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=-

If you like to register for our secure forums, please go here, and please keep in mind we don't give access to people that are not in our industry!

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=-

Selling Copiers "Is Your Dealership Prepared for the Future?"

The blog below was posted some time ago on the Print4Pay Hotel forums. It was intended for P4P Members on how to gauge the type of dealership or direct channel that they are working for and if they should continue or look elsewhere.

Mike K had written this for us and has since left the industry and he worked for one of the largest direct dealers in the US.  Do I need to say more?  Anyway it's good stuff and it's a good read. ENJOY!

Are you working for a dealership prepared for the future of Office Technology?

This might sound like I am making a big deal out of nothing, but I am not.  You are making good money and the deals are closing, but you are losing some of the bigger deals, people in immediate need and you cannot compete in bids or large deals.  Your dealership could be a sinking ship and you better be one of the first out and not the last because your reputation will be tarnished.

I had asked myself these exact questions a year ago. My answer was mostly no for each one. Below are questions that you should answer yes for at least 80% of them.  Questions with the # next to them are “a must.”

#Does your dealership have inventory?

          -What good is a sale if you have no product!!!

Does your dealership have demo/loaner inventory?

          -You need to show and make sure it is the correct solution.

#Does your dealership have Certified Network Engineers?

          -What if something happens while doing network install?

Does your dealership have a software solution expert?

          -You need someone with completely understands all possible software.

#Does your dealership have delivery staff?

          -You need to be selling and not delivering!

#Does your dealership have a real retirement plan that they contribute?

          -The dealership should invest in the well being of their employees.

Does your dealership have a gated commission plan for each deal?

          -This way you or they will not lose money later on.

#Can your dealership pay you all you commissions on time? 

          (Ex: March commissions paid by April 30^th)

         

Does your dealership have an internal bonus program?

          -They need to invest in the strongest reps and keep them happy.

          80/20 rule applies here!

Does your dealership have President Club Trips?

          -They need to invest in the strongest reps and keep them happy.

          Not to Dealer Sales Meetings!

          80/20 rule applies here also!

Ricoh LTD commits to almost 3.6 million dollars (300 Million yen)

Ricoh LTD commits to 3.6 million dollars (300 Million yen) for relief and reconstruction of quake victims in Japan  (this was posted today on the Ricoh web site in Japan today.

Can we be affected here in the US & Canada?

Since the Fukushima Nuclear Power Plant dangers are not under control, and the likes of Japan being back to normal in a few days, a few weeks or even months could be wishful thinking.  All of the events in Japan made me think what are the ramifications here in the US, if you're a reseller of Multifunctional Copiers?  Could there delays in getting equipment, supplies and parts?  As most of you know I sell Ricoh products, so I started today with some research on where the Ricoh facilities are located in Japan.  I realize that a lot of the units are assembled in China, however many parts, motors, pcb boards, connectors and some MFP's still are assembled in Japan. 

Back in 2003, I had the chance to visit the Tohuko, Ricoh Facility in Myiagi, which is located some 20 miles south of Sendai, and about 65 miles north of the troubled Fukushima Nuclear Power Plant.  When I had visited back in 2003, Tohuko was assembling 55 page per minute and above digital devices, along with Digital Duplicators.  I took a trip the their web site to see if they were still assembling these products but couldn't get any additional information from the site.

So, I put together this short list of locations and factories for Ricoh in Japan:

Ricoh operates factories in Tottori (Ricoh Microelectronics Co., LTD), located 421 miles southwest of Tokyo, Ibaraki (Ricoh Printing Solutions) which is about 95 miles south of the Fukushima Nuclear Plant and Miyagi (Tohuku Ricoh) which is about 20 miles south of Sendai and 65 miles north of the Fukushima Nuclear Plant, Iwate (Ricoh Optical Industries), which is located about 95 miles north of Sendai and about 55 miles inland of the Ocean, Yamanashi (Yamanashi Electronics Co., Ltd.) which is located about 73 miles west of Tokyo, Miyagi (Ricoh Hasama) lies 113 miles north of the Fukushima Nuclear Plant and 54 miles northeast of Sendai, Saitama (Ricoh Unitechno) is located about 13 miles north of Tokyo, Saga (Ricoh Keiki) about 713 miles southwest of Tokyo, Kanagawa (Handano & Atsugi Plant) is located 28 miles south of Tokyo and a few miles from Yokohama, Hyogo (Yashiro Plant) 331 miles southwest of Tokyo, Fukiu (Fukui Plant) located 324 miles west of Tokyo near the Sea of Japan, Shizuoka (Numazu & Gotemba Plant) is 111 miles southwest of Tokyo.


What They Do

The only plant I’m familiar with is Tohuku Ricoh,when I visited back in 2003, they produced 55ppm and above systems, along with duplicators, and additional products. Seems that the Gotemba Plant which is a production site for consumable solved with RFID tags, Fukiu Plant a manufacturer of electronic circuit modules, Numazu Plant, which is a production site for consumables.

