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 user 2006-12-05 at 12:54:00 pm Views: 53
  • #17332

    Conquering consumables
    sales of hardware earning limited margin, the importance of an
    effective consumables channel has becoming distinctly apparent in
    recent years. Not only does the sale of supplies and consumables cement
    the vendor-customer relationship, but it helps build brand loyalty and
    ensures a continuous flow of revenue. Channel Middle East reveals how
    the market is shaping up.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.”

    Maximising margin
    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 add-ons 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.”

    Refillable market
    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.A-brand 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.

    Unauthorised channels
    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.