A massive decline in shipments back in the first quarter gave members of the Middle East printer channel a firm indication of the uphill task facing them this year. Now, with the market glancing anxiously towards the final four months of the year for salvation, it is clear that the rules of engagement have changed dramatically.
It is not an exaggeration to say that the Middle East printer market took something of a turn for the worse earlier this year, caving into the economic conditions that have devastated large parts of the global IT hardware sector.
While free-spending customers showed an appetite to purchase the latest printers before the downturn, new imaging equipment has been one of the first categories to fall down the pecking order by end-users under pressure to cut infrastructure expenditure.
Data from research house IDC reveals that shipments of printers, MFPs and single-function copiers plummeted a staggering 600,000 units in the Middle East during the first quarter, valuing the size of the overall market at just 1.7 million units.
Second quarter figures had not been published as we went to press, but although they are expected to show an improvement in fortunes it remains patently clear that the printer channel is locked in a fierce battle that is destined to rage for some time yet.
True to form, vendors remain somewhat reluctant to concede that the market has been through the wringer - preferring instead to express their optimism for certain sub-sectors that appear more resilient to the downturn.
Printer vendor Epson, which remains one of the more established players in the Middle East, acknowledges that the printing sector has taken a beating this year, but insists some sectors have been worse hit than others.
"The downturn has certainly affected the consumer market, particularly for products of general use," said Khalil El-Dalu, general manager at Epson Middle East. "Sales have dropped by 15% to 30% depending on the economic situation of the particular market. However, the SMB and enterprise markets remain in good condition with just a slight drop of 5%. The decline in shipments varies from one product category to another. Products targeting the SMB and enterprise markets are relatively stable, consumer products, on the other hand, have been more affected."
El-Dalu says this distinction in end-user purchasing behaviour has led the company to "double" its sales efforts and focus on the commercial market where it sees greater stability. "We have also partnered with some of the leading resellers in the region as part of a strategy to expand our market presence and secure more deals," he said.
Like Epson, printer vendor Samsung is pinning its hopes on success in the Middle East corporate sector. Its global printing business was worth US$550m last year and the company is banking on the recent launch of document workflow and print management solutions to move it further up the corporate ladder.
"With research showing that companies can save as much as 40% of their costs by getting their printing environment under control, organisations can now realise these savings with Samsung's wide range of print solutions - allowing them to reduce costs through efficient processes and print solutions," stated Mehdi Heidari, business head of printers at Samsung Electronics' digital printing division in the Gulf.
According to IDC, sales of hardcopy peripherals totalled US$493m during the first quarter, a figure that was down on the previous year as a result of a slump in single-function machines especially.
However, if there is one positive aspect to emerge from the predicament facing the market it is that every printer supplier is now forced to demonstrate exactly how they can deliver value to the customer.
"While the markets may be tough to operate in, the ability to provide a superior offering that is differentiated from others now exists," admitted Dan Smith, general manager for integrated marketing MEA at Xerox. "Price is not the only discriminating factor - value is more than just cost."
That's not to say vendors aren't addressing the price-sensitive nature of the regional market - they are - but many are now paying greater attention to the value that is attached to the hardware sale. Services such as fleet management, device usage monitoring, consumables replenishment and helpdesk support are gaining in significance as vendors in the region fight for business.
"We certainly see the move to consulting and managed services provisions in the hardcopy peripherals market as a positive development," remarked Naser Sha'sha'a, programme manager for imaging and hardcopy devices at IDC's MEA office.
"IDC has been advising vendors and their partners to present such an approach as a major cost-saver for their customers rather than an added expense," he added. "The aim should be to optimise the number of devices and brands in the customer site to meet the organisation's various print and copy requirements, while also reducing the total cost of ownership."
What about at channel level though? How should resellers be addressing the market now that new business is harder to find?
"Resellers have been very active in box-selling and trading to other markets, but the time is now ripe for them to ‘segment' their business and decide which part of the market they wish to cater for and specialise in the same," advised Hendrik Verbrugghe, CCI marketing manager at Canon Middle East.
