandlers stores included in the survey.

But, while the number of units mov- ing into the scanner market might seem sufficiently large, operating in a market space that has experienced a dramatic fall in prices over the last 18 months does not carry a promise of significant profit generation.

The surveyed Chandlers store, for example, has a monthly turnover of between $40,000 and $50,000 in its computer section alone. Only around $2000 of that is generated by scanner sales.

Add to that the fact that even vendors have trouble marketing the limited usage/scope of scanners and you will have several "I told you so" flags annoyingly waved at you by connoisseurs from all walks of the reseller arena.

Penn's delivery of some scanner market facts is equally discouraging.

"Typically, in a business environment, especially a large organisation, one scanner will be put on the network, but you will not have one scanner for every PC on the network. So, the market will always be far smaller than the number of PCs sold, even though they are complementary peripherals to PCs."

And then, there is the issue of value-add that Penn is similarly cautious about.

"A scanner is a product the usage of which will depend on where it is employed - kids might use it for school projects, their parents to enhance their Web pages, organisations to scan and store documents. But, since most of these scanners will come with some sort of software bundled in the package, there is not much room to add value there." Or is there?

Three segments, four opportunities. Let's consider a different set of facts now. There are three segments in the scanner market and at least two of them appear to offer resellers not only reasonable profit margins, but also the opportunity to add value, capitalising on follow-up sales.

First, there is the lowest "earning-potential-denominator" of the scanner market - the SOHO segment. As is the case with low-end printers, Hewlett-Packard and Canon reign at this end of the scanner market, even though they're not entirely unchallenged in that space. Plustek's Optic Pro range is another popular SOHO option, Epson is not far behind, while IBM has just unleashed what it hopes will be SOHO's next favourite scanning beast - its high-resolution (600 x 1200) Idea Scan imaging product.

Fundamentally, the SOHO market segment is driven by the ability to store and manipulate photographic images. A small real estate agent may opt to use scanners to put photographs of the property it is selling on its Web page as part of a marketing campaign.

Other SOHO users will look for the ability to visually enhance their Web pages, create e-mail attachments or take school and work presentations beyond the graph-and-bullets format. According to our survey, most of them will want to purchase a high-resolution, single-pass scanning product that can also offer fast image transfer and a simple set-up procedure. In addition, they will not necessarily go for the cheapest product.

You would think that the key words of the SOHO market are therefore price and quality, but that is actually not the case. The key word in this segment of the scanner market is the Internet.

Jerel Chong, Acer's commercial PC product manager, goes as far as to suggest that any SOHO sales pitch should focus on the Internet.

"Generally what happens is that customers buy scanners as part of the Internet bundle. It is a part of natural progression in their involvement with the Internet - first they buy a modem to access it and then they want to publish on it, so they also buy a scanner," Chong maintains.

Selling scanners in an Internet bundle makes even more sense when one takes into account the skinny profit margins available to hardware resellers.

Additional software

"As we all know, when resellers sell hardware, they don't make an enormous profit. If they sell a $500 scanner, they'll be lucky to make $60 or $70," estimates Performance Software's Franklin. "However, they can make a further $60 to $100 selling additional software." And that is the first add-on sales opportunity in the otherwise sparse market of non-essential peripherals.

As input devices that need software in order to perform all the functions users want them to perform, scanners are sold with driver software and usually include some rudimentary version of optical character recognition (OPR) software, such as the popular OmniPage Light or Textbridge. Selling upgrades to professional versions of that software is one way of improving your profit margins in the scanner market.

"Although resellers often think that once you sell a scanner there is no foll- ow-up, there actually is a follow-on opportunity - you can supply OPR software, document management software forms recognition software - there is a whole range of on-sell above and beyond just hardware," Franklin explains.

"For example, if a customer had a need to scan a large number of typed documents, newspaper articles they wanted to put on their Web site, if they wanted to convert their hard-copy forms into Web forms or if they had a wealth of information stored in hard copy and wanted to computerise that information, there is a whole range of software that covers those areas."

Software for scanners, then, is that little niche in the market that resellers should concentrate on, unless they want to sell scanners to the high end of the market. This is where both hardware and software profit margins significantly increase.

Asking himself the perennial reseller question, Stephen Bennett, national sales manager of Contex distributor Southern Graphtec Systems, is brief and to the point: "Why sell scanners? Well, we're in it for the money."

Southern Graphtec Systems distributes the top-end business scanners that are mainly used for document storage and conversion and Bennett, who is currently looking for more resellers, is quick to point out that this end of the market offers "a decent size margin" of around 30 per cent.

Currently driven by changes in business practices that require companies to convert their hard copy documents into digital format so that they can view them on screen and have access to them from any mobile station, the document scanner market is not only growing in terms of the number of units it can absorb, but is also offering some additional dollar-generating opportunities for resellers.

"The great new opportunity for resellers is in the business market's migration to the space of colour scanners," Bennett claims. "Now, you can have posters, maps and things like that reproduced quite easily, which is something that you previously could not have done - and the business market is going for it. So I would say that the scanner market is currently business-driven."

Increased demand

Historically, Hewlett-Packard has been realising 65 per cent of its scanner sales in the business market.

Indeed, the emphasis on mobile computing and document management in an enterprise is likely only to increase the demand for both scanner hardware and software in a market that is steadily growing larger.

If one considers that software alone can be priced anywhere between $200 and $5000 for the top end of the market, it is clear that there is definitely some room to make money there.

