By Alex Malouf
Printer channels in the Middle East are buzzing with activity. Printing vendors experience double-digit growth year-on-year and the market is alive with innovative products and novel channel strategies. Players are introducing new incentives to motivate channels-to-market and educating customers as to the potential return-on-investment which their products offer. They are also warning of the dangers posed by using non-brand consumables.
Channel focus|~|printer-side1HP.gif|~|Rania Hannoush, channel marketing manager at HP Middle East|~|The Middle East printing market is dominated by HP, Canon, Epson, and Lexmark. These giants of the industry have had the market all to themselves until recently, dominating regional sales and driving growth. With such a small field, recently enlarged by ambitious new arrivals from Asia, each vendor has been feverishly working away to distinguish themselves from the competition and grow at a rate faster than the rest of the industry.
To augment growth, market leader HP and Canon Middle East have initially looked to improve upon their channel structures. Following HP’s merger with Compaq two years ago, the company’s Imaging and Printing Group (IPG) embarked on a consolidation and streamlining exercise along with all other sections of the company. Channels-to-market were modified and resellers who used to buy straight from HP now buy from HP’s channel development partners (CDP), distributors designed to provide those further down the channel with both sales and marketing support. This has reduced the number of partners the vendor is directly dealing with, saving HP both time and money.
“Right now it has become more interesting for [resellers] to purchase from CDPs than coming to HP,” explains Rania Hannoush, channel manager at HP Middle East. “CDPs develop our final tier partners and provide them with market development funds. HP wants to reduce its relation to final tier partners for a less complicated, more cost efficient channel-to-market model.”
Rather than improve on a model like HP has done, Canon has had to build a retail channel from scratch. Up until three years ago, the vendor initially worked through original manufacturer agreements, supplying other companies with printer parts to be sold under another name, and not promoting its own brand in the Middle East retail market. “We had not been concentrating on using the distribution channel to take the products to the shelves of mass retailers and computers shops in the Middle East,” said Ammar Alul, director at Canon Middle East, when explaining Canon’s absence from stores. “We wanted to grow rapidly and be closer to our resellers. With our shipping strategy we are growing more aggressively now [in the consumer market] by establishing wholesalers. We came from nowhere and in some markets we are already very strong.”
Choice is Epson’s watchword when it comes to its channel structure. “Our reseller partners can either buy from the local in-country distributor or the regional one based in Dubai, to ensure that we have stock in the right places at the right times so we can move quicker for our customers,” surmises Scott Leach, Epson’s Middle East sales manager. The recent turmoil at SMB Computers gave both Epson and Samsung an opportunity to revitalise their UAE distribution network. While Epson deepened its relationship with an existing partner, Samsung embarked on a multi-channel distribution strategy for the UAE, with one distributor focusing on printer corporate sales and another supplying the whole printing product range.
Entering the market two years ago, Samsung’s strategy was to focus on national partners, rather than regional suppliers. “We like the concept of in-country distributors,” says Vivek Sharma, sales manager at Samsung’s Digital IT division. “They are the people who have the local expertise and knowledge to drive sales.” There is no regional supply hub, as Samsung’s partners order directly from factories in Asia.
Retail channels have changed to reflect how consumers in the Middle East now purchase products. Whereas specialist IT traders were the preferred method of choice for consumer outlets, now two more sales methods have been added to the channel reflecting developments in regional shopping habits.
“Within the consumer channel we have segments where you have mass retailers, specialist retailers, and you have e-business,” says Leila Fakih, IPG consumer sales manager at HP. “E-business is the smallest part. It is rising, but e-tailing is not as developed or as in use as much as in the US or western Europe.”
While retail channels mainly involve putting products on shelves, it is at the enterprise level where printer vendors have been making moves to sell more than just hardware. Corporate customers are being lured by complete printing solutions — hardware, software and services — and the benefits of more favourable TCO and ROI rates.
As part of its engagement with the corporate market Lexmark employs specialists who work with businesses to ensure that both printing needs and business priorities are met. “It is through an understanding of what the customers do and what they need that we have been able to develop printing solutions just for them,” says Robert Kikano, managing director at Lexmark Middle East. “We do not try to make our customer’s business fit our products. We build our solutions to complement our customer’s particular business operations.”||**||New innovations|~|printer-side2Canon.gif|~|Ammar Alul, director at Canon Middle East|~|Printer vendors are aggressively pursuing the SMB and SOHO spaces in the market. Their individual purchasing power is small, but collectively this represents a huge opportunity for vendors. Market approach to SOHOs and SMBs are seen more through product ranges, with functionality and cost of vital importance. Sales of multifunctional devices, which eliminate the need for separate printers, faxes, and scanners have been exceptional for all major vendors.
Other innovations include Bluetooth printer integration, allowing for wireless printing, and photoprinters capable of producing pictures which are equal in quality to those which are developed in a lab. HP and Canon have an advantage in the printer market as they are the only vendors who sell complete ‘home studio’ solutions — digital cameras and photoprinters. The home studio concept has proved to be very popular in a region where many customers want to develop pictures by themselves. Both vendors have established a correlation between camera and photo printer sales.
“Digital photography is booming,” says Sherifa Hady, IPG marketing manager at HP. “We are finding that many people want to buy digital cameras and photoprinters for that home studio effect.”
All major vendors market innovations aimed at digital photography. One such technology is Pictbridge, which allows a user to connect the digital camera to the printer without the need to use a computer. But what matters is the power of brand loyalty as well as special deals such as product bundles which prove attractive to customers.
