MFD market matures

MFD market matures

Things have come a long way since Johannes Gutenberg invented the printing press with replaceable wooden or metal letters in 1436. Indeed, the history of printing has taken many forms.

In the late 1970s, the market saw equal excitement and intrigue as a new printing method was accidentally discovered — or so the story goes.

Canon claims to have invented bubble jet technology, after a scientist accidentally touched a hot smoldering iron with an ink-filled syringe. The result? Heat oozed out a drop of ink from the needle — and the rest is history.

Today, equal excitement surrounds the latest incarnation — the multifunction device (MFD) or multifunction printer (MFP) which offers users a mix of functionality that can include print, fax, copy, scan and email capabilities.

“With all great inventions there always seems to have been an accident,” Canon Australia’s marketing manager, consumer imaging products group, Stuart Poignand, said.

But there’s no accident in terms of surging MFD sales, he said. The technology was the latest to capture both consumer and business attention.

“It was an enormous year for MFDs,” Poignand said. “The print, copy, scan market grew by 400 per cent globally.”

Analysts say burgeoning MFD sales are dispelling the paperless office myth, highlighting the fact that companies are printing more than ever before, and are on the lookout for cost-effective and efficient printing solutions.

IDC said 40,000 MFD units were sold in Australia in 2003 (representing $12 million in sales), compared to 11,600 units ($6 million in sales) in 2002.

Why all the fuss? MFDs offers huge price savings (getting rid of the need for multiple purchases of clunky standalone gear), user-friendliness (good form and function) and space savings benefits — HP claims to have developed the smallest item on the market, and even worries it will get lost on the shelf, according to Guyon Collins, market development manager, personal printing for HP Australia’s image and printing group.

Indeed, with today’s increasing acceptance of new printer technologies, inkjet MFDs were the darlings of the printer world, market analyst for GfK Australia, Stuart James, said.

Inkjet MFDs grew by 88 per cent in 2003, while laser-based MFDs bulked up by 34 per cent. MFD sales grew by about 176 per cent in 2003 over the previous year, he said.

GfK pegs HP, Lexmark, Brother and Canon as the MFD market heavyweights.

James said the entry-level inkjet market had come under attack from the rise of MFDs.

“The days of $80 standalone inkjets are numbered,” he said.

The high-end inkjet market (the $500-$700 range) was still appealing to users who wanted to produce high-quality photographs and for overall business use, James said.

The MFD uptick was phenomenal, he said.

“Average monthly channel volumes for the MFD have now reached half that of the inkjet market for a 13 per cent greater return in value,” James said

“Clearly with such a clear advantage in shipping less units for a greater value return, we should expect the emerging vendors in this market — Canon, Brother, Epson — to rapidly increase their exposure to resellers so they many capitalise on both the increased profit margins from MFD sales and the associated cost saving from shipping fewer units. It’s an equation that makes good economic sense to both reseller and vendor alike.”

Typically, MFDs have been sold through mass merchants and independent retailers (into the consumer and SOHO space), but the market will see the dynamics change to include corporate dealers and traditional resellers selling into the SMB and large enterprise space.

Today, the majority of the printer market (60 per cent) is sold through the corporate/traditional dealer channel including VARs and service companies, according to GfK.

But corporate dealers and vendors needed to educate the business world about the benefits of device consolid­ation, a Gartner survey said.

The survey, titled Australia: Printer User Perceptions and Plans, 2003, said “Despite the increased popularity of all-in-ones/personal MFPs in the home market, business awareness of MFPs is unexpectedly low.

“Vendors must effectively educate organisations on the cost-effectiveness of consolidating the acquisition process of MFPs, printers and copiers under the same department to leverage economies of scale and drive down overall input cost.”

Industry speaks out

The MFD market had noticeably grown in the last 12 months and was approaching the size of the standalone inkjet market, marketing manager for Epson Australia, Mike Pleasants, said. It was carving out new scenarios for resellers and retailers who could cash in on increased paper and toner sales (selling different quality paper), along with consulting and printing services.

MFDs were the “golden-haired ones” of the printer world, according to Phil Gibbs, national sales manager for Melbourne-based distributor Alloys International.

Gibbs, who said the company’s MFD business took off in the last year (from peddling 28 units to 250), saw a growing opportunity for resellers hawking entry-level boxes.

He said MFD prices had been halved over the last few years, making the technology more attractive to consumers and businesses (you can get a complete scanner, copier, printer and fax for about $200).

Cost savings along with space efficiency were key drivers, Gibbs said.

A hearty injection of research and development has also helped curb the negative swirl surrounding MFDs, which have been criticised for being of inferior quality to their standalone cousins — and attacked as a jack-of-all-trades but master of none.

They have also been condemned as a consumable cash cow given that users end up paying more often for the toner/ink since the device has to pull off all four functions.

But thanks to a good dose of R&D cash, MFDs now offered improved engines, better connectivity, enhanced casing and buttons for ease of use and enhanced software integration, HP’s Guyon Collins said.

“The challenge now is to make them faster and better,” he said. “Reliability, speed and efficiency are key business requirements.”

Resellers get busy

So where are the opportunities? On both the consumer and corporate side, digital cameras will drive the sale of photo printers (and MFDs) as the convergence of entertainment (with an eye on the connected home) and computing kicks into high gear.

Consumers want good quality photo printing at the home, while businesses want the technology for doing presentations (instead of having to outsource proposals).

Indeed, the trend towards digital imaging meant VARs needed to get savvy in this space, Pleasants said.

