The maturity of the printer market in Australia is bringing both advantages and disadvantages to distributors and resellers. First the bad news. The sale of printers through the channel, according to research company Inform, has been slow, growing at a dismal rate of 1 per cent in 2000 over 1999 unit sales. Besides the maturing market, the millennium, GST and the Olympics distraction are factors for the slowdown, said Chris Herbert, research manager at Inform.
Here is the good news. According to Lorraine Cowan, category manager for Printers, Supplies and Imaging at distribution giant Tech Pacific, resellers can take advantage of the mature market and existing large install base to push the sale of higher-end printers.
"The existing huge install base of printers is probably the reason for the slowdown. However, this has also highlighted an area of growth for resellers," Cowan said. Resellers with a sizeable install base of printers can help these customers upgrade to higher-end printers. They can also target their inkjet install base for upgrading to faster inkjets and laser printers."
She also pointed out that resellers should not neglect the sale of printer consumables and media, as these are additional opportunities for raking in revenue. "The emergence of the printer supplies market is another large area of opportunity for resellers. This is a very very large market due to the huge install base. All printers need consumables to function."
Quality and speed
A large install base also means customers have become familiar with using a printer and many are looking for better quality prints and speed in their printers, said Cowan. "Many customers would have bought a PC with a low-cost inkjet bundled in, and are therefore familiar with using printers. Many are now looking for more quality and speed."
Of more concern to resellers than the market slowdown is the fall in printer prices. Inform estimates the retail prices of inkjet printers have fallen 27 per cent and laser printers 21 per cent in the last 12 months. For resellers, this means shrinking profit margins.
"Prices continue to decrease, putting ever increasing pressure on margins, particularly in the comparatively cheaper inkjet sector where volume is the key to success," said Herbert. "At the end of the day it is going to become increasingly difficult for smaller resellers to combat market slowdown and eroding margins simply because demand will not maintain the volumes required.
"I think more and more resellers are realising this and this is shown by the increase in inkjet sales going through mass-merchant retailers (65.3 per cent in 2000 as compared to 54.3 per cent in 1999) at the expense of all other channels. Sales through all other channels have fallen as a percentage of the inkjet market, even direct marketers."
Sydney-headquartered distributor ASI Solutions commented that they have an average profit margin of 1 to 5 per cent when it comes to selling printers. "Take the BJC1000SP for example; we buy that from Canon at a $109 mark and are left with a 3 per cent margin. By the time the printer gets to the reseller, they will have an even smaller margin," said Ruth Chalmers, channel sales manager at ASI Solutions.
Canon announced in early November that it is dropping the retail price tag, not wholesale price, on its entry-level BJC1000SP, the aforementioned model, to $119 for Christmas.
Almost every major printer vendor has also launched sub-$200 inkjet printers in 2000. "In the inkjet area, most major vendors have brought out products priced at under $200. This time last year, there were only one or two players in this segment, so the sub-$200 market has grown quite substantially in the last year," said Michael Pleasants, director of marketing at Epson.
Pleasants also advised resellers to counter eroding prices by "stocking, displaying and selling" printer consumables and media. "Resellers should encourage their customers to experiment and try out different media and consumables. This has been an area they have neglected. There is additional margins to be gained from the sale of consumables and media, these will boost their profit lines," said Pleasants.
Cowan is optimistic the laser printer market will improve next year as a result of lower prices. "We expect sales of colour lasers to improve as price falls and technologies improve. Monochrome laser printers should do well in terms of volume sales as price points fall and people print more from the Web."
"Technology advancement such as faster networkable inkjets or cheaper colour lasers can prolong the maturity stage of the life cycle, so until this happens, any measures taken by resellers can only be seen as stop-gaps," Inform's Herbert said.
"For the short term, resellers could and should stock printer consumables, specialise in higher-end printers [like colour printers], use printers to add value to a complete system or solution or refocus on emerging technologies such as multi-function devices."
Cowan also pointed out that resellers should keep an eye on trends in the market, such as the growing use of digital cameras. "[For example], they need to also watch the growth of the digital camera market. There is a strong emerging market which sees the convergence of photo-taking and printing, and therefore the need for photo-printing technologies."
