Sell the hardware at cost and make money from flogging consumables. That's been the mantra of numerous resellers in the printing business up to now, but is this format really sustainable two or three years down the line? In an article designed to give commercial printer resellers an insight into how they will need to reposition their operations in the coming years, Channel Middle East asks the leading printer suppliers to spell out the future.
How will printer resellers need to adapt their selling methods to maximise the profits they make in the future?
Natesh Mani:They should look at selling volume, but they must also look at selling value such as office solutions.
At the moment there is too much focus on short term profits. Commission might be linked to a particular month and salesmen don’t give enough time to prepare for other opportunities.
The most important element of the business model is to look at both the after-sales service and post-sales. Many printer players think the money is only in the printers, but there is money to be made on post-sales. If they can offer the full value chain they will end up making more profit.
Mohammed Addarrat:How resellers are measuring profit is a bit peculiar sometimes and can be unclear. Some are after the cashflow and generating profit from the volume.
Some are just looking at net margins and increased value of revenue. Elements that have to be taken seriously do not just include selling the printers, but value added services from proposing software solutions - whether installations, demonstrations or integrations.
Product positioning - making sure you place the right product, with the right customer, for the right usage - is important. That combination will translate into revenue.
The third thing is simple customer relationship management.
Vishal Gohel:It is opposite to the mantra ‘sell the hardware at cost and make money from consumables'. What I have found is that a lot of the resellers are selling hardware at high profit margins.
This is the business sector, but speaking to some of the other product managers and area sales managers it almost seems as if it has gone from one extreme to the other.
We obviously don't want to go back to selling at very low margin and making the money on consumables, but you need to find the balance and people need to appreciate that there is profit in everything.
Madhav Narayan:The future resellers have to be selling hardware and consumables. Consumers want to go back to the same guys to get their consumables. Also, customers are looking to resellers to give them the right solutions when it comes to selling printers. So sales people need to be equipped or trained to talk about the right product for the customer. What skills and competencies will Middle East resellers need to exhibit in the future if they wish to stay ahead of their competitors? And what kind of investment will this require on their part?
John Ross:Simply put, resellers that understand they're running a sustainable business for the future, rather than a trading enterprise for today, have already developed the basic skills to satisfy their customers, not to just feed a demand created by manufacturers.It is not only price that keeps customers coming back, it is understanding their business as well. Part of an investment should go into human resources and the right staff that view satisfying customer needs as paramount.
Ranjit Gurkar:The corporate resellers need to invest in trained sales personnel who call on the customer at pre-determined intervals to check on satisfaction levels and future requirements.
It is not just about selling and saying goodbye, they have to keep a calling cycle at least once a quarter. It is important to revive the revenue stream if possible and maybe they will require the assistance of a call centre.
It is not a sexy product so as a manufacturer we have to integrate more with what is sexy, like WiFi or enhanced WAN. The world is a smaller place, printing networks need to adapt to that.
VG:As a reseller you have to look specifically at the customer's wants and needs. That means looking at their business and understanding its practices. Up-selling is very important. I have even noticed that some of our partners have been offering things like furniture, lights and everything for the office.
On the investment side, the key thing is really the time aspect with the customer, but also learning the products in their portfolio - what they do and how they can be implemented.
Hard work fixing some of the bad habits they may have and working on well-organised business practices means the financial burden can be minimal. To my surprise, the country that I least expected to take this on board - Saudi Arabia - has done so with brilliant success and seen a lot of solution sales.
MA:Last year I would have answered this question differently. The investment really needs to be in people. In reality it is not just the number of people, it is the quality of the people. The other aspect that needs investment is a structured sales cycle and that back-to-basics CRM concept. How can Middle East resellers differentiate when it comes to selling printer hardware and consumables?
NM:They need solutions. There are possibilities around printing management, asset management and security. If they bundle these solutions with the hardware then they will certainly prosper.
VG:At the moment there is too much focus on short-term profits. A possible business prospect from an existing client could generate 10 times the revenue six months down the line, but because the sales commission might be linked to a particular month the salesperson may not give the appropriate time that is needed to prepare for that future opportunity.
Zaid Ghattas:Selling consumables and supplies means that the reseller has to initiate a long-term relationship with the customer. The customer might request consumables once or twice a month, whereas selling printers could take place in less volume. Delivering the consumables and adding value by installing them as well will help them differentiate.
MA:They need to understand the customer's common headaches. It is about simple fulfilment procedures and I think enterprise resellers do not utilise the web enough. Another aspect of differentiation is consultancy and helping the customer understand which type of products they really need. The challenge is understanding what the customer wants versus what they need.
What kind of changes can the channel expect to see in printer technology over the next couple of years?
JR:The most striking change will be the slow death of inkjets as more customers move to networked products that can print duplex. Also, we expect to see the growth of multifunction devices, particularly colour toner-based products.We will see more software add-ons being incorporated in the box as standard, something that we have been doing at Oki for about 10 years.
MA:Printing is a very difficult segment to add some pizzazz or make sexy. It is not a sexy product so as a printing manufacturer what we have to do is integrate more with what is sexy, like WiFi and Bluetooth, or enhanced WAN.
The world is becoming a smaller place, but printing networks need to adapt to that. In the future you will remotely print, scan and copy and do things from anywhere, as if you were in one office.
