Ed Holden, Editor of IT Reseller Magazine, spoke with a number of leading analysts within the printing & labelling sector to gauge their views on a wide range of important issues; including brand consolidation, technological development and value-added opportunities for the channel.
In terms of key technological developments within the printing and labelling solutions space over recent years, Neil Frackiewicz, senior account manager of GFK, immediately homes in on the laser printing market. In recent times, we have seen the shift towards colour machines accelerate, particularly within the multi-functional sector where unit sales growth of 76 per cent (Jan-July 08 vs Jan-July 07 see Fig 1) has been seen, he said, adding: The single-function colour market has also grown, and has been reporting consistent solid double-digit volume growth rates. Frackiewicz also points out that all areas of the laser printer market have seen significant price erosion. This trend, he believes, has been driven by the increased availability of laser printers in SME and mainstream retail channels; something that has been made possible by the key manufacturers efforts to offer low-priced colour laser machines to the market.
Within the consumer printing sector, Frackiewicz maintains that the huge declines being seen in the single-function sector are offset only by the ever-maturing multifunctional market, which is holding on to some single-figure growth rates thanks to the continuing trend of aggressive promotion of key SKUs through the major retail chains. Technological advancements here have been very limited, Frackiewicz points out, although the increased presence of wireless-enabled devices, backed by the heavy promotional activity of the key manufacturers, has been a key recent trend and now (based on July 08 data) accounts for a fifth of the multi-functional markets value.
Shift in outlook
Peter Mayhew, senior European analyst at Lyra Research, points out that, over the past few years, the marketplace has seen a significant shift in the outlook for printer companies. The mainstream PC and printing markets have matured, particularly in the industrial markets of Western Europe, North America, Japan and Korea, he said. These regions are now focused on replacing existing output devices with new ones. Emerging markets like Brazil, Russia, India and China offer new growth potential, but are very price sensitive and their users tend to print less than those in the industrial markets.
Mayhew maintains that colour printing is one area that has some growth opportunities, particularly in small businesses. He cites a recent survey of 1541 small and medium enterprises in the UK, France, Italy, Poland and Turkey that indicated that 46 per cent of SMEs intended to purchase new devices in the next year and that they intended to acquire colour MFPs or printers (see Fig 2). While colour is a major part of their acquisition plan, most SMEs output will still be monochrome pages, due to cost and application requirements, said Mayhew.
He added that printer vendors are now changing their focus from printers to printing/capturing more pages, rather than selling more boxes as their prime objective. Printer and copier vendors are now looking at businesses overall output requirements and how they may capture more of the pages that had been previously produced on analog devices and move them to digital printers and MFPs, said Mayhew. Efforts like HPs Print 2.0 strategy are focused on different applications, like book publishing, silver halide photo printing and even traditional copying and how they can capture these pages. Mayhew added that, while many businesses have WiFi networks in use, wireless printing is still a niche requirement. In Lyras SME survey, 25 per cent of businesses intending to buy printers in the next year will consider wireless printing capability. The majority of businesses have an Ethernet infrastructure in place, which can handle most printing requirements, he pointed out. It is in specific locations where network cables are impractical that a WiFi printer will have some benefit.
Mayhew adds that the boom in handheld devices, such as laptops, smart phones, PDAs, GPS, and data collection terminals has changed data collection and printing requirements for a number of applications. In many ways, these handheld devices have eliminated the need for some casual printing applications, he remarked. For instance, it is now less important to print driving directions when there is GPS to guide us to our destination. Emails and attachments can be read on a laptop, smart phone or PDA and do not necessarily need to be printed, though printing may be more practical for large documents.
Mayhew stressed that there are still some strong print applications in mobile environments. Inventory control is still a major area where labels and RFID printers are required, he said. The harsh environments of manufacturing facilities, warehouses and even outdoor locations put serious strain on both the printer and the print media. He also recognises that printing is a part of the new wave of mobile IT. Rental car locations now have mobile data collection terminals and printers that will output renters receipts, but this is pretty much an established market with little new growth.
In addition, Mayhew points out that the marketplace is now seeing more handheld terminals and printers on board delivery vehicles, and that packages and delivery schedules are now being tracked via satellite. We have also seen on-board computers and printers for vehicles making deliveries of propane gas and other commodities, he added. The information is instantaneously loaded into the system and a receipt is printed from a compact thermal printer. This eliminates the need for handwritten multipart forms that are often difficult to read and require data entry that is both time consuming and error prone.