Stephen Waugh, general manager, Consumer Products Division, Lexmark South Asia, said that resellers who "educate themselves about the features of the different printers offered by vendors" have much to gain because customers are now more educated.
"When customers specify what they want, resellers should be able to put the right printers into their hands. For example, if customers want a printer for home use, they do not need an inkjet that has to use special, more costly paper, they want a low-end inkjet that uses ordinary paper," said Waugh.
The emergence of a new market, where large enterprises such as multinational corporations and banks offer bundled home PC and printer packages to employees at discounted prices, is another area of opportunity for resellers.
"We have signed a deal with Ford Worldwide to offer their employees a bundled HP Pavilion PC and our deskjet," said Joergen Jakobsen, vice president and general manager, Imaging and Printing Systems and Operations for Asia Pacific at Hewlett-Packard (HP).
"Our channel partners are doing the fulfilment side of those deals. They have established supply chain efficiencies which we can tap on to gain efficiencies."
While some channel companies and Inform have reported a slowdown in the printer market, with Inform reporting unit shipment growth of only 1 per cent, vendors and IDC have reported the reverse.
Jakobsen said that HP Asia Pacific has experienced its highest printer sales growth this year in the last three years.
According to IDC, the market saw a 27 per cent increase in unit shipment and 15 per cent increase in revenue in the first half of 2000 over the first half of 1999. Inkjet sale grew 28 per cent in unit shipment while laser printers grew 25 per cent.
Inform's Herbert explained that such contrasting reports from the two IT research companies are due to the fact that Inform gets sales data only from channel companies, while IDC goes to vendors for their figures. "IDC's printer figures are what vendors ship to the channels, while Inform's figures are what the channels have sold."
Changing customer requirements
Although the channel's printer growth figure may suggest that they may be experiencing difficulty in clearing stock from vendors, Herbert said that there is a more important factor. "There is a time lag between what vendors have shipped and what the channels have sold. For example, what vendors have shipped to the channel in the third quarter will not be sold by the channel until Christmas or end of the fourth quarter."
According to some vendors and distributors ARN spoke to, customers' requirements today have changed markedly.
"According to a worldwide survey Lexmark did 18 months ago, customers' criteria include higher-quality prints, faster speeds and greater ease of use. Ease of use includes being able to simply take the printer out of the box and have a happy experience setting it up, with an easy-to-load toner," said Waugh.
"A few years ago, most organisations would be using a simple black and white printer. Today many organisations are investing in multi-function printers and colour printers. Customers consider printer speed to be a critical factor and they are still motivated to purchase printers based on the print quality produced," said Prasad Mamidanna, acting managing director of Ingram Micro Australia.
"As a distributor, Ingram Micro Australia is witnessing the pendulum swing from sales of simple stand-alone printers to selling multi-function and network-ready print solutions," he said. "In 2001, Ingram Micro Australia will continue to have customers requesting advanced print solutions with a focus on new interfaces, printer speed and quality. Departmental multi-function printers will also increase in demand."
"The government and corporate markets want brand names, and they tend to ask for HP lasers. Lexmark printers are also doing well in certain sectors of the government market," said Maree Lowe, managing director of ASI Solutions. "Sale of portables are also growing as they are popular with the mobile workforce and people working from their homes."
HP's Jakobsen gave a snapshot of the future of printers. With the growth of Web-enabled appliances, the uses of printers will increase. "The printer used to be the slave of the PC, but they can now communicate with Web-enabled devices, which may not be PCs, these may be mobile phones and PDAs. This is another area of opportunity for resellers.
"Linked to a Web-enabled device, users can buy stamps over the Web and receive or print them from their printers. We are working with stamps.com to enable this. Printers now can also print tickets. Newspapers can also be delivered over the Internet and printed locally.
HP has recently launched its JetDirect 4000 print appliance, the first in a family of network appliances, and the wireless HP Jornada 540 Series Color Pocket PC, which can beam colour images to colour printers. It has also recently teamed up with Nokia to develop a mobile phone capable of wirelessly sending Web pages to a printer using solutions based on industry standards such as IR, vCard or Bluetooth.