How Will the Quake Affect Us in the US & Canada?

All I have are questions, will there be a shortage of certain hardware devices, parts & consumables?  Will we be able to fill our orders here in the US. Will I have any systems that I can deliver in 30 days, if so will what will be available and not available? Do I raise prices if there is going to be  delay in getting hardware?

I think Ricoh needs to send a message to Direct and Dealers asap either to alert us to changes or tell us that there will not be an interruption in our supply chain.

BTW, I put a new link on the top of the right of this site for the American Red Cross for donations for all.

-=Good Selling=-

Copier Dealers and the Copier Factory!

We (Dealers) all hear about, and see it on the Print4Pay Hotel forums , along with quotes from the field.

We ask ourselves how the hell can Direct MFP Manufacturers continue to offer cost per page contracts that are lower or equal to the cost fact sheets that they give to MFP Dealers, plus dump product that is below dealer cost in most cases? When will the madness end?

For example: Recently a Ricoh 907EX Pro with Bookletmaker, Print and Scan Controller, 3 Hole Punch, Postscript and LCT sold for $27,000.  The MSRP for this base system and the accessories is $68,600. The discount from MSRP is almost 61%!!! What I can tell you is this happens with all of the Direct Branches and not just Ricoh equipment.  I see the quotes come across the forums and we see the same for Canon, Xerox, KonicaMinolta, and others.  Who can sell at a 61% discount and make a profit, especially when you price service at .0042 per click for 11x17, that means you're getting .0021 for letter and the smart CRD, Repro shop is running most jobs 2 up and then cutting them in half.  How foolish are you?

The answer is........no one can sell at this price and make a profit, or not a profit on "that sale" or the service on "that sale".  Years ago I was at a meeting and I remember it clearly because the VP (not dropping names) told me to make sure I spelled his name right when I posted items on the Print4Pay Hotel forums. His statement to those of us in the room is that the US companies like Canon, Kyocera, Ricoh, KonicaMinolta and others were nothing more than a "mega dealer", they get their pricing from Corporate and then marked up the equipment for US distribution. Gee, that's a real surprise.

Moving on, each Direct Manufacturer here in the US has different divisions (now called Channels) of distribution.  We all know they have a Direct Channel aka always in ending in BS, then there's the Dealer Channel and some even have other levels for Printers, Scanners and Internet Distribution.
At the end of the year, we all have to state our profit and loss right, we're all good on this.  The Dealer Channel is a money maker for the US Manufacturer, probably giving them their largest percentage of profit (this is guess, but it's an educated one on every thing I hear from the field, please prove me wrong).  You then have the other Channels to report profit and loss such as the channel that end in you know what _BS. Now, we don't get to see these reports and alas I don't even think it's possible to see the profit level of the Manufacturer's for the America's, wait let me check for ya.................it seems the posted P & L's is listed for the Americas and but there is no break down provided for each Channel.

Alas, at the end of the year as long as the Direct Manufacturer reports a profit, I'm thinking so what if the Direct Channel lost 8%, the Dealer side made us 12% and we posted a 4% profit.  We can report back to Corporate with a profit.  Profit is what it's all about right? 
So, can Direct Manufactures continue to lose money on their Direct Channel's?  Yes sir, as long as the Dealer Channel comes through with sustainable profits. Funny, I hear from many P4P'ers and read all of the "MFP News" and I always hear the same message from the Direct Manufacturers, and it kinda goes like this "We're very concerned about our Dealers", "Our Dealers are our Top Priority", "Dealers got us to where we are today".  Got me thinking, do they love us because they like us, or we're making em boat loads of cash!

-=Good Selling=-

Who Should I Buy from an Authorized Dealer or Direct Branch?

Hmmmmm, should I choose Column A or Column B?

Many years ago you could only buy Copiers from Authorized Dealers. An Authorized Dealer is a privately owned company that is local to your geographic area. A Direct Branch is owned by the manufacturer and may or may not be local to your geographic area.

For many years the debate has raged who should I buy from. Too me it plain and simple, you should buy from the company that has the best support, the best people, the company that offers more than one manufacturers solutions and the company that change on a dime when your needs change.

Typically you should ask some key questions from your sales person or your service person.

1. Ask the sales person how long they have worked with their current company. A sales person who has less than 2 years experience may not have the resources nor the knowledge to meet your needs.


2. Ask about the the tenure of their service personnel and if you will see the same service technician. Having an experienced service person and the same person servicing the machine is important to quality work and troubleshooting. A company that send inexperienced service reps and multiple reps to the same machine is mot what you want. Too many chefs can spoil the soup and is true with copiers.


3. Ask how long they have been in business. A couple of years may not be what you are looking for, today's machines are highly evolved from yesterdays, go with a company that has a proven track record.


