With industry projections showing a declining A3 market, the time is now for dealers to embrace the A4 alternative.
While many businesses still require and insist on A3 copier/MFPs, the last decade has increasingly seen companies switch to A4 devices. The advantages of A4 versus A3 are typically lower prices and smaller footprints, which enable organizations to deploy multiple units closer to users, versus a larger, centralized MFP located further away from some users.
However, U.S. office-imaging dealers have traditionally resisted A4, as most have built a business model around A3 systems with higher profit margins and long-term service contracts. And, historically, A3 systems versus A4 systems boasted lower cost per page, higher print volumes, and document-finishing options.
Now, as many enterprises realize they don’t require A3 capability–at least not in every department–and have learned about the A4 alternative, printer and copier manufacturers have been gradually introducing more A4 systems that can match A3 in terms of cost per page, print volumes, and document finishing. The resulting trend is more businesses deploying A4 systems, in all or parts of their organization.
While office-imaging dealers may have resisted taking on A4 printers and MFPs in the past, the tide is shifting. Savvy dealers are seeing A4 not as a threat, but rather as an important ingredient to winning clients and enhancing their bottom line.
The Art of the A4 Dealer
Chad Schwartz, owner and managing partner of the Arizona-based Imagine Technology Group, stated that his company “really took A4 seriously from the start” when it opened its doors eight years ago.
Imagine Technology has always focused on major accounts ($100,000 opportunities and up), and Schwartz explained one way to get in the door was to take over or optimize the client’s A4 fleet. In many instances, he has found that A4 volume is replacing A3 volume.
Imagine Technology sources its A4 devices primarily from Lexmark International and HP Inc., which Schwartz said both provide great support, along with solid products. According to Schwartz, Lexmark, in particular, does well in large retail environments and any setting where there are special media needs. HP, on the other hand, a staple with brand recognition for many CIO and IT professionals, makes the A4 conversation an easy one.
As for margins, Schwartz said, “We look at A4 a little differently. It is not all about the margins on the equipment. Since we are generally only looking at larger quantity placements of A4 products, the A4 fleets are a way for us to get in the door, whether it is full fleet replacement or optimization.”
Schwartz explained that once in the door, Imagine Technology will then go deeper into that account with managed network services (MNS), MFPs, phones, cyber services, and document management.
“Those additional services can provide the margin we are looking for inside the client’s business,” stated Schwartz.
Like many dealers, Phil Zangara, director at Image Systems & Business Solutions (ISBS), located in Elk Grove Village near Chicago, looked outside the company’s primary A3 manufacturer to expand into A4.
ISBS sources its A3 devices from Ricoh but sought out an alternative for A4. After due diligence, the company recognized the value of partnering with Brother International for A4 printers and MFPs for managed print services (MPS) contracts.
Having placed A4 machines for about three years, ISBS has enjoyed much success with Brother products.
“With Brother A4, we can go out and knock out large HP placements,” noted Zangara.
According to Zangara, ISBS has received tremendous support from Brother and the Brother A4 systems feature great return on investment, low total cost of ownership, and reliability.
“We offer A4 because we listen to our customers,” he said. “They don’t all need 11″ x 17″ (print and copy), but they also want reliability.”
Even though ISBS is a Ricoh A3 dealer, Zangara maintained the two lines play off each other very well.
“The Brother product helps us sell more Ricoh products,” he commented. “It’s just a great complement when we tie these two lines together, particularly with our MPS customers.”
ISBS typically installs some 20-plus A4 machines in deployments that may or may not include A3 which may be added later.
For the past two years, POA, headquartered in Portland, OR, has been seeing its HP A4 business gain serious traction. According to POA President Doug Pitassi, “HP finally got it. They have dealer exclusivity on some of their products and programs and are growing in a big way, in my opinion, because they really recognize the dealer channel is a strong channel.”
Pitassi also likes how HP’s cost of toner for their OEM cartridges is similar to the cost of compatible cartridges, which is a differentiator for dealers like POA who are using the HP A4 devices in their MPS programs.
Coordinated Business Systems in Burnsville, MN, carries Kyocera and Lexmark A4. The Lexmark systems are positioned more towards the medical market while the Kyocera devices are aimed mostly at the traditional SMB market. About 45% of Coordinated’s MFP sales are A4. What Coordinated President Jim Oricchio likes about the latest Kyocera A4 devices is that their per click prices are almost on a par with Kyocera’s A3 machines.
Are more customers catching on that they don”™t need A3 and that A4 will suffice?
“I really can”™t give you an honest answer,” replied Oricchio. “Part of the reason we sell more A4 is that it’s a differentiator if we are going against a Konica Minolta dealer, a Ricoh dealer, or a Canon dealer.”
As customers become savvy about A4 and the OEMs refine those products more, Oricchio wouldn’t be surprised if the percentage of A4 devices Coordinated sells eventually surpasses A3.
Latest A4 Developments
The OEMs continue to enhance their A4 systems with larger screens, increased speeds, greater paper capacity, security, and connectivity options.
Lexmark has focused on developing sturdily built systems, for example, the introduction of the XC6152 and XC8160 models. For these products, Lexmark incorporated an all-steel frame that increases rigidity and all but eliminates concerns over paper-path and image quality. In 2018, Lexmark refreshed 90% of its product line-up with models featuring steel construction frames that are built to last, leading to a significant reduction in parts and screws in the final design–making them easier for dealers to service–and ultimately providing better reliability and profitability.
Sharp has been making huge strides to strengthen its A4 line during the past two years.
“The one thing we’ve tried to do is bring continuity between A3 and A4 as far as interfaces, features, and functions,” revealed Tony Titone, senior marketing manager at Sharp.
