Expect a mix of challenges and opportunities in the coming year.
We are entering into the third year of dealing with COVID-19, a period of time we previously believed and stated on a Fridays with Frank episode that this virus would have run its course. We believed by the end of December 2021 things would begin to have more of a pre-pandemic look.
Why was I so wrong? I chose to interpret that COVID-19 was not a global problem but a North American one. Europe is now going through its fifth wave and as winter sets in, there is a good chance so will we.
Bear in mind, countries in Europe such as the Netherlands, Belgium, and France have 75% or more of their population vaccinated. We did not envision this deadly virus hanging around for another year. Here in the U.S, 60% of our population is vaccinated, which means 40% are fertile grounds for becoming infected. With 93% of those becoming infected being unvaccinated, there is no other way to look at this.
With that said, we must move on and go on record as to what 2022 will bring. Backorders will continue to plague us throughout the year. The reason is that much of the raw materials that go into all kinds of products come from countries in Africa and Asia that cannot even afford sufficient vaccines for their populace.
The print industry is not unique. Virtually every industry has sustained crippling losses from COVID-19. Walk through a mall near your home and look at the lack of inventory in the various stores. We are not the only industry with supply chain problems. That is my mea culpa (Latin for “through my fault”) for getting this one wrong.
The New Year is going to be a mixed bag of challenges and opportunities. We start with businesses that have the resources to obtain the necessary technology to make their workforce more efficient and productive. Here we are talking about software and IT Services.
On the downside, there are those manufacturers and their channel partners engaged in the enterprise who will have to address the loss of employees who will continue to work virtually. Balancing that will be opportunities in vertical markets such as healthcare, education, and legal.
As for dealers, the reduction of A4 MFP production at the expense of manufacturers ramping up their A3 production will find used and reconditioned machines becoming fully exploited to make up for the shortages. There is no other solution.
Those same dealers that have protected their business by diversifying into IT Services, and production and industrial print will have a productive year. They will also continue to acquire dealers that will compensate for the loss of clicks in the office.
The answer is services and production because of the demand. Businesses need the latest technology to offset the loss of employees and need to become more efficient anyway. They will be willing consumers of both. More specifically, commercial printers will be more prone to acquire industrial printers to replace the business they lost over the last decade.
The major driving force in industrial print is the fact that more than 90% of existing machines are analog. The demand for digital will increase dramatically in 2022 but still face the problem of backorders. This is still a hardware business. The good news is the average unit selling price of these printers is $500,000, with entry-level products selling at $150,000. The ink consumption is huge due to the use of inkjet. Dealers will be selling the ink in 55-gallon drums at an attractive margin. The manufacturers of these inkjet machines have prevented the use of competitive ink by patenting the feed mechanism.
Finally, we will have e-commerce, which will begin to find a home in the dealer channel. We know the problems and have heard interesting solutions from manufacturers of A4 MFPs. In the coming months, we will be addressing this subject in great depth. In the meantime, look around and see the number of businesses that are using e-commerce websites.
Don’t Underestimate Entrepreneurship
In January 2022, we will celebrate our 43rd year in business and 51 years of working in the copier industry in one capacity or another. It has taught us a great deal. That may sound boastful until you consider that I began my copier career by pushing a Saxon C500 (an electrostatic machine utilizing coated paper) on a cart in 1971. My first territory was Wall Street and John Street in New York’s financial district. I switched over to being a DSM for the same manufacturer in 1973. In January 1979, I made the break to go out on my own, and Marketing Research Consultants was born.
Over the past half-century, we have seen dealers overcome challenges from the manufacturers of the machines they purchased from them. American manufacturers told them they could not sell plain paper copiers. The Japanese manufacturers thought otherwise and began selling them to dealers in 1973.
The industry analysts claimed that dealers could not sell facsimile, nor could they take advantage of the conversion from analog to digital. It has never stopped. The advent of the mega dealer had financial wizards from Wall Street proclaiming the demise of the independent dealer. They never got tired of saying dealers cannot do it.
The point we are making here is that the independent dealer is and remains the most profitable means of marketing products designed for use by small and large businesses. Their business model has proven to be sustainable. Yes, dealers need to consider changing their approach to market in a unique way that we have already addressed. They must get involved in other areas such as services of all kinds and if possible, move upstream into production print. Nothing we have experienced tells us they cannot do it.
Why do we feel so strongly about this? We have come to know dealers that started their copier businesses in their garages and the backs of their cars. Those selling typewriters and dictating machines saw the opportunity and added copiers to their repertoire; others came from manufacturers of copiers who only sold direct. They believed they could go out and build a business of their own.
We learned what the meaning of the word entrepreneur means. We started in our basement and emulated the dealer work ethic and taking care of the customer. We built a business model that thrives on repeat business. Our supply and service revenues are subscriptions and advertising. Today we have clients that have signed annual agreements every year since 1995. We have others that are repeats from 10 to 15 years. There is no other way to say it. Dealers taught me what you had to do to be a successful business owner.
Dealers are not done, and neither are we. Selling print will be a profitable business for years to come. The only thing that will change will be less printing on paper and the use of different substrates including wood and textiles.
One unhappy former client texted me, “RETIRE!” That brought a great smile to my face. There is nothing more I personally enjoy than a challenge. That person will sell his business long before we pack it in. I will enjoy writing about that, and maybe then I will put the pen down.
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