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Think ink

Inkjet printers, for a start, are cheap as chips. They begin at just over the $100 mark, and the various models of inkjets under $399 make up about 80 per cent of the market. According to channel research company Inform, the average price of an inkjet printer has fallen from $302.99 to $228.76 in the 12 months prior to March 2001. In that same period, laser printer prices remained static at just over the $1500 mark.

Meanwhile, the print quality of inkjet printers keeps improving, as does the speed.

"Inkjets are getting stronger," said Stephen Waugh, general manager of the consumer printer division at Lexmark South Asia. "They make up the majority of printers in terms of unit sales. This is because there is such a low acquisition price, and you can choose colour if you wish by buying a cartridge, whereas printing colour in a laser printer might cost you three or four grand."

"Inkjets are still growing, despite the lull in printer sales since late last year," said Michael Byrne, marketing manager of the Indirect Channels Group at Fuji Xerox Australia. Byrne believes that in the long run, laser printers are likely to fall to more reasonable prices and become more attractive on the mass market. At the same time, however, there seems to be no end to the improvements in the quality of inkjet printers. "The way the technology is changing, inkjets and lasers are getting closer together all the time," he said.

Inkjet sales doubled that of their laser equals early last year, commanding over 65 per cent of the printer market. In the last 12 months, inkjet printers picked up a further 8 per cent market share, while the share for laser printers fell by a similar margin. Does this mean businesses are turning away from laser printers and preferring inkjets? According to Inform research director Chris Herbert, no.

"Despite outside opinions alleging the inkjet market will continue to grow, this only appears to be currently accurate in the consumer market as businesses continue to turn to laser technology," he said.

Vendors would suggest the business market is not the only place where money can be made. While improvements in laser technology and the continuing decrease in laser printer prices may create problems for selling the higher-end inkjets, most agree the dominance of inkjet sales is far from over. According to Lexmark's Waugh, it is because the home office is far from being a saturated market for printer sales.

"Home users are going to continue to be a growth market," he said. "With the penetration of the Internet in the home, the introduction of digital cameras and eventually appliances like set-top boxes coming into the home, there is likely to be a lot of drivers in the future."

Making the most of the sale

It is common knowledge among the printer reseller community that the real money lies not in the hardware sale, but the continual sale of consumables such as ink cartridges and paper. "The money is in consumables," admits Fuji Xerox's Byrnes. "You're never going to make a hell of a lot of money on the box."

But this does not necessarily mean that selling the cheapest printer in the hope of gaining more margin from consumable sales is the answer to achieving success in this market. A disgruntled customer, who buys a $150 printer and ends up having to spend the same amount every fortnight on consumables, is just as likely to purchase those consumables elsewhere.

The key to making the most of the inkjet printer sale, according to South Australia's Hi-Tech Distribution sales manager John Winter, is to match a printer to the user's needs and follow through with some sort of scheme that keeps them coming back in the store for supplies.

"When someone first comes in, you have to ask them what their needs are," he said. "They might have to print photography, or extensive reports, or maybe only print one or two pages a day. But it's important to find them the right printer for their needs because the running costs are an important factor in satisfying them. Too often a reseller just wants a sale and will sell a $100 printer, but the cheaper they are the higher the cost of consumables. The ink cartridge may end up being more than the printer.

"No-one ever gets good margins in this game, but most of the money is being made at the consumable end," he continued. "You have to take a McDonalds approach to it and ask, ‘do you want ink with that?' or ‘do you want paper with that?'. It can raise your dollar turnover per sale and keeps the customer coming back. If you push the consumables at them during the sale and get them in a second time for more consumables, you have established a pattern of purchasing. You need to work out a scheme to get them back for more consumables because they can always go to the closest place that sells consumables, and they aren't necessarily computer resellers."

The vendors agree. "It's a horses for courses issue," said Fuji Xerox's Byrne. "I would generally recommend lasers for those users needing a high-volume printer, and inkjets for higher quality, but smaller output jobs. Inkjets can be superior in output, but you will have to pay for that. A $120 or $150 printer can cost a bomb later."

Lexmark's Stephen Waugh recommends starting with the printer sale and looking to offer cartridges or paper in the same sale, or as a bundle. But the opportunity doesn't stop there, as any imaging equipment that can be sold in addition is worth pursuing - particularly higher margin products like digital cameras and scanners.