“Our camera and printer packages have proved to be extremely successful. In respects to the percentage of printers sold in relation to the number of cameras, the Middle East was no. 2 in the world for 2003, behind Malaysia,” says Canon’s Alul, revealing that sales of Canon’s cameras have had a big impact on the number of its photoprinters being sold in the Middle East. ||**||Old challenges|~|printer-side3Epson.gif|~|Scott Leach, Epson’s Middle East sales manager|~|Even with all these new products and designs, vendors still make most of their money from supplies such as cartridges and toners. While prices for consumables are high, the margins on these consumables are great. Counterfeiters are drawn in by the potential profits on offer. With estimates that fakes cost the global industry $1 billion, printer companies take drastic action to counter the trade, particularly in the Middle East.
Since HP began its anti-counterfeiting programme in 2002, the firm claims that it has stopped tens of thousands of counterfeit products from entering the region.“We have an effective initiative to counter fakes,” says Sherifa Hady, marketing manager at HP’s Imaging and Printing Group. “People can telephone HP if they are not sure if the cartridge they have is an original or counterfeit. They look at the serial no., and the HP person will give them the details. We also have a website where customers can go to and check out if what they have bought is fake.”
Products that are not original are tracked back to the stores where they were sold and then legal action is taken against those who are dealing in these goods. Vendors have been working closely with governments and cross-border authorities to fight criminals behind the counterfeiting business. This has been combined with industry efforts to educate both customers and partners about the risks they face in buying non-branded supplies.
“Using a counterfeit product will damage your printers and hinder performance,” adds Hady. “We are very focused on the experience of using our printing products. If HP printers do not perform as best they should because of fake products, it affects the customer’s image of HP. Our challenge is to make sure this does not happen.”
Vendors are very sensitive to customer awareness, eager to emphasise their activity in the printer market. They go to great lengths to increase their own profile, and the customer’s knowledge of their product range.“Almost everyone knows that we make cameras, but then fewer would say printers,” surmises Alul at Canon. “Our challenge is to increase their awareness, because people appreciate and respect our products. We need to make sure that they know that Canon is also into printing.”
Part of this effort involves getting feet on the street, being proactive and taking products to consumers, being present at exhibitions, and showing the public what the printer can do.“We look at advertising in the region’s media, in newspapers and IT magazines. But what really counts is people seeing the output for themselves. They come to exhibitions such as GITEX to see what the latest product developments are. We work hard on a whole range of activities to make sure the public know what we are doing,” says Leach at Epson.Another part of that marketing drive is to ensure that resellers have the knowledge and the encouragement to push product.
“Focus has to be delivered to retail partners,” states Fakih at HP. “We have sales teams working with each distributor to support retailers and provide them with product information and training.”
Encouragement comes from channel incentives, which every vendor uses to motivate lower tier partners, offering training, demo products and the all important rebate for improved margins. Team Epson, a scheme piloted in sections of the region, is an example of how one vendor has increased growth by offering various benefits and a back-end rebate, ranging from 1% to 3%. “Our pilot partners have grown very well with Epson,” surmises Scott Leach, Epson’s Middle East sales manager. “The benefits [for partners] are more direct contact with us, product updates, invites to exclusive events, access to demo products, and of course a rebate on sales.”
HP’s business strategy is an example of a complete incentive strategy, comprising both permanent programmes and tactical promotions. Rania Hannoush explains, “We launch a lot of promotions, some ongoing, such as the rebate scheme, and some temporary for product launches. There are also certain programmes for selected resellers who are in the imaging and printing business. All of our second tier partners have incentives, such as a target on business units which, if achieved, will gain them a percentage of sales back to invest in marketing activities.”
As vendor’s products and services become more analogous, incentives and rebates will become ever more important, particularly in more mature markets such as Saudi Arabia. Vendors are well aware of the imperative to develop what they offer to partners.
“We are constantly evaluating our incentive schemes to make sure that we remain competitive,” says Alul at Canon. “This is an area we are always working on, to improve the different tiers of the channel along the route.”||**||Niche printing markets|~|printerside4Oceanic.gif|~|Rohit Khubchandani, business development executive at Oceanic|~|There is much more to printing than just mainstream vendors. Niche printer companies such as Oceanic are experiencing rapid growth. A distributor of printers to produce cards suited for a variety of uses such as identification, it has expanded as knowledge of its product has become more widespread in the market.
“Popular applications have made cards very common,” says Rohit Khubchandani, Oceanic’s business development executive. “Any man knows what a card is due to their experiences with credit or loyalty cards. When they know about the possibility, they understand the product and what it can do. Then they come to us”
Niche players such as Oceanic — who lack the resources available to the printer giants — operate with a flexible market approach. “If there is a particular channel in that market then we work through that channel. If not, we give the customer the information ourselves. Sometimes partners do not have all the product knowledge and resources which are available to us, so we step in and deal with the customer face-to-face. Ultimately the deal has to be closed.”
While concepts such as the paperless office are talked about, the reality is that printing technology is more required and in demand than it has been at any other time in the Middle East. The recent entry of major vendors such as Samsung into the market bear out this fact. Printer sales will only grow as customers see the quality on offer and the increasing ROI potential.
For printer vendors, success comes from a combination of activities: excellent service, a wide product range to satisfy different customers, an effective channel, and product developments. “There is no one magic factor,” concludes Alul at Canon. “You need to have excellent products, the channel network to move the product, and a support system to help the customer get the most out of the printer. If even one of these is missing then you will not succeed in this market.”||**||