Sunday, February 5, 2012

The Death of The Direct Copier Channel?

OH, how those of us in the Dealer Channel long for the days when the copier manufacturers sold only through dealers. For those not in the copier business that long, yes..., that was the case!  If you needed a copier except for Xerox you had to go through an Authorized Dealer.   Turning a profit on what you sold kept the doors open, paid yourself, the employees, the taxes,  and if you had a good year there was some left over for expansion, upgrades or your pocket.

To make this short and sweet, cause I've got to get my emails out, a quote (WTF, a quote on a Sunday, yup that's when I do my best thinking), and watch the BIG GIANTS game. 

In recent years dealers have seen the direct channel  sell hardware (copiers) and service at costs that the dealer can't match due to the fact that we're not in business to lose money.  Plus you then read prognostications that most if not all of the Japanese copier manufacturers will NOT turn a profit this year, and most may post losses for 2011 fiscal year. It's bad, and most manufacturers will blame the economy, the Tsunami, the earthquake, the damaged nuclear plants and the floods in Thailand.  Dare they not mention that their Direct Branches are losing money hand over fist because they don't know how to manage their business!

So, this week I heard from a Print4Pay Hotel member just got word that RJ Young announced yesterday that they have acquired the Columbus, Tupelo, & Bilox MS and Huntsville AL locations of Ricoh/Ikon. 6000+ MIF (machines in field). This is awesome and it's about time manufacturers may be thinking about selling off their MIF portfolio to dealers (as long as the manufacturer has a caveat that the dealer will not sell out to a competitive manufacturer).

The other day we had a discussion in the office and one of the reps asked how the direct branch can sell so low.  I explained there are a few reason why;

1. They buy or sell more thus they can get the lowest possible price.
2. It seems there is no pressure from Japan to make a profit (just my thoughts)
3. They have a quota and don't have enough experienced sales people thus have to have the lowest price to capture business
4. The Dealer community profits subsidizes the losses from the Direct Channel losses

I'm big on number 1 & 4. If manufacturers truly wanted to turn around their operations maybe now is the time to start selling their MIF to their brightest and best dealers.  Dealers in turn will need to ramp operations and higher those employees  that are laid off from Direct (and only the strong will survive), within six months they will be driving more profit to the manufacturer and the losses will stop.  Dealers will then be able to sell the value of the brand name, the support, the solutions and their knowledge.

That's it off to watch the game!  Comments would love to hear them.

-=Good Selling=-


Anonymous said...

Your plan sounds like Xerox' strategy, but they own the dealer (GIS)

Art Post said...

Hey Anon:

Thanx for the reply! I guess it could be looked at like that. Seems like Global is doing a lot of "right" things lately, especially with appointing Salierno.


Anonymous said...

I read the statement above and I go for some of it but let me give my 2cents worth. First companies like Ricoh, who by the why bought IKON for 1.68 billion in 08, did so in order to get the largest market channel in the US. This knocked out Canon and ramped up their current dealer channel. Now Ricoh makes about 33% margins on selling to dealer channels with no head aches. IKON was riddled with way to much middle staff and needed to be cut in order to show stronger profits. I feel that Ricoh will try and go to a Xerox channel line, which as we can see in the past has not worked, so I really hope I am wrong.
Now to the direct line: Ricoh has to compete against some very low cost brands which forces them to sell direct in order to compete. As they gain more control of the US market I believe you will sell more sells turned over to larger local dealers.

Anonymous said...

Unfortunately all of the predictions and comments above are not accurate. To understand- look at Japan. Ricoh us simply trying to replicate a services lead model while still maintaining the annuity business of a strong fleet of mif while paper production drops 24% over the last 6 years with predictions of doing that again in the next 3 years.

Anonymous said...

Manufacturers wanted better control of selling THEIR product. Many dealers shot themselves in the foot by playing two ends against the middle. They get a lead from Canon and they sell a Ricoh. They get a lead from Toshiba and they sell Kyocera. Better yet, the pressure they put on the manufacturer for more OTHERWISE they will just buy from a different manufacturer are also elements of the migration to a direct business.

The dollar - yen conversion issue is a good reason for lack of earnings over the last couple of years.


Is it possible that a huge dealer could potentially buy out a manufacturer whose stocks are so low, such as Konica Minolta?