Small and midsize dealers reflect on the state of the document imaging industry and their businesses.
Above, clockwise from top left: Belanger, Everson, Lopez, Schwartz, Seretis, and Simpson.
There’s a misconception about The Cannata Report that we tend to focus on larger dealers. Nothing can be further from the truth. If you look at the CR-Connect Dealer Tour profiles of the past five years, you’ll see a fair amount of small and midsized dealers represented. And some of those dealers have become some of our best sources on an array of topics. For this issue, where we ponder the future of the independent dealer channel, we are focusing exclusively on a group of small and midsized dealers.
Our panel addresses daily challenges, manufacturer relationships, navigating their dealerships through the pandemic, why they are successful, and how they envision the future for dealers of their size.
Panelists include Ray Belanger, president, Bay Copy, Rockland, Massachusetts; Earl Everson, president, Elite Document Solutions, Schaumburg, Illinois; Mallory Lopez, controller, Barlop Business Systems, Miami, Florida; Alan Schwartz, managing partner, and Van Seretis, principal, Premium Digital Office Solutions, Parsippany, New Jersey; and Kevin Simpson, president, Southwest Copy Systems, Albuquerque, New Mexico.
CR: What are the biggest challenges your dealership faces daily?
Belanger: Right now, the biggest challenges are the ongoing supply chain issues. We have a large backlog of equipment orders that we can’t get funded because we can’t get delivery. In addition, issues with supply shortages result in a daily fire drill on keeping our clients up and running.
Everson: As a small dealership in a large market, we struggle in two areas that hold us back from the growth we would like to have to compete with the larger companies. We find it hard to compete for larger opportunities because our pricing level is a lot higher than the larger dealerships placing big orders. Secondly, recruiting great talent is another struggle because so many reps would prefer to represent a larger organization.
Lopez: Today, I think the biggest challenges our dealership faces on a day-to-day basis is hiring and retaining personnel, and noticeably the supply-chain disruptions we’ve been experiencing. Hiring and retaining personnel has always been a challenge, but the Great Resignation has presented a completely different side of this for us. Barlop really prides itself in the longevity of our team members’ tenure, the average of our organization being 20-plus years. Although we have not had any resignations within our longer-tenured team, it does seem as though the turnover with the newer staff has increased. Finding new talent has also been challenging as we don’t like to hire to just fill a position but rather put someone in a role that fits our company culture and who is looking for a long-term relationship with their employer.
Schwartz: Our biggest daily challenges are the supply chain and staffing. It has been a huge disruption just trying to source products and supplies through various suppliers on a daily basis. Plus, with the tight labor market, it has become harder to find the right person to fit within the job requirements.
Simpson: Hiring. Coming out of the pandemic, we had some long-term employees retire, and they have been difficult to replace. The day of being able to move employees to a new employer has become difficult as the wage required to get them to move is much higher. We have been hiring younger, 19 to 23-year-olds looking to develop skills and get into the workforce, which has been successful. The issue with younger or new-to-the-industry hires is the time before they are fully productive in the field is much longer, but the long-term benefit is they don’t bring bad habits that may have developed with a previous imaging dealer. The other big issue is inventory, especially in A4. With the switch to WFH [work from home], A4 is in high demand, causing the biggest day-to-day issues, sometimes up to three to four months.
CR: Can manufacturers do a better job of meeting the needs of their smaller and mid-sized dealers? If so, where can they start?
Belanger: Small and mid-sized dealers need help on pricing programs that put them on equal footing with larger dealers and directs. Complicated pricing programs and excessive documentation force dealers to jump through hoops to compete. It’s not a good use of their resources.
Everson: Manufacturers could offer the small to mid-sized dealership comparable pricing that the larger dealers receive. I know certain manufacturers do a great job having local representatives help on a weekly or monthly basis for the sales team. Having local support is of great value-add to dealers of my size because it’s nice to show customers that we have manufacturer support.
Lopez: Our primary line is Ricoh, and overall, I think they do a great job of providing support to our organization. I think in this industry, it’s the norm to feel like the manufacturers are always going to cater to the larger players. One setback I feel that the pandemic has brought on is a lack of hands-on support and training the manufacturers were once providing. A lot of the in-person interaction and education that our sales reps and technicians used to experience has transitioned to virtual, and I feel this creates a disconnect and disservice to the organization. We are definitely missing the large corporate gatherings that presented educational and social aspects that we’re all in need of, and this might be the perfect place for the manufacturers to start.