Furthermore, Mayhew has witnessed considerable development of print drivers for mobile devices, specifically for Windows CE devices; for example, NiceLabel (mobile label printing). But despite smart phones becoming an important mobile data and Web device, Mayhew points out that there has been little development in print drivers among the cell phone providers, despite a very strong need and desire for printing capability from users.
Less added-value opportunities
Sean Smyth, consultant for Pira International, points out that a few years ago dot matrix type applications used to be very prevalent in the printing solutions marketplace. I see very few of these now, he said. A fixed device in, say, the back office of a retail outlet is now likely to be thermal or inkjet. You see some laser printers but they tend to be highly specialised. Users tend to be choosing more generic systems, so they dont have to keep going back to the provider to buy expensive role stock. For the printing community this means that there are less added-value opportunities. A few years ago in the pharmaceutical sector, for example there would be a special label printed in black ink for each local pharmacy that would have the name of the pharmacy and its branch, and this would be stuck on, say, the front of a pill bottle. Today, with a relatively low-cost inkjet machine a pharmacy can put blank reels in and out comes fully printed colour labels bespoke for the particular outlet. It is a market that is moved away from the commercial printer because the more generic solutions are so attractive in terms of price.
Smyth cites one of the key recent developments as Smart labels. These are going to be time sensitive and temperature sensitive, so in the manufacture of certain high-value items and pharmaceutical is probably going to be the first sector as you pack a serum or a vaccine for, say, West Africa, youll put on a tag that will explain what the prescribed dosages is. And because the label is time and temperature sensitive it will make sure that you know if it has been stored at more than 33C, or whatever the critical temperature is. So you know that you have a batch of vaccine that is in date and hasnt been stored at a temperature that has killed off the vaccine. This is a very specialist area at the moment, but theres a lot of work being undertaken by, for example, charities. Some of the drug companies are putting money into this too. Smart labels can help make the product tamper proof as well, and they can also be invaluable in terms of brand certification and anti-counterfeit.
And how are the vendors currently incentivising distributors and resellers in the printing & labelling systems arena? Mayhew observes that vendors are now paying more attention to the cost of printing and are now offering resellers tools to help businesses better manage their print capabilities, both in terms of the printer and MFP deployment and supplies cost management. These tools help resellers and distributors work as partners with their client companies in their efforts to keep print costs under control, he said, adding: In addition, vendors are paying close attention to recycling and disposal of old printers and ink and toner cartridges.
Mayhew added that copier-based MFP companies, such as Ricoh, Canon, Sharp and Xerox, are developing suites of applications that will allow a variety of standard print tasks to be performed using the display capabilities of these devices. This is a relatively new concept and mostly a vendor-driven initiative at this point, he said. Over time, we expect end-user companies to begin to find specific uses for this capability in order for them to offer some differentiation to their customers. Mayhew remarked that resellers can also help small businesses to use colour more efficiently for their business communications. While many businesses have colour printing capability in-house, they often dont have the expertise to use it effectively, he stressed. Vendors do offer software packages that will help small businesses create colour documents, but there is more resellers can do to add value in this regard to their clients.
Are vendors today offering notably differentiated solutions, or has technology consolidation become pretty much the order of the day? Mayhew believes it is nearly impossible to maintain any differentiation on the technology side in hardware, software, or supplies. This, in his view, is because virtually all printers in the market have similar print quality, speeds and price structures for both hardware and supplies, and have solid service organisations in place. He adds that most of the major companies offer print management capabilities. Lexmark has tried to differentiate its ink jet printers through broad implementation of WiFi capability on a number of its products, but other vendors already have or can easily jump into WiFi. Price moves are also a temporary differentiator, he said. For Mayhew, the most important differentiators are vendors willingness to pay attention to both end-user and reseller requirements and implement strategies based on that information. That is a big reason HP has maintained a leadership position in printers, he said.
Brand consolidation has been widespread within the printing and labelling space in recent times. For Mayhew, the benefits and disadvantages of this activity are a mixed bag. On the one hand, it keeps the industry healthy, eliminating companies that are either poorly run or areas of a business that could not sustain a profit on the other hand, it consolidates the number of players, removing competitive forces that are necessary to provide the stimulus for growth and innovation, he said. The pendulum swings repeatedly between the advantages of direct and indirect business models. In todays competitive markets, neither vendor nor channel player can afford to wait too long for its partner to perform. We are currently seeing the channel changing, at all levels, to compete and survive.
