How Much Will The Copier Industry Change?

Significantly, if you pay attention to the research companies! I recently read a research report that indicated that mono copier based MFD placements had declined from 1.1 million in 2007 to 900,000 in 2008 and will decline another 20% in 2009. This analysis showed mono copier based MFD placements in the low 500,000s by 2012 (in case you missed it that is less than half of the 2007 placements). Think the answer is a shift to color? Not according to this report that showed color placements fairly static, rising from 250,000 in 2007 to 292,000 in 2012, after initially falling in 2008 and 2009. Nice percentage increase but only 40,000 units.

So a research group and their crystal ball are suggesting a “sea change” in the copier industry! Maybe they are wrong; it certainly would not be the first time. Maybe they are only half accurate and the industry will decline from 900,000 mono placements (let’s give them credit for accuracy on an event that already occurred, 2008) to 750,000, and color will remain under 300 thousand units. What will the industry look like when total placements decline from approximately 1.35 million in 2007 to 1 million in 2012? That is a 30% decline in placements. I would keep in mind they are stating that will occur this year, so they would have to be really far off in their predictions.

Let’s throw in the shift to A4 copier based units. Regardless of your desire, over the long term A4 will replace many A3 units at a lower average unit selling price (AUSP). Since we still have the same major copier manufacturers today as we did last year we clearly have a production over capacity issue: There are more factories pumping out more copiers than can be absorbed by end users. Over capacity—as any economist will tell you—leads to lower prices (the old supply and demand theorem). So you have a couple of dynamics suggesting AUSP will continue to decline.

Don’t jump off that ledge just yet! How do you deal with this news? In a word, “PLAN” for it. It wouldn’t surprise me if one or more copier manufacturer merged operations or was acquired by another manufacturer; in this situation operations being defined as technology and channel (dealers). It also wouldn’t surprise me if we had 50% fewer dealers by 2012. Fewer product placements will result in less distribution, either planned or unplanned. This is another fact to discuss with your economist friend.

So PLAN on being one of the thriving survivors!

Put together a strategic business plan that models out the change over the next five years. Launch and perfect a print management program. After all, where do you think some of that decline in copier placements is going? Yes, to printers! Not all of it as printer placements are also declining but there is a shift. And, all of that additional aftermarket revenue coming out of the printer fleet has the potential to more than offset the decline in copier hardware revenue—at a higher profit margin.

Focus on productivity in all departments. Lower equipment AUSP will translate into lower gross profit dollars, even if you maintain your gross profit percentage. Optimize operations so you can operate your back office with high customer service and low cost: Focus to processes and automation. Maximize your return on service. Drive improvements in all areas year over year: Stay focused and maintain a high intensity level.

You don’t want to be one of the “unplanned exits” from the industry and by planning now not only will insure your place in history but you will insure a high profit business. Copiers and printers are not going away, they are just fading slightly. It will remain a great business for those with a plan!

Control your G&A expenses

Controlling your G&A expenses is one of the most important requirements not only now, in a difficult economy, but long as the imaging business gets more and more competitive.
For years, it has been business as usual in the back office operations; if processing fell behind, the natural reaction was to add more employees to handle what was perceived as additional workload. Pretty soon, actual headcount grew to levels that could not be supported by the organization. Because employee expenses are the largest controllable expense area, G&A expenses were out of control. Orders were getting processed, but at a cost that could not be supported.
It is time to take a step back and re-assess how your back office is structured and determine if it still makes sense with the current and/or available technology. Understanding each person’s daily activities and tasks and how they measure up against what you need is a starting point. Beyond that, it would be time to reassess all of your current processes and you will most likely find that there are too many redundancies, unnecessary processes and inefficient use of available technology.
Periodic process inspection and, if necessary, re-design should be a regular part of business practices to make sure that you are as “lean and mean” as you can be. The ultimate goal being to continually drive down those G&A expenses that are leading to a degradation of your bottom line.
If you are setting a long-term target I suggest you need to have G&A expenses to 10% or less five years out. If you look at many of the companies that are entering the imaging space, VARs as an example, their G&A is below 10%. Competition is one consideration but changes in the industry are another driver. A4 will replace A3 at an accelerated rate as more copier companies introduce full A4 product lines. These new units will drive down average unit selling price, resulting in lower revenue for your company. You will need to be lean and mean to thrive so get focused on your G&A expense.
If I can help please contact me at boulden@strategydevelopment.org