Sunday, February 12, 2012

Death of the Direct Copier Channel? "part two"

Last week I blogged the "Death of the Direct Copier Channel", in less than one week there were over 1,400 views.  I'm guessing we hit a hot spot with many of those in the Direct and Dealer Channel.

The Print4Pay Hotel forums also posted many comments like "Wow - it's like Ricoh coughed up a hairball!", "Since IKON / RBS has not been able to upgrade the Canon / Ricoh IKON MIF that was the intent of the acquisition, they are now selling off the base to mega Dealers. But RJ Young will upgrade these 6,000 units to Canon machines and Muratec devices. Ricoh is having extensive back-order issues at present time.", "I doubt that they will upgrade to all Canon devices that would not have been in the best interest for Ricoh. That acquisition is now approaching four years old (Ricoh of Ikon). I agree with the back order issues however so are other manufacturers as well. It's not only Ricoh!", "In the grander scheme of things 6000 machines in field is nothing to Ricoh. Those branches must have really been sucking wind to only have 6000 machines."

But a few interesting threads were posted yesterday that seemed to stir the pot for manufacturers that may be shedding branches and ceding more business to dealers.  One Print4Pay Hotel member stated that they had heard that OCE Canada had released all of the sales reps except for one,  and more interesting is that the one rep had to report to someone in Florida.  It was listed as the Great White North shakeup.  Additionally, another member has now stated that Canon Direct closed a small office in Nova Scotia and handed over operations to a local dealer.

With most manufacturers declaring that they are reducing profit estimates or even posting losses for fiscal year 2011, the writing may be on the wall for the Direct Channel.  I'm not saying that the Direct Channel will cease to exist.  However what's a manufacturer to do when they are posting losses... with any good business model they would try to eliminate or reduce that part of the business which has become a liability.  With no good news for the economy in the short term, the threat of Europe recession and the strength of the yen, the copier manufacturers will have to make some tough decisions in the near future. 

Selling off those Direct branches that are not turning a profit could be a great model and return the manufacturers to profitability in 2012 along with increasing dealer loyalty.  With RJ Young not only did they get MIF (machines in field), they also got employees (pretty much these employees probably won't have to get worried about getting laid off at the end of every March).

Just maybe, when we look at a time line of the copier industry in 20-25 years, we'll see a blip that designated the wholesale changes to the Direct Channel model and then the decrease back the the Dealer Channel model of business.

What come around goes around and I'm thinking just maybe we're heading back to the model of the early and mid eighties.

After writing this blog,  I read the interview that Scott Cullen (The Week in Imaging) had with Chip Crunk (CEO of RJ Young) titled "Chip Crunk Talks about RJ Young's Acquisition of Ricoh Direct Branches" .  Well, I'm thinking great minds think alike and I found this the most interesting statement, "I think the industry is in a transition where in the future the distribution model is going to be large independents and the direct operations. I think Ricoh and the others are going to want to align themselves with the top independent dealers in the secondary markets because they cannot be successful in those markets".
-=Good Selling=-

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5 comments:

Greg Walters said...

Art -

Good post.

I too, have spoken with some very connected folks in the industry - some who have been through the "acquisition and conversion to direct" process.

This is worse than we can see. The move to 'unload' small market locations is not strategic, it is desperate - and it's too late.

The direct outlying locations carry huge amount of overhead. In the good days, the overhead could be covered by the other markets.

Not today. There a plethora of other reasons; most benefit cost related, that are contributing.

One thing for sure - we can assume that selling off direct locations was NOT the plan 3 years ago.

Another interesting take - in this case RJ Young swallows up the direct locations - but isn't this a suicide pact as well?

Copiers are dying, print is decreasing - it doesn't matter who owns what location, it's all part of the same sinking ship.

Perhaps this is a shrewd, 60 month plan - take the MIF, get a few years of profit, let the locations die...not sure, but this is all very interesting.

I see a day when the "directs" will only be in the top 25 markets, sell below cost, just before they pull out completely.

Anonymous said...

"But RJ Young will upgrade these 6,000 units to Canon machines and Muratec devices."

Yeah... Only if it is the right solution for the customer.

A dealer who has the infrastructure and a solid integrated model will always outperform a manufacturer. End of story.

Suicide pact? Doubtful... Especially looking at this from both the inside and the outside. (Yes, I have that view.)

The new boss ain't the same as the old boss. Sit back and watch this one. It is going to be very interesting.

Art Post said...

Greg:

Thanx for the comment!

Greg Walters said...

I don't doubt for a moment that a local can outperform Direct. Especially when talking at the level of RJY.

Still, the overhead is huge. Those locations could strain the new mother and, oh yeah, fewer people are copying, fewer machines are being sold and the outlook isn't turning around.

But then again, maybe RJY will outsmart everyone and become the next authorized Apple dealer- tablets instead of toner.. That's the ticket.

Art Post said...

Greg:

I agree that fewer people are copying, however printing is another story. For those hybrid dealers like RJY they will survive and do it very nicely. Fewer machines are bring sold due to the poor economic conditions around the globe. As some pundits predicted years ago that would be dead, and it's not. There's not as many faxes out there, but it's not dead.

Tablets??? WTF, besides entertainment and ppt proposals what good are they. Ricoh's got a nice one for business apps, however I've not seen one in the field yet. The next great thing for Office Equipment Dealers is the Management of Documents, electronic and scanned.

Thanx for the comments!! :)