Mayhew added that consolidation also means that vendors, distributors and resellers will be larger and less responsive to customers needs. Decisions are made on a larger scale based on the best profit opportunities, and input from customers often comes from responses to a broad-brush questionnaire that does little to truly understand what the customer requires, he said, adding: The message your call is important to us rings hollow to many commercial and consumer customers.
Has the growth in globalisation impacted on the type of business relationships printing & labelling systems vendors, distributors and resellers now have? For Mayhew, globalisation has had a notable effect on vendors who are now looking more carefully at the print requirements for emerging markets and focusing more of their design efforts on products that will fit those countries. Often, this will deal with different sets of supplies that are better suited to those countries, along with other design criteria that fit these new markets, he said, adding: This would have minimal effect on distributors and resellers focusing on specific countries or regions, but may have serious implications for companies that have a more global reach. Distributors would need to carry lines of products for different countries depending upon what the vendor offers. Resellers will also have to carry multiple product lines and will need to train their support staff accordingly.
Have there being any growing differences with regard to channel activity in certain vertical market sectors compared with others? Mayhew maintains that certain output-oriented vertical markets, such as business services or finance, have been more interested in both print management and in print application software that will help them manage their business better. They will look to resellers who can help them more with managing their printers and creating better documents in-house, he commented, also pointing out that they will take a more strategic look at their output requirements. In addition, Mayhew believes manufacturing and wholesale/retail will still be focused heavily on low-cost and durable printers, but that they will also look to resellers who can help them with factory and warehouse automation. Also, it is Mayhews view that government and education will be more concerned with low-cost, basic output. In the future, we can expect cost, security, and document management to be increasingly important in these market segments, he said.
Has channel activity in certain vertical market sectors particularly altered over the past few years? Mayhew has seen a growing interest in both the Internet and computer/electronics retail stores among micro businesses (1-9 employees) where price, ease of purchase and a wide product line are of critical importance while small (10-99) and medium (100-999) enterprises are more interested in support and relationships with the reseller although low price is still high on the list. According to Mayhew, there is also a big shift to multifunction devices, replacing single function printers in many locations driven in part by changing work patterns and office environments.
Has the perception regarding the benefit of using reseller channels changed over the past few years, or are the perceived advantages much the same as they have been for some time? In the past, resellers had been missing major opportunities in printing; viewing printers as just another peripheral and supplies as more of a nuisance than an annuity stream, remarked Mayhew. Over the past couple of years, resellers have begun to look more at the printing infrastructure of their clients businesses, and have realised that supplies are not only an opportunity for additional sales to their existing customer base, but also represent a chance to make frequent contact with their customers for myriad other sales. He added that the copier resellers have been very aware of the revenue stream for both supplies and service, and it is just recently that the IT resellers saw the light.
And with an eye to the future, what can vendors, distributors and resellers expect to be increasingly involved in, in terms of solutions offerings or business strategy? Mayhew makes the point that the days of selling a box with a printer inside are pretty much over in Western Europe. Most businesses have all of the mainstream printers that they need, and niches are niches and by definition not major opportunities. Nevertheless, resellers can gain some additional business by focusing on these niche opportunities like mobile printing or publishing, and also by developing expertise in certain specific print applications that will help small businesses compete.
Smyth reiterates that Smart Labels will become increasingly widely adopted. He cites how Esquire magazine has recently used the technology; printing 100,000 of a 700,000 run with a Smart cover. This says welcome to the 21st century, flashes and changes colour and this type of technology will be increasingly used in labels to attract the eye of the potential purchaser.
Mayhew offers the additional observation that there is a new breed of printer on the horizon page-wide array ink jet. As the name suggests, it is an array of ink jet printer nozzles that stretch across the entire page width, rather than scanning back and forth over the page. HPs new Edgeline technology is an example, and there are other companies expected to introduce similar products, many based on technology from a company called Memjet. While this new technology will provide faster and cheaper output than is available on todays comparably priced lasers, there is still some work to do on the quality of output from ink jets, said Mayhew. As these ink jets improve, it could have a significant long-term effect on the types of printers used in business.