Seretis: They can do a better job by distributing their products to all of their dealers, not just the larger ones or to the manufacturer themselves. There must be a way to split up whatever inventory is coming in to help small to mid-sized dealers, and not just the larger ones.
Simpson: Yes. Most OEMs seem to favor the larger dealers with programs and pricing that benefits larger dealers. I understand the reasoning behind it, but it can make it more difficult for the SMB dealers in some cases. In the past, OEMs could use backend monies to help the smaller dealers (MDF, Co-op, etc.), but we’ve seen a sharp decline in what some of the OEMs offer today. The other issue is pricing support. All OEMs will go to the well for bids, but SMB dealers live in the down-the-street business and smaller takedowns (five to 10 units). These deals don’t usually qualify for special pricing, which can put us at a disadvantage when competing with large dealers because of the better pricing tier they may be able to purchase the equipment. This has been amplified by the pandemic, where the smaller dealer may not be stocking as much inventory and reserving cash instead of putting it on the shelf and tying up cash flow. I don’t think there is a simple answer for the issue, but OEMs need to remember that the smaller dealers, especially in smaller markets, need pricing support to continue to drive profitable business.
CR: In a competitive situation, why do customers choose you over a larger dealer or an OEM’s direct branch?
Belanger: Clients choose Bay Copy if they value simplicity and high levels of local customer service, eliminating pain points they have had with larger organizations that are difficult to deal with and have constant turnover. That being said, small and mid-sized dealers need price support in order to even be in the conversation.
Everson: There’s no question that we win our opportunities because customers love the personal touch and attention that we provide. Larger dealerships and OEMs have massive turnover rates, and we continue to build more secure relationships with our customers.
Lopez: I’ve said this many times before, and I’m constantly sharing it with our sales team: What differentiates us from larger dealers or directs is simple. Barlop is small enough that every customer means something to us, and our number one priority is always going to be customer satisfaction, but we are large enough that we can make a difference in their business by providing the best service and products every time. A larger organization like a big dealer or a direct branch loses this advantage because they are too large to be able to worry about every customer and make them a priority. Compared to a large organization, our local decision-making process is much quicker, which benefits our clients and prospects alike, with much less red tape. There have been plenty of experiences for us where we lose a client to a larger company due to lower price, and the client ends up willing to pay a higher price for us to buy them out of their contract because they are not satisfied with the lack of service they are being provided.
Schwartz: Our clients will normally choose us as a smaller dealer over a larger one or even the manufacturer for that matter because they don’t make them feel important as clients. They feel like they are just a number to them. We have been told that there is always a new salesperson trying to sell them something, instead of listening to their needs and coming up with a true solution that not only makes sense fiscally but most importantly helps their business grow. The customers don’t like calling their service providers to then leave a voicemail versus talking to a live person and feeling that the level of service just isn’t up to their standards. We have clients for over 30 years using our model, and we make it a priority as business owners to get to know just about every one of our clients, either via a phone call or a welcome email.
Simpson: The simple answer would be “we have better service,” but there is much more to it than that. One of my sales reps once came up with the slogan, “We suck less!” which is comical and somewhat true but not a good marketing slogan. The truth is that smaller dealers are nimble and very detailed. These two virtues make our ability to service the customer better in many ways. By being nimble, we can make decisions quickly and resolve clients’ problems much quicker than the OEMs’ direct or a large dealer playing in a smaller market by being able to make the decision on site. Decisions to let techs harvest parts off new demo equipment to get a customer up, or replace a machine that seems to cause continuous issues with a new one, or needing to provide a small credit for an upset customer that feels it is needed is something that OEMs and large dealers must get high-level approval for. Being more detailed also helps the smaller dealer stay more competitive. We watch the day-to-day processes much closer, allowing us to make decisions that OEMs and larger dealers may need to dig into before making. In the end, all the efficiencies and details make our service better for the customer and continue to make us successful when competing with the OEMs and larger dealers.
CR: It’s been a tough couple of years, starting in March 2020. What was the best decision you made during this time to ensure that you would still be here today?
Belanger: Doubling down on our people. The pandemic and the supply-chain problems have been extremely challenging for all of us. Early on, we made the decision not to layoff or furlough any of our staff. We did not know at that time if there would be any help from government programs. In a time of great uncertainty, we wanted to show our employees that we had their backs. Fortunately, we were able to work through it as a team, something we are all proud of.
Everson: I made two decisions that worked out extremely well for me as COVID hit so many companies in the world. One, I implemented our flat-rate billing program six years ago, which guaranteed us all of our service revenue on a monthly basis even though print volumes were gone. Secondly, social media marketing. I got the upper hand on my competition because most were laid off or they went to another industry. This was huge for us!
