There is no doubt that the Middle East consumables market is enjoying a boom in demand at present, driven largely by the fact that regional printer sales are expected to rise 5% this year. According to IDC, the market will be worth 1.7 million units by the end of the year, compared with 1.61 million units in 2005.
This increase in demand naturally has a positive knock-on effect for any reseller dealing in the consumables market as customers snap up the supplies, cartridges and toner to make their hardware purchase valid. “The sale of hardware marks just the beginning of a long-term relationship,” said Khalil El-Dalu, general manager at Epson Middle East. “Selling the printer is just the first step as this is followed by sustained sales of supplies and consumables. These consumables are the main beef of the printing industry and the margins they bring in are more generous than that of the hardware sales.”
He claims resellers can earn margins of between 15% and 30% from Epson consumables.
These sort of numbers explain why the consumables market has become an attractive sector for IT resellers from Egypt to Oman.
However, it is also a fiercely populated market with multiple channels — spanning petrol stations, supermarkets and traditional computers stores — looking for a piece of the action.
Frank Sheu, CEO at Almasa Distribution, reveals just how significant the market has become to its operation: “Today, consumables deliver around 40% of our overall printing business,” he said. “The Middle East is considered to be one of the fastest growing markets worldwide. With our strategic approach to further extend our geographical reach and increase the customer base, we expect our revenue share of consumables to increase significantly within the near future.”
The saturation of the printer market in recent years has seen many vendors come under fire from consumers for slashing the cost of printers yet sustaining high ink cartridge prices. John Ross, general manager at Oki Middle East, claims Oki takes a measured approach to its pricing strategy. “The sale of consumables is important to us and our channel as a way of balancing the portfolio profitability,” he said. “We try to balance the costs between the printer and consumables to make the ongoing brand experience as easy as possible without sudden shocks regarding the price of a particular consumable.”
Alya Azar, supplies business manager IPG at HP Middle East, believes current prices of consumables are justified. She said: “Consumables are an important and valuable part of HP’s business. In fact, 70% of the technology in a printer is actually in the cartridge alone. HP original consumables provide high-quality for the end-user.”
Technology is becoming more sophisticated throughout all sectors of the IT market and the printer arena is no exception. Expectations in terms of print quality have shot up dramatically among organisations of all sizes in the Middle East, inciting a trend towards more sophisticated printer models.
Like other parts of the world, Middle East markets such as the UAE and Saudi Arabia are showing a healthy appetite for colour laser printers and multi-function devices.
“Corporations, and to some extent the SoHo and SMB segments, tend to replace or upgrade mono laser printers with colour laser and multifunction printers,” confirmed Sheu at Almasa. “The home segment also tends to invest in a second, additional printer, which is usually a photo printer. Naturally an increase in the sales of printing devices leads to an increase in the sales of supplies and consumables.”
Many vendors are already seeing the impact of this development on their top line. “Sales of colour inkjet machines and colour laser machines are actually doubling each year,” claimed Ranjit Gurkar, general manager at Brother Gulf.
So with the consumables market performing so strongly, how do Middle East resellers go about getting a bigger slice of this lucrative pie? Aside from urging resellers to stock original consumables and maintain a legitimate operation, printer vendors are full of advice for their partners. Oki’s Ross encourages the channel to sell as many addons as possible at the point of sale, including paper, mains surge plugs, cables and of course additional consumables. “Channel partners should also include within their invoice or within the box information on how to purchase additional consumables and upgrades in the future, be it a telephone number, fax number or a website,” he added.
After-sales service remains a critical element of the consumables channel. Resellers need to work towards establishing a good rapport with the customer and offering a high level of after-sales service, according to Gurkar at Brother. “Channel partners can maximise their revenue by maintaining adequate stocks and really servicing the customer,” he commented. “By that I mean that they should collect the customer’s contact details and follow up the sale with calls or e-mails to retain contact with the customer and ensure their satisfaction.”
Vendors also have an active role to play in how resellers address the market by supporting them with training, advice, sales resources and incentives.
Francois Feuillet, general manager at Lexmark Middle East acknowledges that the vendor carries a lot of responsibility for a reseller’s success: “Lexmark ensures very attractive margins on our supplies and consumables for our partners. The competitive nature of the supplies market does not evaporate the profitability of the partners due to our distribution strategy,” he said.
El-Dalu insists that Epson also offers adequate support to its partners: “We work very closely with our partners to understand their market reach and strengths in providing excellent service in each market place,” he said. “We provide them with rebates, special prices and special bundle offers that can be passed all the way down to the end customer.”
Every vendor that
Channel Middle East
spoke to was keen to stress the importance of branding in the consumables market.
However, with a market share in the region of 70%, it is quite clear that HP still dominates the Middle East consumables sector with its rivals fighting it out for the rest of the market.