One important message when offering the right solutions is to offer the right fleet of printers. Corporates are not only going to buy one model, they are going to be buying multiple models.
MN:At the consumer or the corporate level there will be a shift towards laser printing. If you look, for example, at mono lasers, they are available at less than US$81 and mono laser multifunctions are available at less than US$162. Colour lasers are becoming affordable at less than US$240 in the market now. All of those were probably twice the price a couple of years ago.
The channel continues to emphasise the importance of consumables sales when it comes to subsidising the printer hardware. How do you expect this trend to play out in future?
JR:As long as the end-user expects low-cost hardware then this will continue to be the case. With the growth of illegal counterfeit consumables and legal compatible consumables, the reduction in inkjet - and hence ink tank sales - I would not be surprised to see the price of some hardware units increase, whilst the price of original consumables decreases.
MN:This happens a lot on the inkjets, but it is not so relevant when it come to the laser printers. What should always be taken into account is the total cost of printing, which comprises hardware costs, acquisition costs, consumables, maintenance, installation and software costs. One important message when offering the right solutions is to offer the right fleet of printers.
Corporate clients are not only going to buy one model, they are going to be buying multiple models. Coming back to subsidising, as laser gets cheaper and more popular you may see the consumables becoming the focus.
ZG:To help them move to solution-selling we continuously launch new products. Both hardware and consumables sales form the same importance to us; printers are the vehicle and consumables are the petrol. It is the relationship between the reseller and the customer that is important and the consumables sales will happen more often than the hardware.
NM:The trend will continue for some time. The whole business model is similar to a Gillette razor. When someone buys a razor the money is not so much spent on the razor as it is the blades.
If I was a reseller I would look at selling the concept of total cost of ownership and not highlighting the cost of the printer and the cost of the consumables. Your first instinct will be to sell as many boxes as possible, but then you must follow that through and sell the supplies.
How do you expect your engagement with the printer channel to change in future?
NM:One of the things that we want to do is to sell the way the customer wants to buy. We will look at the business in terms of verticals and look at resellers in a different way and draw a vertical line across them to understand who is selling into which vertical. The value proposition that we offer each of these resellers will be very different.
JR:If the channel in this part of the world starts to go in the same direction as the USA or Western Europe then the growth of internet sales will dramatically increase, especially in the commodity-end of the market. In the meantime, I see resellers gradually moving away from selling boxes - which should be the role of the supermarkets - towards developing more focused solution-selling to SMEs and above.
RG:This channel is maturating and we promote value added resellers to work in tandem with our resellers. The one thing that we do insist on is that they retain trained personnel dedicated to selling printing solutions because we make a lot of investments in going out and training them.
One thing that continues to upset the apple cart here in the Middle East is the high turnover of staff. Everything else we can provide to our partners, whether it is training or planning.
ZG:We have meetings with our partners in the Middle East on a regular basis. It is now getting more to the stage where we are talking strategy and about how to move the actual sales.It is becoming more engaged on a daily basis because we need to educate them on how to move these products.
MA:It will definitely stay the same. We will start to look at partners that think pages. Sell solutions to customers that will print a lot and at the same time look beyond the traditional sales cycle.
We will look for partners that want to have leasing, managed print services and other differentiators.
Be more proactive. For instance, there are a lot of opportunities in Saudi that haven’t been touched and I am 100% sure about this. Resellers need to go and knock on doors to exploit these.
We will also engage with partners in a more structured way and are planning to launch our new channel partner programme at GITEX. That will have a structure in place where we can optimise our resources at Lexmark to help the channel.
MN:We have volume partners who address the retail space with the volume products. And then we have value partners who address the medium and large enterprises. Volume partners are typically evolving in terms of putting in place product managers or business managers.
All our volume partners have a specific unit when it comes to selling printers. The organisation is a little bit larger on the value side because it is composed of pre-sales, post-sales and sales personnel. That is the way it is evolving.
What's the best piece of advice you can give to printer resellers that want to position their organisation for future growth?
MN:Look at the trends in the market. If you meet consumers daily, then fair enough, look at the volume business, but you need to have at least one specialist capable of talking to the consumer and offering the right solution. As far as value added resellers are concerned, network your organisation with the right sales people and training.
ZG:They need to have a better understanding of the market and know the competitors. Be more proactive. For instance, there are a lot of opportunities in Saudi that haven't been touched and I am 100% sure about this.
Resellers need to go and knock on doors to exploit these opportunities. Also, develop a better understanding of the corporate market in order to move into the value-added reseller domain.
RG:Recruit the best, recruit them young and invest in training. Reward performance with money and growth - that is important. Lastly, commit to a good line-up from a good vendor and build a long-term relationship.
VG:Focus on your existing customer base - what are their needs and what do they need from you? It is easy to sell to someone who knows you. By developing these long-term relationships the end-user trusts you.
It is also important for resellers to trust what the end-user is telling them as well. Canon has a philosophy called ‘kyosei', which simply put means living and working together for the common good. In the business sense, if you help your clients and your partners grow, your business will grow.
MA:As a challenger in this market I would always say diversify your portfolio. This is something I say not just because I'm the challenger, but from the reseller's standpoint.
Putting all of your eggs in one basket is a big mistake. Also, understand the customer's needs, don't just respond to their wants. Be their consultant and advisor.
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