The rise of the inkjet multifunction printer (MFP) market has been meteoric with retailers recording record sales of the devices over the last eight months and printer vendors hurriedly re-arranging their product lines to take full advantage of the boom.
According to market analyst Gartner, MFPs accounted for about 25 per cent of combined inkjet/MFP market unit shipments in Australia in Q1, 2003.
Business group director at consumer market research company GfK Marketing Services, Ludovic Milet, said MFP unit shipments from May 2002 to April 2003 had increased 65-70 per cent over the same period the previous year.
In value terms the market only increased 30-33 per cent due to unit price cuts.
Milet reported that scanners had been steadily losing market share on the back of increased MFP sales, with unit shipments dropping 10-15 per cent over the last 12 months.
“This is mainly due to the price of MFPs coming down to the price of average scanner prices.”
MFPs have also been eating into the inkjet printer market, although this has been offset by the increasing demand for specialised photo printers from digital camera users.Higher-end photo or laser printers still occupy a market because general-purpose MFPs don’t produce the high-quality prints and razor-sharp documents that users have come to expect for their photos.
General manager of peripherals distributor Galas, Peter Xie, said: “We have not reduced the number of single-technology devices such as inkjets to make room for more MFPs. We have seen only slight changes in growth of the higher priced, better-featured printers. With some of the new pricing, new markets are being created rather than cannibalised.”
Galas’ MFP business has grown more than 60 per cent in the past six months compared to the same period last year, Xie said. Printer/scanner/copier MFPs like Lexmark’s x75 were proving the most popular.
Marketing development manager of HP’s imaging and printing group, Guyon Collins, said HP’s PSC (Printer Scanner Copier) range was its best seller. These products address the large home market, and have low ASPs (average selling prices), thus high unit volume.
There is increasing demand for inkjet MFPs in the SME sector as businesses become increasingly aware of the faster speeds, lower upfront costs and the competitive advantage of in-house printing that inkjet MFDs offer. However, the huge surge in demand for the devices is coming from the SOHO (small office home office) and home user market, with 85 per cent of all MFP sales made through the retail channel.
“We are seeing some evidence of increased demand in the small-to-medium business segment of the market, where we are hoping to grow demand over the coming six months,” Marketing manager of Lexmark’s consumer printing division for Australia and New Zealand, Scott Millington, said. “But primarily the consumer market is driving growth — which is reflected in the sales we are experiencing in this market segment.”
Four of the five top-selling MFD models in April were aimed at the home and SOHO markets, according to IT channel research group Inform. The top four MFDs were all priced under $500.
The explosive growth of the colour inkjet MFP market was triggered by Lexmark slashing the price of its X73 product in June last year to $299 and promoting it heavily through a range of outlets. It was not long after Lexmark’s product launch that other vendors such as HP released their own sub-$300 models. The decision gave Lexmark a good lead, albeit short, over HP which owns the lion’s share of the inkjet MFD market.
Demand has been such that even PC maker Dell dove into the low-end multifunction pool earlier this year and released the All-in-One A940.
“We aggressively priced our products to compete with single-function printers,” Millington said. “This has paid off for Lexmark and is reflected in our strong sales growth in the MFP market. Lexmark’s strategy has increased end-user demand for these products by pushing MFPs into the consumer market.”
Price is the key driver behind the increased demand for inkjet MFPs in the retail sector.
According to Xie, the new sweetspot for inkjet-based MFPs is $169-$299.
“A larger range of offerings from all the vendors has also livened up the marketplace,” he said. “Last, but not least, is the increased simplicity of the products. The technology has evolved so now the devices are smaller, simpler to use and much better value than buying separate products.”
What has held this segment of the market back from purchasing an MFD is the perception that the peripheral functions of the unit are less superior than the functionality from a dedicated device: that an MFD is less than a sum of its parts.