Lopez: First and foremost, at the start of the pandemic, we had our sales reps reach out to every single customer to touch base with them and ensure them that we were doing everything we could to help them and to let them know we were open to serve them with whatever needs they had. Second, we focused on the well-being of our personnel. A small business is nothing without our team, and we emphasized that to all our members. We did not furlough any employees or reduce hours or pay, and essentially this created a stable environment for everyone by making them confident that we were going to get through this. Ultimately, it made us a stronger organization because of it. In addition, we diversified the products and services we sold, including thermometer and camera kiosks, filling the gaps that our clients needed at that point in time, creating new revenue streams.
Seretis: We decided as a company before this pandemic to diversify our offerings and to be able to go wider in our accounts. We also utilized every tool that was available to us during the shutdown. For example, the PPP [Paycheck Protection Program] offered us the ability to keep all our employees on our payroll and continue our operations without skipping a beat. We were told by many clients how impressed they were with the way we were handling everything during the pandemic.
Simpson: When everything hit the fan, we moved very quickly to see what our best line of action was, and we decided to stay the course. Not knowing what was in store, it was a very difficult decision, but we feel it paid off in the long run. We got the PPP monies and decided not to make any changes to our staff. This one decision has made coming back much easier and built employee loyalty by allowing the staff to be home, at least in the beginning, without having to worry about where their next paycheck was going to come from. Now that we are all back in the office, we continue to be thankful for the loyalty and trust our employees put in us.
CR: What qualities are essential for a dealership of your size to be successful?
Belanger: Be flexible, nimble, resilient, humble, and most of all grateful.
Everson: You can’t be what you’re not. Don’t try to be a large dealership because they have a lot more issues than what we have. Sell what you are, how you’re going to help the customer and be different in your marketplace. You’ll notice that the big dealers will try to be like you when you figure out what’s different and better than the rest.
Lopez: Efficiency to be able to scale; adaptability while prioritizing customer satisfaction.
Schwartz: Ownership and management must be involved with the business every day. We have great employees that are essential to our success, and working as a team is the only way to stay successful.
Simpson: The biggest thing for small dealers is culture. Being open with the staff about company plans and structure for growth is essential. Everyone needs to know the end goal, and by collaborating with the team, we all know where we are headed. We also have an open-door policy allowing any employee to be able to discuss any issues, ideas, or concerns. This has proven to be highly successful.
CR: Do you see a future for dealers like yourself, and if so, what factors other than those identified in the previous question will determine your longevity?
Belanger: I think there is still a promising future for small and mid-sized dealers. As the industry continues to consolidate many mega-dealers and directs are becoming more distant from their customers. There is a void that can be filled by those that pick their sweet spot and work it hard. Change is inevitable, but sometimes, it’s better to not get distracted by all the noise.
Everson: Stop watching other people and how they’re diversifying their businesses. Go with what the customers need and become great at it. As long as people go into an office to work, there’s so many things that you can offer to help bring value to any organization. Just open your eyes and be creative.
Lopez: Although I do see it becoming more challenging for small to midsized dealers to exist, I feel like there is always a space and a future for us. Entrepreneurs do whatever it takes to get better, grow, and thrive, and that’s not something that can be changed. I think the industry will evolve into more offerings, as it sort of already has, and so long as dealers continue to stay ahead of the changes and always continue to look for the best technology, products, solutions, and services to provide their customers, I can’t imagine that the big players will push us out. In fact, I feel as though the big players give us the ability to exist. We’ve seen it happen in the past. Large organizations buy many smaller ones thinking they can dominate local markets, only to grow beyond their means and create a too costly management infrastructure. That becomes counterproductive, and you lose local decision-making abilities, and eventually have to sell, which, in turn, allows growth opportunities for smaller and midsized dealers to expand all over again to continue thriving.
Schwartz: We see a great future for our industry. The future for businesses like ours is the fact that we can turn on a dime if we must. The larger companies just can’t move that fast and in most cases are in their own way. There are too many layers to go through to get anything done. We compare ourselves to a speed boat versus a cruise ship. It takes a long time to turn a cruise ship versus a speed boat. Additionally, we make it a point for our clients to know us as the owners of our business, and we are always available to our clients should they ever need anything. It’s all of the details and moving parts that really add up, in our opinion.
Simpson: Yes, especially in smaller markets. The ability of smaller dealers to pivot and change or add offerings quickly will always be a strength that smaller dealers can use to stay relevant and bring more and better service and support to our customers.
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