Brace for continuing page-volume declines.
Imaging equipment dealers and OEMs know firsthand how the printing industry has experienced single-digit declines for the past several years—long before dreaded COVID-19 entered the economic fray.
“The technological shift and page migration toward digitization is nothing new among businesses, schools, and governments,” said Charles Brewer, president of market research firm Actionable Intelligence. “But the pandemic has accelerated this trend.”
As myriad employees worldwide were forced to leave their offices and work from home earlier this year, printed page volumes dropped steeply, especially in the A3 and big A4 space, where Brewer estimates an 80% reduction in pages in the late first quarter and the second quarter of 2020. That number was a gut-punch, “even to war-worn people in our industry,” he observed.
Through July, different paper mills shut down temporarily or cut capacity. For fiscal year 2020, overall print volume is down approximately 25%, according to Brewer. Even with most U.S. schools still closed, students, parents, and office workers alike do not print nearly as much when they toil from home or in decentralized working environments.
For toner and ink remanufacturer Clover Imaging Group, April was the worst month. “We were down 50% in volume,” reported Clover President Eric Martin. “No one was in the office.”
Supplies Network was sinking in the same boat.
“Our daily [consumables] sales hit a low that month,” revealed Monte White, senior vice president of product marketing, Supplies Network. However, print volumes for the firm’s fulfillment and managed print services (MPS) have picked up steadily, almost monthly, since then.
“The market is coming back,” reported White. “We see it, and the manufacturers see it.”
Demand has grown for lower-end inkjet and entry-level A4 laser printers, along with their associated supplies.
“We are at full capacity at our inkjet facilities in Michigan and Mexico, supporting large retail customers and the new mobile workforce,” said Clover’s Martin.
Availability Challenges
Because OEMs sliced production in March and April, some vendors had difficulty keeping up with increasing demands. OEMs sliced production in March and April, creating availability problems as the market demand picked back up. “Global supply chains are highly disrupted,” noted White.
Transportation and logistical issues plague all industries, not only the printing industry. There have been port delays and domestic issues for LTL (less than load) freight carriers, as well as full truck loads. In addition to bulk shipping delays, parcel service is running slow as well, due to the availability and reliability of carriers.
“The delays for consumables and devices are as bad as I’ve seen in my career,” acknowledged White, who has been around the industry for more than 30 years.
In the fall, normal seven-day deliveries over-the-road and rail were taking anywhere from 10 days to two full weeks.
“Depending on the manufacturer and region, there still are shortages and supply-chain issues,” reported Brewer.
Martin added that Clover has benefitted from inkjet supplies on backorder from the likes of Brother, HP, and others.
On the pricing side, Supplies Network’s White said he has not seen typical, scheduled increases from equipment manufacturers this year.
“My take is that [OEMs increasing prices] probably is not the right thing to do in these difficult times,” said White.
The reverberation effect is that as recurring consumables costs remain flat and do not increase, end-users are less inclined to engage in equipment-refresh strategies.
Research-and-development investments have slowed but not entirely halted amid the pandemic. Product manufacturers are beefing up firmware by programming computer chips in cartridges to communicate with machines, according to Actionable Intelligence’s Brewer. “This technology drives third-party guys crazy,” he said but it is one way to help OEMs remain competitive.
For remanufacturer Clover, sales are about 15% to 20% below pre-COVID numbers, according to Martin. “Our October was very good, month over month,” he said. Looking ahead to 2021, he says large, enterprise accounts might not see employees returning to the traditional office until next June. “We are cautiously optimistic,” Martin added.
Supplies Network is heading into the new year with fairly conservative estimates as well.
“We are forecasting based on third quarter and fourth quarter activity, modest growth,” reported White. “There still are a lot of unknowns,” he cautioned, citing the late-year surge in COVID-19 cases as an example. The situation may vary geographically. “We really can’t look past six months.”
Actionable Intelligence’s Brewer concurred. “Europe was getting back to normal in September, but now there’s a resurgence in Belgium, the U.K., and France.”
Hospitality, food, and restaurant industries abroad may again go into full lockdown mode. At press time, the COVID situation has been worsening in the U.S. too.
Rolling with the Changes
“We all need to grasp the reality of the situation and make adjustments to business plans accordingly,” recommended Brewer.
A telltale sign, he said, is that there are no industry tradeshows or dealer gatherings planned in the near term. “The next couple of quarters are going to be tough,” he stressed. “My expectation is that there will be another U.S. lockdown.”
White thinks that the business climate eventually will improve but will not get back to where it was before COVID-19. Unfortunately, he believes the trends of people working remotely—and printing fewer pages—are here to stay. Employers are realizing cost savings from a more remote workforce. Because print volume drives consumables, how can dealers combat the trend.
“Continue to sell the value proposition and lock customers into MPS solutions,” advised White, who sees OEMs stepping up their e-commerce aftermarket efforts and aggressively pursuing intellectual property infringement cases.
Brewer, who closely monitors this area, has not necessarily seen an increase in lawsuits during the pandemic, but he said OEMs are not letting up either. Given the install-base shift to more A4 consumer machines, he expects to see more litigation going forward.
People are working differently, and channel partners need to change their thinking, too.
As printing is reconfigured on fewer A3 and centralized A4 devices, there are other equipment opportunities, such as device refreshes. White recommends that dealers think less about consumables, per se, and more about relevancy.
“Site access restrictions and lockdowns are the new norm, jeopardizing your ability to repair, replenish, and refresh customer fleets,” he said.
Compound that with the work-from-home trend, which threatens OEMs because demand has increased for alternative products.
“Remanufacturers continue to compress as part of their straight price play,” noted White.
Another trend that will gain steam in 2021 in response to lower margins for cartridges and supplies are refillable ink reservoirs such as Epson’s EcoTank, as well as HP’s QuickSilver MPS and Instant Ink plans, according to Actionable Intelligence’s Brewer.
Meanwhile, remote device management has become a bigger deal. There are different dynamics associated with printers these days. Managing alerts through firmware allow dealers to resolve problems virtually. Supplies Network offers mpsSELECT, which features HP Smart-Device Services integration. It also offers barcode supplies for Zebra barcode printers.
Clover’s Martin encourages similar, out-of-the-box thinking, especially during these trying times. In addition to his firm’s strong retail division, Clover launched lines of wide-format printer cartridges and barcode supplies. “We are trying to help our customers drive additional revenue streams,” he said.
Clover also started up a PPE (personal protective equipment) division, producing masks and face shields in its Vietnam facility and sourcing disinfectant wipes and hand sanitizer in the U.S.
“This division has helped to fill the gap and continues to grow as these products are still very much in demand,” said Martin.
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