“MFDs are moving to a specialised photo area — so VARs need to be aware of digital cameras, digital photography and understand how to support the technology,” he said.

Digital photography was driving demand for machines with added functionality, Collins said. As such, HP was rolling out MFDs with 8-card slots for digital cameras and LCD screens to improve the digital photo process.

On the corporate front (particularly with SMBs), businesses were looking to reduce printing costs and improve in-house output — another key area for resellers to target, GfK’s James said.

HP was stepping into the ring and offering managed printing services through a combination of hardware, consumables and services in a bid to help organisations deal with bulging printer costs, Collins said.

“The managed print services are tailored to the vast majority of products including MFDs,” he said.

Through channel partners, HP aims to become a trusted advisor and to help resellers in the area of print and imaging consulting — a hot market is the SMB space.

“We take the corporate resellers in with us and help them do audits,” Collins said.

HP is trawling for partners in Australia to enter the fray.

The idea was to help a company assess its current printing solutions and deliver a managed solution through document and imaging consulting, Collins said.

This year, in addition to opportunities around consulting, resellers could also expect to see more targeted MFPs — a key trend to hit Australian shores, he said.

These would include specific office-related targeted machines with a heavy focus on speed, connectivity, document management and better paper handling.

Resellers needed to dig for the opportunities, he said.

“Don’t get into this mentality of selling just the box,” Collins said. “Stay in contact with the customer and understand what they need.”

An emphasis on services was as important as cashing in on the consumable sales (peddling an array of paper and toner).

Lexmark, meanwhile, was pitching its distributed print strategy to VARs, according to general manager for enterprise, corporate and government, Graham Kittle.

“What’s happening in the marketplace is we’re putting functionality where it’s required,” he said. “It is no longer centralised. We now have a team of consultants who diagnose and understand where to put an MFP. And not everywhere requires one.”

MFD technology offered the corporate environment greater flexibility and functionality and integrated well into an IT environment, Kittle said.

Whereas the centralised model was pitched mainly by copier companies, the distributed print philosophy targets IT-based network environments and offers cost reductions and process improvement once the workflow has been diagnosed.

Ultimately, with the move towards device consolidation, resellers can help in the areas of information management, document workflow, supplies cost management, and help-desk management.

Ready for wireless

Wireless technologies such as Bluetooth and Wi-Fi were also taking up residence in some models, but don’t expect to see much of it on the radar screen in Australia, GfK’s James said.

“It’s not even registered on the Australian market,” he said.

Epson rolled out its wireless-ready version (the 935 in April 2003), but hasn’t tracked whether the device is faring well because of the wireless aspect or its other functionality.

“Sales are good, but are they good because the machine is damn good [thanks to its colour] or because of the wireless?” Pleasants said.

And while wireless is here (and is growing interest because of the benefits of mobility), the advent of 6-colour printing was the MFD area to watch in 2004, he said.

Epson has two 6-colour MFDs currently on the market.

“Built around 6-colour printing engines — you get true-to-life colour reproduction,” Pleasants said. “We see 6-colour MFDs as being key for 2004.”

Wireless printing was still on the growth curve of acceptability, he said, but the ball would start to roll in this area in the next 12 months.

The healthcare and education markets, in particular, were a good fit for the technology, Pleasants said.

“Vendors and resellers have to go out and find where the opportunities are — they need to show users what can be done,” he said.

Lexmark’s Kittle said there was market play in the federal and local government arena, where secure printing over wireless was a must.

HP was also heavily pitching wireless-enabled MFDs in the consumer space, Collins said.

The trend towards wireless was related to the surging demand for digital photography, he said.

Market winners and losers

The real loser, however, was the scanner market, GfK’s James said.

Vapid sales in November 2003 were the lowest on record since September 11.

He said this year the scanner market — which was down 37 per cent in 2003 over 2002 — would continue to take a hit because of the rise of MFDs, which were making waves because of attractive price points and beefed up functionality.

“With growth in the multifunction market so bullish, the comparable MFP offering — featuring a flatbed scanner — dilutes the premium paid for scanners, thus pushing the market into further decline,” he said.

But the decline was playing out in the low-end scanner market and not affecting the high-end sales, managing director of Dicom Australia, Seamus McGuinness, said.

Dicom recently inked a deal to distribute HP’s high-end scanners packaged with its vital scanning software, and saw enormous opportunity in the SMB and large enterprise arena for resellers.

Users interested in heavy-duty scanning wouldn’t seek out MFDs, he said.

James said the real market winner to watch — once it got around to showing up on a volume scale — was the printer-based colour laser MFD, pegged at the $3000 price point level. This would set the pricing benchmark.

“Colour shows the greatest growth potential,” he said.

The colour proposition for businesses is becoming more attractive. The increase in the standalone colour market points to the trend.

James said vendors would begin launching product into this neglected category at the end of 2004 and into 2005.

“We’re wondering what they’re doing, and I pitch this area — rolling out gear at $3000 — to them all of the time,” he said.

It would be the next killer app, James said.

“The colour-laser multifunction market will surely become viable over the next year or so,” he said. “But the top players in the market aren’t going to give anything away.”

Today, typically the gear exists in the $30,000 and more range, but James expects the real action to be played out at the low-end space by Konica, Minolta and Brother.

“These are the ones who are on attack and will go after it,” he said.

James expects market leader HP to jump into the arena late in the game.

“They are so successful in other areas, they don’t have to get into it right away,” he said.

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