Do you have a plan to replace A3?
One of the basic premises for success in the imaging business, at least for independent dealers, is staying close to the customer. That’s followed by giving the client what they need versus what they want, and finally, making the customer more efficient and profitable.
Manufacturers have bought into those messages and emphasize giving the customer what they need to be successful. However, dealers and their major A3 MFP vendors talk a good game but somehow manage to ignore reality. A3 MFPs are a declining segment as opposed to A4 which is also maturing. However, the latter provides the most efficient and cost-effective alternative for most end users.
In a recent proprietary survey, The Cannata Report asked a group of select dealers about their major concerns. Several cited the dilemma of replacing A3 with A4. As one dealer noted, “A4 activity is increasing and it is impossible for a manufacturer to be relevant without a competitive A4 line.”
The more successful dealer has addressed this situation by engaging in production print as well as MPS and IT services. The goal is to derive 50% of their revenue from A3 and A4 and 50% from the other three segments. That approach enables dealers to absorb the conversion of their MIF from A3 to A4.
If the object of the exercise is to give the customer what they need, then in more than 90% of the average dealer’s MIF, they would need a plan to trade out the A3 machines. This is not something that would be done in a year but over a 3- to 4-year period. There are still applications that require A3. Graphics is one example. There are others as well. However, those applications do not exceed 8% (and that is a generous estimate) of the current imaging business.
This should not be viewed as a threat to future solvency but an opportunity to address the future. Successful dealers have it figured out. Balance the revenue by expanding into at least three of the following: production print, managed services, software, telephony, and industrial print. Then support these other revenue opportunities with a compensation plan appropriate for the 21st Century.
Dealers often ask us, “Where do we begin?” Our response starts with wide format, then examines areas such as label printing and telephony. These opportunities have a low cost of entry that is manageable and give the dealer a platform to diversify, obtain net new customers, and reduce the impact of the eventual deterioration of A3 MFP.
The Cannata Report believes that the independent dealer channel is the most effective channel of distribution in the imaging industry. Manufacturers with products and services that make sense for this channel can build distribution for their products in months not years and do so far more profitably than by selling direct. However, there are still manufacturers whose thinking is embedded in the dark ages of selling and marketing in the coated paper, analog era that says, “Dealers cannot sell or service the more sophisticated products.”
If we were dealers, we would look for partners who believe in what we do and appreciate our capabilities and together build distribution that is profitable and sustainable in all the areas we have explored in this piece.
The future has never been brighter!