Amir Khatami at Dubai-based reseller Khatami Computers said: “I don’t have to work hard to sell HP. In fact, if I try to sell a product from an alternative vendor, it’d take me over an hour to convince the customer why not to buy HP. HP products sell themselves, and that’s why most resellers stock them.”
One problem facing many vendors is that the high price associated with branded consumables — particularly ink cartridges — has seen a shift towards cheaper alternatives.
As a result, the refillable ink market, or black market, has taken on more significance. Abrand vendors are inevitably keen to claim that black market goods and even ‘compatible’ third party products do not provide the same quality as those made by the manufacturer of the printer model.
Vendors argue that original products are the only logical choice for resellers to stock as those made by other parties will not have been designed to support the product as effectively.
Non-original consumables can therefore lead to deterioration in print quality and reliability, in addition to shortening the life of a printer.
Ross at Oki said: “We have holograms and other marks on our original consumables, which allow us to identify genuine from fake should a case go to court. Resellers should be aware that if a deal is too good to be true then it probably is fake or refilled.”
Je Hyoung Park, president at Samsung Electronics Gulf, agrees with Ross’ assessment that original cartridges offer a better investment. He said: “Customers do not have to reprint a substantial number of pages due to poor print quality or printer breakdowns caused by cartridge problems. Therefore they save time and supplies wastage, reduce frustration and improve productivity. These could add to a lower overall printing cost. If you consider total overall printing cost, an original cartridge is more economical.”
As market leader, HP is more exposed to the problem of counterfeit products than other vendors. Azar says the vendor is taking precautions against such products entering the market place in order to limit the problem.
“The warranty that we provide with our products is no longer valid if the user switches to a non-HP original cartridge or toner. Compatibles and counterfeit products affect the hardware as the cartridge is an intrinsic part of the printer. We make the end-user aware of this policy and the negative effects of non-originals by providing resellers with information and running extensive marketing campaigns,” she added.
Vendors claim that stocking counterfeit refill cartridges is not in the channel’s best interests because they cannot provide the same quality as genuine products on the market and can damage the printer if incorrectly refilled. “The yield that a refill cartridge claims doesn’t reflect the reality,” argued Feuillet at Lexmark.
“There is significantly less ink in the refilled cartridge than the original. This causes the cost per page for the user to be a lot higher than if they were to use original products.”
Rather than counterfeit or compatible goods, the grey market poses the biggest threat to the authorised consumables channel in the Middle East. Khitam Al-Hindi, business unit manager at distributor Aptec, says the consumables sector is severely impacted by grey marketing: “The IT market in general isn’t really being affected at all anymore by the grey market — however consumables is an exception,” she said.
Gordon Jones, president at Canon Middle East, agrees that the grey market threatens to undermine the legitimate channel: “Imports from Asia are infiltrating the market,” he said.
“Resellers are obtaining products for a cheaper cost in Asia and selling it in the Middle East at a cheaper price, thus increasing grey market activity in this region.”
Several vendors operate a global pricing strategy in order to reduce the threat of grey trading. However, that alone is not enough to stop grey imports entering the market. Some resellers claim they are becoming increasingly frustrated at vendors’ apparent unwillingness to protect their business.
Joseph Jayaseelan, managing director at Dubai-based Penguin Computers, said: “I see plenty of resellers around here stocking grey market goods and I don’t think that many vendors are taking enough action to prevent businesses from suffering due to the grey market. Resellers who do not deviate from the proper channels should be rewarded, not neglected.”
Khatami also vented his frustration at the negative impact that the grey market is having on his business: “I’m constantly calling vendors and asking them why they aren’t doing anything to prevent grey market activity — I never get any reassurance.”
A spokesperson from an unnamed consumables distributor offered a different view to the issue of grey market goods. “We can’t hide from the grey market — it’s here and we have to deal with it,” said the source. “I think it has had a positive effect on the market. I’m not saying that grey market activity is a good thing, but we have to harness it and use it to our advantage.”
The spokesperson added: “It’s because of the grey market that vendors have dropped their prices in the Middle East to reflect other regions. And it is also for this reason that launch dates for products in the Middle East are now in line with other markets. However, it must be said that grey market traders do not tend to sustain good relationships with vendors. Resellers who focus on the vendor-partner relationship will ultimately make their business a lasting success.”
However, don’t be mistaken for thinking this is a market where it is easy to make a quick profit. The consensus among printing players is that they face challenges with pricing consistency, black and grey market goods, and stock availability. That said, vendors in the printer market are constantly looking to strengthen their sales channels and educate resellers about the benefits of carrying original product. With more complex technology being integrated into printers and cartridges, the trend for new and more powerful systems is as strong as ever. As more companies demand printers that utilise the latest technology or replace their legacy systems with new models, the outlook for resellers stocking ink cartridges and supplies is particularly healthy.
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