By Antonio Sánchez Navarro
Making profit as a dealer in the printing industry is getting more and more difficult. External and internal elements threaten their status-quo. But not everything is bad news. Quite often these threats are opportunities that, well managed, can be used as a competitive advantage.
Most of the small dealers see how their customers are being addressed by companies that are not even located in the neighborhood. In other words: new type of competitors are showing up. Quite often the competition comes from web stores that use an aggressive pricing combined with an outstanding availability of the product and fulfillment facilities.
Fighting against these competitors is not too complex: it is a question of reducing the price and increasing the stock. But the consequence is a radical reduction of the margin, to turn it even negative. This solution is therefore unsustainable over time.
There is another type of competition, also made it possible thanks to “internet”. Opposite to a web store where the customer proactively buys, these are service companies that use Nubeprint’s auto-fulfillment technology to serve all the printing needs of the customer in a proactive way. The shipment is automatically triggered. This is possible because the supplier has direct access to the printers of the customer, and therefore knows in advance when a cartridge will be needed.
The profile of these companies is very wide: from OEMs that go direct to the end-customer, to MSPs or dealers that have moved forward from just shipping cartridges to auto-fulfillment or even managed print services. The geographical distance to the customer is not an issue. Quite often the distributor from where the supplier buys facilitates global delivery.
Fighting this type of competition is harder because most of the auto-fulfillment contracts tight the customer over a period of time. Therefore the only way to fight against is indeed being the first to sign with the customer.
Pressure on prices / competition
As a product becomes popular, its price goes down. It is not only the result of mass production economies; instead it is merely the increase of competition that pushes prices down, and so does the margin. The globalization accelerates competition, leaving little room for healthy margins.
The competition based on price is not sustainable long term. It obliges the dealer to go find cheaper cartridges. Long term the quality is impacted, the customer starts suffering and he ends up by moving to a competitor looking for a trouble free product.
Not even big pocket with full of cash will work anymore in a low price strategy. The reason is that the printing market is very open and “perfect”. There will always be competitors somewhere ready to compete with your pocket. Fighting low price with lower price is a “lose – lose business”. There is no winner.
A consultant recommendation would be to change the strategy and redefine the sales proposal. Though the aim is to keep selling what you’re good at, the right approach is to present it differently; adding value around the cartridge box makes the customer perceive the difference between the cartridge he is buying from you, and the cartridge he can buy from somewhere else. For example, using auto-fulfillment technology converts your sales of cartridges into a service, where the customer is granted the toners he needs and with deep control on the costs.
There are three major differences between billing cartridges and billing services:
- the first one is the perception of the customer. When a customer buys services he is indeed buying a solution to his problems. Opposite to a product that can be easily compared and where the main difference is the price, a service is valued based on how much benefit the customer perceives. Of course the risk is that the customer perception is something difficult to control and manage. But as long as his perception is good, the loyalty of this customer is high.
- The second difference is a consequence of the previous point: the possibility to get a healthy margin is higher in services. It is the result of the ability of the dealer to define its “service” proposal. The better he does it, the highest he can price his customer and the better his margin is.
- There is a third aspect that makes selling services very attractive compared to selling products: its recurrence. When the dealer bills monthly a recurrent amount, no matter if it is variable, it can much better plan for its financials, making the business more stable, and letting him focus on developing it, instead of struggling with cash issues. A service contract compromises both the dealer and the customer over a long period of time. This is good for the dealer as mentioned above. It is also good for the customer because he receives customized services thanks to the increasing knowledge of his needs that the dealer acquires.
Demands from customers
The financial crisis that most of the economies suffered from 2007 up until recently have stressed the need of companies of all sizes to control their costs. As a consequence, their willingness to outsource non-strategic activities like IT or printing has also grown. Printing is just that: a need, not their core business. Still plenty of companies spend thousands of hours calling to request toner, chasing the toner when received, allocating hundreds of square feet to stock the toner delivered in excess by the supplier, and again hours and hours renegotiating the price every year based on the volume of cartridges delivered, no matter if there was a need or not. And meanwhile nobody has been controlling to which extend all the cartridges bought were really necessary.
The customers are aware of this “hidden costs” and they demand the outsourcing of their printing needs similar to what they already did with other IT facility. The basics for printing outsource are that the contractor brings all components (the copiers and the printers, the supplies and the service), the contractor handles proactively all the needs of the printers (auto-fulfillment of supplies, control of stock, control of efficiency), and the customer’s employees step away from any task, specially anything related to the fulfillment process of toner and other supplies. Yet the control remains at the customer side, as a way to supervise the quality of the service.
The dealer is a fundamental element of the distribution channel. He is in a very desirable position: he knows his customers and his customers trust him. Though his position is threatened from many sides, he still can take advantage of his current position and reinforce his role. But he must adapt to the new situation, moving out from the competition in price and into the delivery of value added service. But this transition has to be done carefully: no need to make dramatic changes. The change should be well controlled: the dealer must start first with his current customers. He must adapt to the wide possibilities with network connected printers: automatic fulfillment of supplies. Last but not least, the dealer should not waste more time and start ASAP. Every customer he loses is a customer he will not recuperate, at least in 3 years’ time.