Tuesday, August 18, 2009

MFP Wars "Death of the A3 MFP"


You've read about them, you've seen them in the field, and you've heard some manufacturers dismiss A4 MFP devices as a flash in the pan. HP started the A4 MFP trend a few years ago by releasing the HP4345 (I hope that model number is correct), Samsung followed with their own A4 MFP design which is also sold by Xerox and Muratec.

Hold on a moment we're talking about high speed A4 MFP's not the small printer centric stuff sold at superstores and some of the recent low end devices that have been released. We're talking 35 page per minute speed or above. Now that I've got the straight, we'll continue..., Sharp then released their Frontier Line of A4 MFP's (Sharp was the first to release a copier centric device, all of the others are more of a printer centric device). Now, just the other day I heard from a pretty good source that Ricoh will release a copier centric A4 MFP device (this is the first I heard of this and I am still trying hear from others to confirm this).

If this proves to be true, you can bet dollars to donuts that Canon, Toshiba, KonicaMinolta, Kyocera and Xerox will follow with their own devices. Some of you may ask, well what's the big deal? Traditional 45 page per minute A3 MFP devices (will copy or print up to 11x17) with all of the bells and whistles will have a street price of $10K - $15K. The A4 MFP devices (will copy or print up to 8.5x14) with all of the bells and whistles has a street price of $5K-$7K or a third to half the cost of the traditional systems.

Manufacturers will see a decrease in margins along with decreased revenue in total sales. Dealers will also see a decrease in margins and lower revenues as the market heats up for these devices. Dealers and Salespeople will have to sell even more hardware wo keep up with Quotas, while adjusting to accepting lower margins for these devices. A good example would be a dealer had sold 100 A3 MFP devices last year at an average of $11,000 for a total of $1.1 million dollars. So, according to HP's study done many years ago, 78 out of 100 of these machines would now resell for $6,000 and 22% (A3) at the $11,000 for a combined total sales revenue of $710K. Which result in a revenue drop of $390,000 or about 35%. Now to look at profit, just using a 10% profit... a dealer would lose $40K in profit for selling and supporting the same amount of boxes and would also fall behind in quota dollars.

A4 MFP devices are here to stay and with recent rumors of 70 & 90 page per minute devices somewhere down the road, what's can a dealer do? Dealers need to become......I'll have part two of this next week.

Just read this 5 minutes ago that Panasonic just announced a 35 page per minute A4 device for $495, what piece of ..... weighing in at a mere 21 lbs..

-=Good Selling=-

2 comments:

MFP Dealer said...

I'd point you to this link http://www.economist.com/businessfinance/management/displayStory.cfm?story_id=14248815&source=hptextfeature and paragraph five:

"Historically, firms have found it hard to cannibalise their own products. They have tried to hang on to declining market shares for too long before deciding to introduce new products that compete with their own. Kodak, for example, refused for years to introduce the 35mm camera for fear of cannibalising its older products. Likewise, years later, it was late to embrace the market for digital imagery. Bausch & Lomb invented the soft contact lens but failed to launch it because the firm did not want to lose the lucrative business of selling the drops that hard lenses require. As a result, Johnson & Johnson swept into soft lenses, and the market for hard lenses (and their drops) disappeared."

If A4's are better for the customer (this probably applies to 90% of placements), they will acquire them. They will acquire them from you, unless you attempt to "sell" them the A3 capabilities they won't use.

In that case, you'll lose the A3 customer... to someone else's A4. We can't just hope that they never realize they could have accomplished 100% of their print needs for 50% of the price... hope is not a strategy.

Art Post said...

Well put!