The Toner supplies Business Remains Under Threat And Could Crack.

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Date: Thursday November 3, 2016 12:51:32 pm
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    The Toner supplies Business Remains Under Threat And Could Crack.
    By David Holes.

    With printing in decline, plus a host of other challenges, the imaging supplies sector remains under threat and could well crack for those not in the right place at the right time.
    The triple threat of declining print volumes, margin erosion and battles against counterfeit products continues to dog the imaging supplies (IS) industry, but success in this sector is still a possibility say category experts, provided the correct strategy is followed.

    It’s true that printer sales are in decline and consequently fewer supplies are needed, says Jerry Gigliotti, Industry Consultant and IS-sector veteran: “That trend will continue, but it’s still a very big market. For dealers that remain focused on it, the upside is huge and they will continue to grow. The ones that do not will see their business transition over to those that do.”

    “It’s still a billion-dollar market,” reports Sandra Dadinger, Marketing and Product Manager at German printer supplies manufacturer KMP. “Yes, the general conditions in the market are changing with a lot of new competitors – often pushing low-quality products – having a big impact on price pressure. But companies with high-quality products at attractive prices will still be the most successful.

    “As a company you have to act cleverly, keep an eye on industry trends and provide products that fit. The market will face new challenges, but this also creates opportunities.”

    Market movements

    HP’s acquisition of Samsung’s printer business is indicative of the way the market is shifting, with a trend away from mono A4 and towards A3 colour printing. “This is an area with huge growth potential,” maintains Stuart Bleese, Technology Category Manager at UK wholesaler VOW.  “Purchasing trends show a migration across to more effective inkjet ranges – a significant change to the previous laser printer dominance within businesses. The newer inkjet printers are not only more economical than their laser counterparts, but also deliver better print quality and speed than older models.”

    HP’s PageWide printing is also shaking up the market by offering all the efficiency benefits associated with inkjets while using environmentally-friendly technology akin to laser printers. “It’s the biggest development in the past decade,” states Bleese. “Quality is on a par with laser-printed documents and this new genre offers additional growth opportunities.”

    Consolidation is ramping up across all sides of the businesses, with Apex Technology being the first aftermarket manufacturer to purchase an OEM with its recently approved acquisition of Lexmark. “Traditionally, the supply of consumables has contributed significantly to printer manufacturers’ profitability,” says Gigliotti, “but this acquisition shows that the line between the OEM and aftermarket is now blurring.”

    Paper-light vs paperless

    Industry commentators are divided on how rapidly print will decline, but the reality is that most offices and workplaces are still only paper-light as opposed to truly paperless. 

    “There’s a pervasive belief that paper is more secure because it is tangible,” reveals Elise McFarlane, Marketing Managing at MPS provider PrintFleet. “It’s particularly prevalent in those industries that deal with large amounts of confidential material or require original or signed copies of documents. In these paper-intensive verticals, the shift to a paperless environment will be very long term and as such, they continue to represent significant opportunities.”

    In fact, the paperless office is nothing more than a Utopian dream, according to Bleese. “Business environments operate with too many documents for a paperless office to practically work. Yes, we’re seeing less paper used, with mobile technology resulting in documents not being printed as frequently, but printed reference documents still have their rightful place in most offices. Their touch and feel cannot be underestimated.”

    “The only sector that has dropped off substantially is home printing,” explains Sophie Lansac, Marketing Director at France-based remanufacturer Armor Group. “Mobile device use means we print less and less – recipes are read directly from tablets, travel bookings are in digital format, etc. In the home, this is a trend that affects the sale of consumables and that’s set to continue.”

    There’s no doubt that managed print services (MPS) are becoming increasingly popular as more businesses move from a transactional to a contractual purchasing model for their printing needs.

    But McFarlane sees a bigger picture emerging as companies look to encompass all their managed services in a one-stop shop: “A business might have contracts with many different service providers managing print, IT, telecommunications and more,” she says. “Aside from the sheer inconvenience of this, the cost is potentially higher when paying for these services individually rather than paying for them as part of a package. In response to this, we now see these IT and telecoms managed service providers (MSPs), for example, looking to add managed print into their existing offerings in order to become the solution of choice.

    “While this may seem to put MPS providers at odds with MSPs, there is actually an opportunity to partner and leverage each other’s expertise in their respective fields.”