OKI marketing director Jeremy De Silva believes customising or bundling software with the printer sale is also a strategy resellers should consider. "It's important to find your own value-add," he said. "Bundling software applications and having a good range of after-market products, like different types of consumables, is where the greater proportion of profits can be made for the reseller."

A helping hand?

Another potential value-add for the channel is maintenance and support. But it is debatable whether these services provide a consistent source of additional revenue or just a headache for the reseller. In a lot of ways it comes down to choice. A reseller whose focus is on selling as much volume as possible in as shorter time as possible may consider the maintenance and support of printer sales a waste of resources. But a reseller with technical skills would prefer to keep those additional revenues. In many ways, these choices are made when choosing vendor partners or distributors, as the vendors and distributors have their own ideas on who should be responsible for supporting the product.

Lexmark recently introduced a support program called LexExpress, a 12-hour-a-day helpdesk for assisting users with problematic installations and other printer issues over the phone. If the problem can't be resolved over the phone, the vendor sends a replacement model directly to the user. "Resellers and dealers don't have to provide support, it cuts into their time for making sales," said Waugh. "We take away the burden of support and make it easier for them to sell, because customers like getting support directly from the manufacturer."

Hi Tech Distribution also provides repair and support services for its resellers, and will even take on jobs from printers it does not distribute. Winter said it was a way of supporting the brand names Hi Tech distributes, which in turn helps to sell those brands in the region.

Lexmark's Waugh believes most resellers are retailers who aren't interested in providing support. "I think resellers used to enjoy providing support, but because of squeezing margins, any hour you aren't selling is eating into your profits."

Fuji Xerox's Byrne sees other opportunities for vendors to differentiate themselves. He talks of "adding value to the box" by not necessarily offering cheap printers with expensive consumables, but providing extensive warranty services and other unique selling points. "We are bringing to market printers that can reduce the cost of ownership for the user, but still provide some opportunity for the reseller after the sale."

And the vendors need to add value at their end to win market share in a highly competitive industry. In vendorland, the last 12 months have proved particularly turbulent. Of the four main players in the inkjet market, Inform research suggests Canon stole a small amount of market share from rival Hewlett-Packard. At the same time, competitor Epson's market share dropped by around 12 per cent, gobbled up by Lexmark, which bounded from only 7.4 per cent of the market to a healthy 19 per cent over 12 months.

The vendors all operate in a similar fashion with regards to how much product they push through the channel and how much they sell direct. Generally it is the consumer and small-business machines that are sold indirect, while the large corporate machines are sold direct. In terms of units, the channel takes well over 50 per cent of the business. But in terms of revenue, the majority of dollars are earned through high-margin direct sales.

Winter suggests vendors that put the marketing dollars where their mouths are will always win the hearts of the channel, and the end user as a result. He said his vendor partners provide important tools for the reseller, such as throwing informative product shows and sending print samples to their distributors. "They know how to go to some expense to help out the resellers," he said.

Vendor partners also provide opportunities for the distributor to add value. "I tend to go out and buy a bunch of picture frames when a vendor sends us some print samples, and frame all the samples to distribute among my resellers," he said. "You can mount them there on the shop wall and you would swear they were photographs. It's a great way to get the customer to see what the printer can do."

How long will ink be king?

If laser printer prices do come down as promised, and if consumers get sick and tired of buying consumables, will we see the demise of the inkjet market in the near future? Inform research suggests inkjets are gradually been squeezed out of the corporate market as the price of colour lasers continues to fall.

But according to Winter, the small-business and home-office user, who commands a large portion of the market, will still prefer inkjets that excel in terms of price, and is seeing the quality of inkjets exceeding expectations on every new release.

"I have often wondered how long it would take for laser printers to catch the quality of the inkjets," he said. "When you get a top-quality colour inkjet, laser printers don't even come close. Inkjets have that gloss appearance on the paper that really catches the eye."

OKI's De Silva has seen an interesting trend arise in both small businesses and homes, which was previously only restricted to corporations. "Inkjets are still the most common printer in this market, but I've often seen lasers going in as a second printer," he said. "Users can do the bulk of their printing at low cost on the laser and the high-quality jobs on the inkjet."

Whether it's inkjets, lasers or the new range of multifunctional devices hitting the shelves of small businesses, the printer market is far from dead. Winter has seen several resellers ditch PC sales and focus their entire business on printers and consumables, suggesting a reasonable amount of confidence in the market's potential. "You tend to find you can sell some of this stuff even when PCs aren't selling," he said.


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