4. Ask if they carry multiple solutions from different manufacturers. No one manufacturer can be everything to everyone. Authorized Dealers will have multiple solutions from multiple manufacturers. While direct branches will only sell their solutions.


5. Ask them how long it takes for a service rep to be on-site and then ask for some references. Doing the research before hand will save you time.


6. Get a copy of the sales contract and service contract to review before you sign, a wishy washy document that was created in a word document is NOT THE CONTRACT! The contract will have many clauses to protect the Direct Branch and allow them to charge you extra for supplies, fuel surcharges and more!

Do you really want to buy from someone who offers the lowest price? Ask yourself, what are you sacrificing when you buy solely on the lowest price? Will it be the service, the training, or the support years down the road.

Typically, Independent Authorized Dealers have longevity with their customers, sales people, service staff and technicians. Typically, Direct Branches have the higher turnover with sales people, service staff, technicians and clients.

Now some of you who know me may say that I work for a Dealer and he doesn't know the other side. That's true, I have only worked for a Dealer and never a Direct Branch. My problem is that with 27 years in the business I don't know one rep who has more than 6 years with a Direct Branch while on the other hand I know 40 or more with Dealers who have over ten years with the same Dealer (they must be doing something right). Plus, why is it, that I will get new service accounts from the Direct Branch and I don't lose any to them.

The end result is most Direct Branches (mind you there are a few excellent Direct Branches out there) are out there to capture market share for the manufacturer. They have a high turnover of sales people and support people. Since they have NO "Value" to sell, they typically sell on price. What is "Value"? It could be a number of items, the value of support after the sale, the value of competent support staff to conduct on-site training, the value of troubleshooting a problem and finding a solution. The value of providing the right solution at the right time.

Some of you may be located where there is not a choice between an established Dealer or a Direct Branch, just follow that you should buy from a company that has the best support, the best people and the company that can offer more than one manufacturers and a company that can change on a dime when your needs change.

We all want a good price, however a cheap price is long forgotten after poor service!

MFP WARS, Who Wins and Who Loses, Ricoh, Canon, Konica Minolta, Xerox or Sharp?

MFP Wars, basically I've never seen anything like the past year in the last 27 years of selling copiers. Direct Branches from KonicaMinolta, Ricoh, and Toshiba are basically selling MFP systems at cost or a few dollars above in order to acquire the aftermarket business. How long can this last? My bet is it will last as long as the deep pockets of the manufacturers will permit it.

All of the manufacturers have a dealer side of the business, recently a pricing issue was raised to one of the top three manufacturers in reference to the aggressive campaign that RBS is waging to acquire new business AT ANY COST, even if it means cutting into Ricoh Dealers business and profit margins. When the issue was raised to a senior level executive, they stated that they had no knowledge of this and that it could not be happening. The Senior Level exec then did some checking and found this out to be true and then escalated this issue to the VP of Sales (that's about where it sits right now). I seriously doubt that there will be any change in the SOP.

Now Ricoh is not the only manufacturer that has this problem, KonicaMinolta and Toshiba Direct branches are also in direct competition with their dealers and are looking to gain market share at any cost!

So, where does this leave dealers? For the dealers that are in the major market areas such as New York, Chicago, LA, Dallas, Boston etc, competition is fierce and dealers are taking a beating! Consider this, when the dealer loses a sale to its own manufacturers Direct Branch, who loses? The dealer loses because they did not get the sale and the clicks, the Direct Branch loses because they moved a box @ zero profit and in turn the parent company will lose because the dealers that buy at higher prices will not buy as many systems! So if everyone loses, what they heck are they doing? Preserving market share? At what cost?

Recently we have seen some new players in the market such as HP, Okidata, Samsung and even Lexmark has a full line of MFPs. Samsung has hit big with their 45ppm MFP that has an MSRP of $3,000 and due to launch a 55ppm system in the near future for under $8,000 MSRP. HPs foray with the Edgeline series will make an impact also.

I'll say it over and over there are too many managers @ Direct Branches that are teaching new reps to sell on price and price alone. I know they are under pressure to move boxes, however selling on price helps no one, especially the new reps that come and go. Basically thats the reason because they come and go, no one is their to teach them the skills of selling, such as FAB (feature, advantage and benefits), or Lock Out features that a certain system might have an most all the art of probing the customer and finding out the pain that they have or a solution that will allow them to sell at a profit. It seems to me that most Direct Branches are selling themselves into a hole they might never get out of.

I have a dear friend who works for RBS in New Jersey, we chatted the other day and he keeps stating that Dealers are the past and the Direct Branches are the future of the industry, I beg to differ, if that's the case then our industry is in a bad state of affairs.

As an industry we need to start from scratch, we need to hire energetic and dynamic people and teach then "How to Sell", educate them in prospecting, probing and customer relationship selling.

On the flip side I'm sure their are many fine reps out there that make a good living that are working at Direct Branches and Dealerships, however if the industry continues to "dump" boxes our way of life will could go downhill very fast.