That’s a change from the days when A4 interfaces and connectivity were different compared to A3, which meant end-users had to learn how to operate two different systems in an office.
Most of the best-selling Sharp A4 devices now have more A3-like features and 7-inch screens that mimic the 10-inch screens on Sharp’s A3 devices.
“These are fully loaded, as far as processor, screen, and security,” emphasized Titone. “Among our color and monochrome A4, we share a lot of similarities like paper decks and cabinets. We’ve tried to make it easier for our dealers to not keep as many accessories in stock.”
Now that Sharp dealers don’t have to complement their A4 offerings with other lines, Sharp is providing them with a very competitive CPC on monochrome models that provide decent margins, according to Titone.
“That’s the reason they don’t like to sell A4 (low volumes, smaller margins),” he noted. “Everyone still likes that click and the maintenance schedule on the A3, but you need A4 to supplement A3.”
Kyocera will introduce a new line of A4 devices later this year. According to Chuck Clarke, product marketing manager, Kyocera Document Solutions America, Kyocera takes a holistic approach to its A4 products and incorporates much of its HyPAS operating system applications and functionality found on its A3s. The A4s will be Kyocera Fleet Services (KFS) ready, which enables remote monitoring.
“As we grow, we’re trying to add more A3 functionality [into our A4 line],” revealed Clarke. “By that, I mean raising the bar by adding finishing. The new products will have a standard internal finisher, with the standard automatic stapler and stapling up to 50 sheets, which for a desktop is quite a lot. Most of our competition is around 20 or maybe 30 sheets at a time, so 50 is a nice number.”
With security concerns growing, Clarke noted that Kyocera will provide the new models with free data security kit activation. Also, because dealers like having fewer SKUs, there’s been standardization on the toner and maintenance kits across the product line. Kyocera is also expanding the toner yields, in some instances nearly doubling them.
Kyocera will continue to improve the cost per click, including introducing a 40K yield toner cartridge for its 62 ppm A4 model. That’s up from 25K, which Clarke said would make a difference in the cost per print.
What’s next for A4?
Kyocera’s Clarke expects to see more optional internal trays and optional stackers as well as an A4 console configuration.
Sharp’s Titone doesn’t see speeds going much over 55 ppm (even though Kyocera has a 62 ppm device in the pipeline), reasoning that most OEMs don’t want to cut into their A3 business. There may also be some tweaks to the finishing capabilities, but Titone offers a caveat.
“When we came out with our Frontier models, those had more advanced finishing than we are offering now, but we just didn’t see the demand for it,” acknowledged Titone. “If customers need finishing, we”™re stepping them up. We have basic finishing in our A4s but no external finishers.”
He also sees the processors on A4 devices catching up with those found on A3 systems. Screen sizes may also expand. While at least one manufacturer has already introduced a 10-inch screen, Titone is skeptical.
“I don’t know if that adds any user benefit. I’d rather spend the money elsewhere and give them another feature.”
Gaining Traction
For Phil Boatman, director, business development and alliances, North American business channels at Lexmark, the company’s dealer program is instrumental in gaining traction in the A4 arena.
Lexmark launched its North American dealer program in 2007 with a small group of business development professionals. Through advisory councils and early learning, Lexmark fine-tuned its dealer program leading up to the introduction of an A4 line and corresponding toner for the independent dealer channel.
“This was the tipping point that got dealers to take Lexmark A4 offerings seriously,” explained Boatman. “The Lexmark team listened intently to its dealer community, and their feedback provided a path for a sales-coverage model that put our reps in front of dealers regularly, vying for mindshare and helping them win more deals with A4.”
Lexmark’s diligent, dealer-focused strategy has paid off.
“Ten years ago, Lexmark had to demonstrate to dealers that there were multiple A4 devices placed for every A3 placement,” said Boatman. “It was an educational process to show our dealers where to find the opportunity. Today, most dealers not only embrace an A4 strategy for growth but also understand the need to protect their A3 installed base from the competition and look for ways to grow that base along with A4 to lock-in customers.”
In North America, Boatman reported Lexmark’s dealer business has seen nearly 20% compound annual growth over the last 10 years, with much of that revenue coming from A4. In 2018, Boatman stated Lexmark’s North American dealer business experienced double-digit revenue growth.
Projections from market research firms such as IDC, InfoTrends, and KeyPoint Intelligence show that the A3 market in North America is flat to declining in nearly every segment. Any growth a dealer is realizing in A3 is most likely coming from competitive replacements. Conversely, that same industry data for the A4 market in North America shows growth in every segment, which Boatman said makes it “fertile ground for dealers to grow with Lexmark.”
Lexmark has added several sales resources to its channel organization in the last two years, specifically focused on mid-enterprise and state/local opportunities. These high-growth areas have naturally led to an increase in up-down-the-street business for Lexmark dealers as well.
“Dealers are growing with Lexmark in multiple ways,” Boatman said. “The time has never been better for dealers to partner with Lexmark for profitable growth.”
Boatman also noted that Lexmark developed its Lexmark Business Solutions Dealer program to support the traditional dealer model.
“With dealer-unique models and toner, profit margins are strong and enable dealers to go after all opportunities with confidence,” added Lexmark’s Greg Chavers, vice president, North American channel sales, who noted profit margins as a percentage of revenue with Lexmark A4 devices are on-par with A3.
Access Related Content
Visit the www.thecannatareport.com. To become a subscriber, visit www.thecannatareport.com/register or contact cjcannata@cannatareport.com directly. Bulk subscription rates are also available.
.jpg)