For Your Consideration: Labels Can Be an Appealing Differentiator
An ENX Magazine Exclusive
March 30, 2021by
TEST V16 ACCOUNT TEST, Tom Porter*
More than ever, market forces and technology trends are prompting office equipment dealers to explore alternative revenue streams. Digital transformation initiatives are reducing businesses’ reliance on paper, which in turn is driving overall office print volumes downward.
That decline, which was already happening at a slow and steady pace pre-COVID, got thrown into overdrive by the pandemic’s lockdowns. MFPs sat idle in empty offices, and businesses accelerated their digital transformation strategies to accommodate remote workers, putting the squeeze on office print volumes.
This makes it difficult for office equipment dealers to grow or maintain revenues and has forced the need to find adjacent revenue streams. Many are going the IT route and launching managed services businesses, but that isn’t for everyone. Managed services is a different game with different rules and its own unique risks and challenges. The cost of entry can be very high, with much greater labor and infrastructure costs than print, and it can take years to see a return on investment. In addition, the business model is completely different, requiring entrants to figure out new payment, commission and cash flow models.
But there’s another fast-growing technology office equipment dealers can sell that’s already in the print hardware wheelhouse. It doesn’t require many resources to get off the ground and can provide fast growth. We’re talking about label and packaging printers.
While print may be in decline overall, the label segment is growing, both in market value and print volumes. According to industry experts, the label market will grow to $41.02 billion by 2024. The same research shows that label print volumes grew by 5.5 percent in 2019 (jumping from 1.15 trillion A4-equivalent impressions to 1.21 trillion) and that volumes will continue increasing. Likewise, the digital packaging market is poised to grow by 13 percent to over $22 billion by 2022. The label and package printing segment can be an ancillary growth engine for office equipment dealers who want to diversify their business.
Jumping into the label and package printing space shouldn’t be difficult for office equipment dealers. Sure, salespeople and service technicians need to become familiar with new products and terminology, but the learning curve is much shallower than with other opportunities. Plus, while not every manufacturer participates in this segment, many dealers have already forged great relationships with OEMs that can provide the technology and know-how needed to succeed.
Furthermore, there is a sizable overlap between the traditional office printing customer base and those who can benefit from deploying their own label and/or packaging printers. It’s an easy target that doesn’t involve cannibalizing your core business, and it opens the door to new accounts you may have never approached before. A small win with a label or packaging printer can be a great way to prove your worth to new customers and could balloon into bigger wins later on. At the end of the day, it’s a new sales segment and a new service segment—it’s 100% net-new business.
So how can dealers succeed in selling labels?
Introduce Clients to New Revenue Streams
Many small print shops are looking for new ways to make money. This presents dealers with opportunities to act as trusted advisors by helping clients find additional revenue opportunities through labels and packaging. Not only can this provide an opening to expand into new segments, it can also help print providers take on work that they had to turn down or outsource in the past.
Take short-run label jobs, for example. Consider the technology you would typically find at your local print shop, such as cutsheet production and wide-format printers. The manual processing that’s required to finish such a job would make it difficult to break even. Without a quarter-million-dollar machine that can automate the costly, time-consuming tasks and thousands of orders a day, it’s very difficult for them to make money. But with more entry-level label printers, print shops could take on these jobs and stop leaving money on the table.
Don’t Forget Packaging
According to forecasts from Karstedt Partners, packaging will be a central component in the industry, making up 60 percent of the global print market. Dealers need to take this opportunity to educate clients and provide print shops with the technology that can drive the next era of their business.
Many companies want more than just drab brown boxes. Their packaging is an extension of their brand and is vital for standing out from the competition, right from the second their product lands on the consumer’s doorstep. Colorful, creative designs and photo-like images with vibrant, durable finishes can add brand personality to the packaging, and can be further enhanced with personalization and point-of-sale customizations. With the Precision Packaging Series 675i, print shops can create low-cost, high-quality short-run corrugated cardboard packaging and displays.
Help Customers Bring Production Print In House
At many universities, hospitals and corporate settings, shallow accounting makes the cost of outsourced label and packaging print seem more attractive than it really is. Helping these customers see the actual math may be eye opening to them.
A converter might be able to sell labels or packaging at a lower cost than it would be for a company to produce them in house, but it often means buying more units than are required. Purchasing 20 times more units than what’s actually needed means spending more money with the converter than it would have cost to print the proper amount in house. In many cases, all those extra labels end up in a warehouse of old inventory, never to be used.
In addition, businesses that outsource their label and package printing processes can’t be as nimble. Using an outsourcer means adding extra steps to the process, which requires additional time. So, if the customer wants their prints on a Monday, they may have to send the assets on the prior Wednesday. But if printing occurs in house, they could make changes up until it was time to print. And since in-house printing enables businesses to print the precise number of labels or packaging vessels they need at one time, they can change their branding and designs as much as they want.
Get the Word Out
This one might seem a bit obvious, but you’d be surprised by the number of print shops that didn’t know they could purchase label printers from office equipment dealers—or how many dealers didn’t know they had access to such equipment. I always encourage dealers to start with the low-hanging fruit; take a look at your existing accounts that have in-house printing functionality or have purchased production and/or wide-format devices. Once you’re done with your own customers, you then want to reach out to all the local print shops.
As market conditions continue to squeeze margins, dealers need to find new ways of making money. The rapidly growing label and package printing segment presents dealers with an outstanding opportunity to stabilize and grow their businesses. Labels and package printing are an excellent ancillary revenue engine because they are adjacent to most office equipment dealers’ core competencies, but don’t threaten to cannibalize them. This ease of entry into the market means dealers can expect to see a speedy return on investment.