The latest generation inkjet MFPs feature greater scan, print and copy resolutions at much faster speeds than their earlier counterparts. Improved print resolutions have also made MFPs a more appealing option for digital camera users.
“In the past, the move to multifunction meant a customer would need to make a trade off in quality — specifically speed and print quality,” HP’s Collins said. “Entry-level multifunction devices, such as HP’s PSC1210, offer the highest print resolution available, 4800x1200dpi, and selected HP All-In-Ones now include Direct Digital card slots for the photo enthusiast, and other smart features.”
Integration issues that once plagued the technology have also been largely resolved and the devices’ software is simpler than previous versions.
“The integrated software now used on the devices has seen dramatic improvements, with ease of use a key factor in this development,” Millington said. “Software is now an integral part of ensuring you get the most out of your MFP in the easiest way possible. Software can also be a key decision-making element for consumers wanting the best value for money.”
Printer vendors have been realigning their business strategies and product lines to make room for their rapidly expanding MFP businesses.
HP has been focusing on the enterprise MFP market and released three new high-end MFP products in the past year as well as a new desktop category.
Lexmark has reduced its standalone inkjet printer range from six to four and has announced the release of two new inkjet MFP products over the course of the year. The vendor will discount its popular X75 product and replace it with the X1150 model that will be released in Australia this month.
The X1150 will carry a similar retail price to its predecessor (about $199) but offers more advanced features such as faster print/scan/copy speeds and higher print resolution (4800dpi) making them more suitable for printing digital photos.
Millington said that eventually memory card slots for digital photo printing would also become a common feature in low-end inkjet MFDs making them an even greater value proposition to photo enthusiasts.
Lexmark will also launch its first inkjet printer/scanner/fax/standalone copier in July. The unit is aimed at the SOHO market and will carry a retail price of around $499.
The plethora of MFPs, general purpose inkjets and photo inkjets cluttering the current marketplace may confound the customer, but it does provide resellers the opportunity to offer a product that is more specifically tailored to the customers needs.
MFDs have not only become an easier sale because of their increased value proposition, they provide significantly greater revenue opportunities to resellers. So it’s not just the printer vendors that are replacing some of their general purpose inkjets with MFP products.
While MFPs offer 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 the devices use 67 per cent more consumables than single-function printers — thus driving future profit stream.
“Margin and consumables revenue on MFPs are much better than on printers, especially for the resellers who can demonstrate the extra value to the consumers,” Xie said. “We offer consumables deals for MFP customers — with our vendor’s support we run paper sample packs and bonus printer cables from time to time.”
Despite the pervasive marketing of MFP products by vendors, the technology is still relatively new to consumers and subsequently resellers need to spend some time with their customers working through any concerns they have about adopting the technology.
“The reseller has to be ready to do a little bit of extra work, in showing the different options available to the customer, after comparing the single technology solution and MFP, it’s quite easy for the consumer to make up their mind,” Xie said.
Clearly articulating the benefits of the device over single-purpose units and providing a product demonstration to emphasise the ease-of-use advantages from the integrated software solutions are important steps to securing a MFP sale.
“The key to making an MFP sale is to focus on features like its space-saving design – and if you look at the notebook and LCD monitor market, you can see that attractive and space-saving IT equipment is hot at the moment,” Millington said.
“Emphasis should also be keyed towards the time and cost-saving options of purchasing one MFP device in opposition to purchasing multiple devices with multiple software applications which takes time and effort to connect, install and use.”
According to Xie, the majority of MFP vendors provide good support to their resellers. “However, we do find that products with on-site warranties sell much easier for resellers, and a good vendor support centre also helps cut down on unnecessary returns.
“If we could run more product training nights, demo deals on new products and a more streamlined POS material provision to the resellers in conjunction with the vendors, there would definitely be more sales on the front line,” Xie said.
Lexmark has announced it will be conducting a series of product launches and training roadshows over the next couple of months, travelling nationally to all major capital cities.