    Another prevalent trend arising from the MPS sector is automation. Technology shifts such as the Internet of Things and predictive analysis are enabling the introduction of just-in-time supply deliveries and fully-automated re-ordering. As McFarlane explains: “Previously, OEMs and remanufacturers were alone in the supplies game, reaching out directly to many customers. But, as automation becomes a reality, businesses are now partnering with solutions providers and working alongside distributors to enable a seamless end-to-end automated process for their customers.”

    Gigliotti sees another notable shift in this market: “An OEM’s objective is to control the whole print environment. By placing its hardware with contracts that cover supplies and maintenance, the aftermarket is prevented from competing. But successful MPS dealers are now thriving on replacing OEM supplies with remanufactured equivalents, lowering user costs and providing far greater margin than they’d get selling the OEM product.”

    Armor Group is one company that’s exploiting this. “MPS is now gaining traction, not only in large companies but also in SMEs,” says Lansac. “Previously OEMs had a substantial advantage as they could lock the end users in for many years and hence prevent competitors taking their business. However, our solution is to supply high-quality remanufactured products to our partners for the printing services they manage.”

    Compatible complications

    HP hit the headlines recently following a firmware update to its inkjet printers that prevented some non-original cartridges from functioning. This attempt by HP to protect its intellectual property is just the latest round in the ongoing fight between OEMs and the aftermarket suppliers, but has left consumers frustrated.

    HP originally said its printers would continue to work with refilled or remanufactured cartridges fitted with an original HP security chip. It later apologised and issued a further update that removed all restrictions. 

    But Vincent van Dijk, Secretary General of the European Toner and Inkjet Remanufacturers’ Association (ETIRA) comments: “This is the second time this year that overnight firmware updates have locked out cartridges which functioned perfectly well the day before. The overall image of our industry is definitively affected by these problems. ETIRA sees this as yet another example of the anti-remanufacturing practices of printer manufacturers, just like unfair patents.”

    Gigliotti agrees: “Users just want a hassle-free experience, yet the development of chipped printer consumables can mean they’re unable to use a printer just because an alternative supplier was used. This is having an adverse effect on the user’s experience, with many products now being returned to suppliers due to this issue. It’s a real threat to the aftermarket business.”

    And this type of tactic is becoming increasingly commonplace, according to Breese: “Manufacturers are adding countermeasures to fight against counterfeiting, with ‘regionality’ – embedded chips that only enable cartridge use in certain regions of the world – being used to combat cloned cartridges.”

    “It’s a difficult issue,” says Gigliotti. “OEMs have protected their intellectual property by developing complex patents on their products and the aftermarket has continually tried to work around their patents and provide the user with an alternative to high-cost supplies. There are legitimate suppliers that have worked hard to understand the law and develop products that comply with it. But illegal clones and counterfeits, mainly from China, produced at a lower cost are now readily available in the marketplace.” 

    “The fight against counterfeits is hard,” admits Dadinger. “The fact that they’re lower quality isn’t immediately obvious when you first use them and only shows up later. If customers are looking for compatible printer supplies, they should stick with trusted brands. If distributors and end-users want additional information we recommend the Guide to the Clones produced by ETIRA.”

    Tougher times ahead

    The imaging supplies industry is undoubtedly a tough category to be in. We may be a long way from the paperless office, but print volumes and margins are declining. The perennial war between OEMs and both legitimate remanufacturers and illegal counterfeiters seem to constantly reach new heights, which some ultimately see as an existential danger to a whole sector.

    As Gigliotti summarises: “The industry has always been a competitive one, but it’s going to become more so. With aggressive consolidation and partnerships, and OEMs creatively trying to hold and grow market share with controlling technology and patented intellectual property means they are truly in the ‘box seat’. 

    “Meanwhile, the aftermarket is being dominated by fewer larger players and is now ripe for change. The dealers that ‘get it’ by understanding the upside margin available with remanufactured supplies and are fully invested in this $25 billion market, can put price pressure on the dominating suppliers, leveraged by a strong, low-cost, global competition. There’s never a dull moment in the imaging supplies business.” 

    http://www.opi.net/issues/2016/november-2016/features-november-2016/category-update-imaging-supplies/

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