COVID-19 has changed everything for the copier industry. At the beginning of 2020, the industry was operating business as normal and appeared on track to endure a very busy Q1. New vendor/dealer strategies pointed towards revenue opportunities and profit growth with several key product launches and steady channel M&A activity. COVID arrived in the US in March and nearly the entire industry came to an immediate halt as traditional business operations were forced to close and the world essentially started to work-from-home (WFH). For most copier dealers, page volumes are now down significantly year-over-year due to office closures, installations and contracts have been delayed, and sales reps are struggling to close deals virtually. However, while new business and clicks are down, current clients are still paying their monthly contracts, which is effectively a lifeline for many copier dealers. With this lifeline, dealers have a chance to change their business plan and survive this once-in-a-century pandemic.

Now nearly three months into COVID-19, it appears that the work-from-home trend will be a long-term practice in the United States. Due to this major challenge, several industry trends (some of which have been around for years) are quickly gaining new momentum across the dealer channel. These trends have become a larger part of the industry conversation and are critical opportunities amid this current landscape

Channel Growth Opportunities

Greater Adoption of A4 MFPs – Most of the dealer channel has shifted sales strategies towards selling an increased number of smaller-sized and decentralized A4 devices to support the newly emerged remote workforce. For those who aren’t familiar with the copier channel, this is a major departure from traditional sales strategies to sell larger, more robust A3-sized copier MFPs that sell at significantly higher prices (compared to A4 devices). Ironically, the industry shift towards A4 sales has been around for what seems like forever (and I actually wrote a separate blog about it) although COVID-19 has ultimately accelerated demand. Part of the focus on A4 sales is driven by manufacturer strategies to provide dealers with incentivized work-from-home bundles that include an A4 desktop hardware model at a discounted price (i.e. Canon imageCLASS bundles), while some dealers are creating their own customized hardware and service bundles independent of the manufacturer (i.e. Marco and Gordon Flesch). Overall, this offering represents a greater customer-centric focus on supporting the lower-end market demand and is viewed as a key opportunity for dealers to diversify through new products and services geared towards the work-from-home customer.

Expanded MPS Strategies – Prior to COVID-19, managed print services (MPS) was a prominent business model for many dealers and manufacturers. MPS allows customers to outsource the management of their print infrastructure. Work-from-home has made that value proposition even more attractive as businesses now must manage potentially hundreds of printers across their disparate workforce. An effective MPS program takes the burden of purchase, installation, supplies replenishment, and maintenance off the client and is instead managed by the dealer. This has created a unique opportunity for MPS providers to deploy a hybrid MPS strategy that helps manage, secure, monitor, and service devices across the network — including home environments — with a convenient subscription-type billing structure that customers are already familiar with at the consumer-level. The ability of these MPS companies to adapt to the industry changes and create a tailored (and scalable) solution for this segment of the market will help counteract the declines that are occurring in the office copier room.

Document Management and ECM Solutions – With many companies operating remotely due to COVID-19, it’s more important than ever for dealers to have a customer-centric sales strategy that’s focused on desired workflows. This includes having conversations that are 100% focused on understanding a customer’s systems and various workflows, and how the dealer can help bridge the gap for employees and companies working from home. These conversations need to be less about the MFP and focus more on changing the mindset of the dealer to concentrate on workflows independent of the MFP/copier. There is a growing market need to support document workflows and information/content management for the remote workforce as customers need to send, capture, organize, and secure information differently with WFH. Although the sales track and revenue/profit model for software and solutions sales is often longer (6-9 months vs. 30-days) and more time consuming than hardware equipment sales, it’s a key way that dealers can support their customers and drive new revenue amid declining page volumes.

Cloud Print Services – The adoption of cloud services has provided businesses of all sizes with access to enterprise applications and infrastructures based on subscription-type models, even prior to COVID-19. The structure provides flexibility, scalability, reliability and improved workflow efficiency, while reducing costs and enabling IT departments to focus on more strategic initiatives. Not to be confused with the wide range of cloud print solutions including platforms like Google Drive, Box, and Dropbox, cloud print management services provide a centralized and versatile way for companies to manage print environments without the traditional server-based model. As a result of work-from-home, many dealers (and IT administrators) would benefit from shifting print infrastructure management to the cloud, where information is always accessible and often more cost-effective. Cloud print management will serve as a way for companies to achieve increased flexibility and improve security as employees continue working from home and are scattered across the globe.

Managed IT Services – Managed IT has been a growth segment for many of the larger copier dealerships for several years and there are some perceived synergies between the knowledge and service of a company’s on-premise networks, whether it be IT or print. With the IT services industry growing consistently year-over-year, dealers have capitalized on ways to integrate IT (managed network, cloud, security, etc.) into their portfolios as a way to further support clients and essentially streamline all technology solutions under one company.

Work-from-home presents an opportunity for dealers as the notebooks and equipment employees are using at home may not be as secure as the business purchasing them requires. Dealers with effective IT services can extend their reach deeper into these customers’ workflows by expanding beyond the office and into the home. To address this opportunity, a range of print manufacturers and dealers have released work-from-home network solutions aimed to provide connectivity options for secure and remote network access.

Future Industry Outlook

Without a crystal ball, it’s hard to know exactly what the future holds for the copier industry. Gross margins will go down. Dealers that lack a diversified portfolio and customer base will be hit harder than those that do. The cost of capital is cheap right now, and the private equity-backed mega dealers will use those funds to acquire additional smaller dealers. There will be consolidation.

However, the dealers that are lucky enough to have a lifeline need to adapt now to survive and grow in the future. COVID-19 is a threat to hardware unit sales, clicks, and margins, and dealers are faced with an almost immediate decision to pivot from their traditional revenue streams. Although businesses are starting to open up across metropolitan areas in the US, there is an expectation that many employees will stay remote for the long term, which means that dealers will need to adjust their business strategies accordingly to capture growth in new segments.

The copier has been one of the most resilient products of our time. The copier has survived the laser printer, email, the internet, and all sorts of digital revolutions. If there is an industry that knows how to pivot and endure, it is this one.

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Original Post June 9, 2020 gap Intelligence