Similar to the documents segment, the fast-emerging professional graphics market offers 20-25 per cent sales margin on 35mm film scanners. Used in the field of professional digital production, film scanners have been around for about five years but have recently significantly improved on speed, resolution and - yes, price too. Polaroid, the contender for the market leader's crown, sells them for around $2500 dollars, but warns that apart from limited software upgrades, there is not much room in this market for direct follow-on sales.

"It is more about the fact that this is a new market segment which is producing from incremental sales and margins," says Graeme Blockley, Polaroid's marketing director for commercial products.

"Even though the number of units sold now is considerably higher than it was a year ago, it is still relatively small compared to the number of users out there who have libraries of analog images that will have to be digitised in the next few years."

Capturing the space of business scanning and desktop publishing revolutionaries in search of Internet bundles and good image and document management software is then something resellers should definitely reckon with.

You can also choose to look at it the way Bennett does: "We're really in what they call a turnkey situation where a reseller should be able to sell a PC, additional hardware and software all together as one package.

"The customer of today wants to be able to 'do it all' and resellers should capitalise on that opportunity by offering total scanning solutions to their customers."

What customers want

High resolution

Fast image transfer

Clarity of scan

Natural-looking colour

Ease of installation

Ease of use

The ABC of the scanner market

Types of scanners

Flatbed scanners. These are the most common desktop scanners that resemble copy machines. The item that needs to be scanned is positioned on the glass surface and the scanning head moves underneath it. Most flatbeds can scan various document sizes, but need adapters with a separate light source in order to scan slides, x-rays and other transparent documents.

Sheetfed scanners. Sheetfed scanners look more like fax machines than copiers in that they move the document that needs to be scanned past the scanning head, just as a fax machine does. They tend to be less exact than their flatbed counterparts, due to distortions that accompany scanning a moving sheet of paper.

Slide/film scanners. Scanning slides requires a scanner that passes light through the image, rather than reflecting light off it. As slides are very small in size, they also need to be scanned on units with a very high resolution, which is why several manufacturers developed specialised slide/film scanners. They are suitable for the high-end graphics market and are thus more expensive than flatbeds and sheetfeds.


Parallel. Low-end scanners generally operate through parallel connections with a pass-through printer connector, allowing for lower cost of installation, but impeding the speed when operating at high resolutions.

SCSI. Scanners with higher optical resolution and colour depth will generally ship with SCSI connector and controller card, allowing faster data transmission and greater bandwidth, necessary for higher-end graphic and document management scanners.

USB. Newer and cheaper than parallel connection, USB is an easy-to-install, plug-a and-play solution that offers greater reliability, bandwidth and configuration flexibility than a parallel connection, but is not in the same league with SCSI. Most scanners now ship with a USB connector.

Scanning technology

Charge coupled devices (CCD) reduce the original image with mirrors and lenses, focusing it onto a photosensitive chip, subsequently converting the scan into a digital image. They require high-quality optics and are thus prone to damage.

Contact image sensor (CIS) technology relies on a row of lights passes over the original document, scanning it in the process, instead of having to "reflect" the image onto a photo-sensitive chip as CCDs do. They produce less detailed images, but are expected to improve, making scanners smaller and tougher.


Contex FSS 4300dsp Full Scale Scanner

The Contex FSS 4300dsp Full Scale Scanner is designed for high-volume, high-speed scanning and is controlled by CADI-mage/SCAN software, which avoids the need to move between the scanner and a workstation.

The FSS 43000dsp includes a digital signal processor (DSP) that allows it to perform image processing in real time.

Scanning documents up to 914mm, it comes with a SCSI I/F cable terminator, CADImage/ SCAN software and an optional floor stand.

HP ScanJet 52000C business series

The HP ScanJet 52000C package focuses on Internet applications.

Software included in the kit allows scanned objects to be linked to e-mail and Web applications, including being scanned directly to Web page authoring tools, in multiple languages.

The package includes a range of business management and design software such as HP PrecisionScan 2.0 and Caere PageKeeper.

The ScanJet itself is a flatbed scanner that has a resolution of 600 x 1200dpi and can operate with documents up to 216mm x 297mm on Microsoft Windows and NT platforms.

Options include a USB connection and a 35mm slide adapter.

Polaroid Sprintscan 4000

The Sprintscan 4000 is a high-end designer market scanner for large format documents, film cropping, image archiving, publication and image manipulation.

The scanner comes with a SCAI card, a data cable, a four slide and a negative holder. Claiming to be the highest slide scanner on the market, it has the ability to create resolution of 4000 x 4000dpi and can auto and batch scan up to six continuous negative strips at a time.

It takes less than a minute to scan 35mm film at 4000dpi and has an auto-focus feature and APS options available.

Canon CanoScan FB320P

This SOHO market single-pass A4 flatbed scanner (that falls in the under $200 category) uses the new LIDE (Led InDirect Exposure) and CIS (Contact Image Sensor) technologies.

Easy to install, the 300 x 300dpi optical resolution scanner comes packaged with a range of entry-level photo imaging software and parallel cable and is compatible with Windows 95/98 and NT 4.0Epson GT-7000 USBThis A4 flatbed scanner has USB connectivity options and operates on Macintosh 7.5 or later, iMac, G3 and Microsoft Windows.

Aimed at the SOHO market, the GT-7000 has resolution of 600 x 1200dpi, with monochrome scanning speed of 2.7msec/line and a colour speed of 8.1msec/line. Options for the scanner include a film adapter, which allows negatives and slides to be scanned, and an automatic document feeder.

Southern Graphtec Systems

Tel (02) 9748 4888


Tel 131 347


Tel (02) 9950 7000


Tel (02) 9805 2000


Tel (02) 9903 9000

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