Positive trends and new opportunities indicate a bright future for the channel.
After spending three months going through our 38th Annual Dealer Survey, we have every reason to be enthusiastic about the future of our industry–an industry fully capable of embracing diversification. What we came away with is that the consolidation we are experiencing within the dealer channel is becoming a huge plus.
The average revenue of the 458 respondents to the survey was $17.3 million. Sixteen dealers indicated that their revenue was more than $100 million. If we take out those 16, the average revenue for the remaining 442 dealers was $12 million. That is not a bad number.
What does that really mean? It tells us dealers have sufficient resources to diversify their business. They can enter production print and IT services and improve their managed print services offering. There are a host of other equally significant opportunities that they can take on.
Exploring Diversification Opportunities
In our efforts to appeal to dealers that need to be more aggressive in diversification, CJ and I committed to present to a host of independent dealer groups to address the subject of diversification. We attended five meetings in 2023. We were very pleased with the response we received from the dealers. They were eager and willing to embrace the concept of adding new and different revenue streams to the business.
One telling factor about dealers exploring new opportunities has been the growth of other manufacturers in both A3 and A4. In A3, Epson and Xerox both added many new dealers. For example, Epson had 15 dealers select it as their No. 1 manufacturer in A3, and Xerox had 16. Bear in mind, we give dealers a total of four positions to place their A3 and A4 providers. Xerox had a total of 40 dealers that placed it in a secondary position, and Epson had 25. A total of 120 dealers selected Epson and Xerox in 2022. Those two manufacturers combined had 26% of the dealers in the 38th Annual Dealer Survey selling their products.
Considering that Epson was severely hampered by the pandemic as the OEM had not released its complete initial offering until the post-pandemic period, that was quite an achievement. Xerox gained dealers due to its excellent production print line.
Diversification and A4
In the A4 arena, Brother had 19 dealers select it as their primary source, and a total of 57 that placed it in a second-place position. More impressive was the fact that those combined 76 dealers increased their revenue year-over-year by nearly a half-billion dollars. Brother and these dealers not only added numbers, but also substantial revenue.
You can look for these three manufacturers to continue to advance in the dealer channel. We will say not only in numbers but also in average revenue per dealer.
Then, there are those dealers that are already excelling in production print and IT services. Their efforts in MPS are also helping them grow A4 at the expense of A3. We have devoted entire issues about production print to demonstrate what dealers are doing and how they do it.
You cannot diversify without a significant opportunity staring you right in the face. It is there for every dealer, to differing degrees. What does diversification do for you? It allows you to sell something new and different to existing customers, or it gives dealers a vehicle to add net-new customers to the MIF.
Diversification and IT Services and Production Print
IT services is equally important, particularly with growing cybersecurity threats. If you can solve that problem for a client, you are a winner. Dealers that excel in that would receive a huge reward for customer loyalty. That is real, that is today, that is available to dealers.
We are often asked, what do you do first? My answer is always the same. Production print first and IT services second. Why? Production print enjoys a higher margin than IT. It also provides a quicker return. Once you get that done, IT, which garners a lower margin, takes longer to sell and requires additional resources. You can also afford to be more patient with managed IT.
We mentioned A4 MFPs as something that can be exploited. Our answer to those who think we don’t get it is to look at what Toshiba introduced at its recent dealer meeting. The company introduced products that can do more than the traditional A4. How about e-commerce in the supplies area directly from the MFP?
Always look upon challenges as opportunities. There are still trillions of pages being printed every year, and print is far from dead. You also should be conversant with the latest developments in print technology.
Packaging, labeling, large format –all inkjet—is a growth area in print. How many of those are there? The shortcut to success is to learn from your fellow dealers. All of you have friends in the business who are not competitors. Seek them out and see what they are doing, and perhaps together you can come up with answers to a difficult problem.
That is right, we said difficult. None of the things we have mentioned are easy. They are expensive as well. You cannot think of any means of diversification that will not cost a significant amount of money.
Risks and Rewards
There is an old saying, that the greater the risk, the greater reward. That applies here, and we wish each of you facing this difficult time to believe in yourselves. Once upon a time, you built a business and made it successful. The mere fact you are still doing it is proof of that.
What you need to do now is reinvent yourself. We promise you if you are patient and willing to invest, you will be successful. The degree of success comes down to how well you adapt your business to new technologies and software. Think of it like you thought of it when you started your dealership.