Six dealers share their biggest concerns.
The February print issue of The Cannata Report features a panel of dealers from New York City to Washington State, representing dealerships ranging in size from just over $5 million to nearly $200 million. The panelists discuss topics such as acquisitions, diversification, their dealership’s recent performance, growth strategies, and what trends they’ll be following most closely in 2017.
Panelists included Dawn Abbuhl, president of Reliant, Albany, NY; Erik Crane, president of Copy Products, Springfield, MO Steve Gau, VP of Copiers with Marco, St. Cloud, MN; Frank Grasso, president of TGI Office Automation, New York, NY; Aric Manion, president of Kelley Imaging Systems, Kent, WA, JD Sullivan, co-owner and president of Image Matters, Knoxville, TN.
Because of space limitations, we couldn’t include all the interview questions in the print publication. With this bonus coverage we ask our panelists to share their biggest concerns about their dealership and/or the industry for 2017.
Abuhl: We are watching the HP/Samsung deal closely. Many of our customers are in markets where security is a significant issue and HP has been alluding to high-level security features. We want to make sure we have products that will compete with and surpass their offerings.
Crane: Like everybody else, the compression of margins both in hardware and service. It wasn’t as bad in 2016 as in 2014 and 2015, but hopefully it’s loosening up a bit in 2017. Just today we saw the Fed increase interest rates by a quarter point so maybe we’re going to see a loosening up on margins.
We’re also seeing increased pressure for market share from the manufacturers. They’re wanting to drive that business and what you did five years ago, 10 years ago, last year, doesn’t mean anything. We’re seeing decreasing service revenues. Contracts are decreasing in size as we have become better able to forecast what a customer is able to run and as the customer becomes more educated in what they should and shouldn’t pay for. You have to prepare for that. Finding and retaining good people. You have to train them. You find some good ones—you’re not going to put an add on a website and get six or eight experienced copier techs. You’re going to get some good people that you have to train.
One of the things that’s going to be a concern for all dealers is the need to continually reinvent ourselves as an office equipment dealer because the term “office equipment” changes so quickly and has changed so much over the years. It’s changing even more rapidly now and [because of that] we’re constantly diversifying and reinventing ourselves as to what the title “office equipment dealer” means.
We have to change quickly. An office equipment dealer now has to be a document workflow consultant from document origination to whatever format or whatever application the customer creates that document in. Being able to get it where it needs to go whether it’s electronic or hard copy, find it again easily, and print it wherever, however, and whenever the customer wants. So you’re doing mobile printing, document security—follow me printing—these are all different things we’re doing from a document standpoint.
Are clicks declining? Hardware clicks are definitely declining, but the amount of documents being produced is staggering and we just have to get those clicks electronically. Also, an office equipment dealer is providing solutions not only for documents, but digital signage—inside communication whether it’s a smartboard for an athletic department, a digital display for a cafeteria in a school or hospital, way finding, and room schedulers—all different things. We’re doing that all the way down to [seeing dealers] diversify into water systems. Whether the equipment is a water system, a digital sign, a printer/copier, software and MNS, being an office equipment dealer means providing the total solution.
Gau: For copiers, it’s maintaining service rates and margins. We’ve maintained and even grown our margins by improving efficiencies in our [business] model. We feel we’ve reached near maximum efficiency, so in order to maintain profitability we will need to maintain top-line rates. One manufacturer in particular has seemed to given up on holding service margins as they’ve nearly single-handedly brought down service rates in many of the markets we serve. Regarding IT, my biggest concern is effectively and profitably bringing our IT strategy in all of the markets in which we sell, so that we are one Marco everywhere.
Grasso: CPC pricing that is not sustainable and lower page volumes.
Manion: Continuing to acquire the best talent and be able to cash flow the payroll before the manpower becomes profitable. This is true with network engineers, sales leadership, and service leadership. Hiring a great team is the key to growing my business, but the cash flow hurts as all things take time to come together.
Sullivan: Motivation is the number one concern we have—keeping people happy and motivated in what we do. This is a burnout business. How do we keep things fun, how do we keep the environment positive for everyone here, and how do we continually motivate people to go out and do what we do every day? A lot of the traditional industry issues don’t concern us. We can’t control that, we can only control what’s inside these walls.
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