It is also vital for the channel to bear in mind that even if customers are desperate to purchase new equipment, they will now scrutinise every dollar they spend. Resellers must therefore articulate the benefits of the technology they are selling more lucidly than they might have done in the past."What's important to note is that customers have become more discerning, calculating the total cost of ownership in terms of printer set-up costs, running costs in terms of ink and toner consumption and productivity in terms of speed and energy consumption," said Canon's Verbrugghe.
His colleague Vishal Gohel, LFP product manager at Canon Middle East, reiterates that message, insisting that partners must elaborate on the cost-saving factors of the technology they provide. "Resellers need to capitalise on the solutions available and focus on their existing customers' needs as well as looking for new opportunities," he said. "This financial downturn is a perfect opportunity for resellers to visit their customers and re-evaluate their printing technologies with the view that cost savings up to 40% can be achieved by looking at how they can make changes within their existing environment."
Irrespective of the trends that shape the immediate direction of the printer channel, it seems almost certain that the days of volume and price dictating the market are over. This is reflected in the channel recruitment policies of the tier-one brands, which continue to show an inclination towards working with partners that offer a wide range of support services and consulting expertise.
"It's true that the emphasis on solutions and services has increased mainly due to customers now seeking a greater value from their purchases under the pressure of constrained or reduced IT budgets," agreed Bruce Dahlgren, worldwide VP of enterprise sales at printer giant HP.
"Printing alone does not bring competitive advantage for a company, but the value content of the pages produced does," continued Dahlgren. "So customers are looking for ways to integrate imaging and printing products in their business workflows through solutions. HP and its partners have a wide portfolio of solutions including cost control, security and access control, electronic forms, barcode or cheque printing, and document processing, as well as the services to easily integrate the offerings into the customer environment."
Xerox is equally adamant that the channel needs to get serious about solution selling. Smith insists the economic crisis is prompting firms to seek solutions that increase output and decrease costs.
"This is a growing reality in today's business community to ensure a competitive edge as margins get tighter by the day," he commented. "Resellers need to maintain a strong relationship with their customers, while keeping a watchful eye on both industry and consumer trends. This approach will ensure that there is a healthy business which can generate cash. Looking at recurring or annuity revenue streams will also establish a solid base of operations."
Not surprisingly, most of the top suppliers are putting greater emphasis on multifunctional products (MFPs), which offer improved space utilisation, ease of use, increased efficiencies and added functionality. Declining price points have further fuelled the appeal of MFPs, making it the major battleground for printing suppliers.
"Demand for MFPs is increasing year-on-year and it is taking away market share from single function inkjet printers as MFPs offer more functionally, rich features and competitive prices," said El-Dalu at Epson, adding that the decline in the inkjet market has been particularly pronounced among entry-level products.
Canon's Gohel observes the same trend, but he refuses to sound the death knell for single-function devices. He points to the fact that an MFP may be too expensive or large for a small business, rendering single-function printers as a more appropriate option.
"We are shifting focus over to MFPs due to the advanced capabilities of the products, but demand for single-function devices is still there and we will support and develop these products to ensure that they are at the forefront in terms of specifications," he said.
Dahlgren at HP suggests that the broader migration to MFPs is also being driven by a focus on document life-cycle management as customers look to get the most from their printing infrastructure.
"There is a growing awareness of the management costs associated with a document's life-cycle," he said. "From research conducted on behalf of HP, we found that for every US$1 spent on printing - hardware, supplies and service - another US$9 is spent on managing and maintaining the document throughout its lifetime. This is the major factor driving consolidation projects and the shift to MFPs with our customers."
Printer-focused resellers are undoubtedly going to have to work a lot harder for their money in the coming months and engage in the kind of solutions-based conversations with customers that they would never have envisaged just two or three years ago. If they don't then they could find that the economic downturn leaves a deeper mark on their business than they imagined.
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