Navigating a Changing Channel: Notes From the Analyst Showdown Webinar

On March 19, BPO Media’s Patricia Ames and Amy Weiss and gap intelligence’s Valerie Alde-Hayman and Lisa Brown joined together to present the “Analyst Showdown” webinar, which, while covering a number of industry topics, focused heavily on the impact of the coronavirus pandemic. Here, Brown summarizes a few of the key points we covered in the webinar; to hear the full hour of topics and discussion, download the full recording.

In the past few months, the coronavirus has had a global impact on the print industry and continues to bring changes to manufacturer and channel strategies.  Trends that were relevant two months ago (e.g., M&A and portfolio expansion) seem less important now in this critical time as businesses are actively pursuing efforts to keep their companies intact and remain somewhat profitable.

Manufacturers have had to shift company-wide strategies related to production, supply chain, portfolio, and sales, while the channel (dealers, distributors, and resellers) is faced with a range of operational and customer-related challenges.  Across countries, the virus continues to threaten industries, closing schools and businesses, and forcing the non-essential workforce to work from home (or not work at all, in many cases) with no end date in sight.  As a result, the retail sector and consumer segments have likely experienced the largest and most drastic impacts to-date, while the office technology solutions industry (dealer/direct channels) may see the effects over a longer period although, particularly for sales reps, the day-to-day schedule and pipeline looks very different now than two weeks ago.

The impacts overall will vary by region and by vertical as the situation evolves, given various country- and state-level announcements surrounding safety initiatives and business closures.  What initially was viewed as a slowdown of manufacturing in China a few months ago continues to develop as the print vendors and dealers take measures to combat the spread of the virus, ensure the health and safety of their customers and employees, and minimize the impact on revenues and profits above all else.

Nearly all OEMs and dealers have postponed employee business travel and are amplifying cleaning and sanitizing services.  Many companies are actively implementing new business “continuity” plans to ensure minimal impact to production, distribution, inventory, and customers.

This situation could be good for e-commerce-centric retail players (or diversified IT resellers/dealers), presenting an opportunity to target the increased demand for printers and PCs. Key retailers (such as Office Depot and Staples) are taking advantage of the situation and are currently marketing work-from-home bundles that may include a PC, printer, and monitors, among other home office essentials.  This shift to work/school from home could be beneficial to the home and consumer printing segments in Q2, as well as dealerships looking to expand support down market (e.g., sell more A4 desktop MFPs/printers vs. A3 copiers) and integrate more adjacent office supplies/solutions to help customers transition to what we view as the new office norm.  The much-larger number of at-home students/employees presents a growth opportunity for traditional retail manufacturers (i.e. Brother, Canon, Epson, and HP) to promote their home printing systems and grow their install base.  However, the uptick in demand within home printing segments will be temporary as this segment of the market continues to contract due to channel challenges and an overall slowing need for home printing.

Manufacturers with small direct divisions (i.e., Kyocera, Brother, Epson) may see the least impact during this time, but there will likely be a sharp reduction in the number of overall copier/printer/supplies shipments to dealers.  Dealers will be challenged to generate new business (and shift their traditional sales model to more online selling/prospecting), but may at least get the minimum revenue from committed contracts with low service costs/low supplies costs while companies are closed.  If dealers take full advantage of this situation, we could see more dealers selling desktop printers/MFPs and possibly even PCs, VoIP phones, or monitors as a way to support existing clients’ work-from-home initiatives.

Looking Ahead

As retail stores continue to close (or shift exclusively to curbside pickup), nearly all consumer, SOHO, and SMB technology sales are taking place online.  Dealer sales reps are also developing remote/online sales and meeting strategies to protect existing revenue and profit pipelines and drive new business.

Given school closures, dealers with large school installed bases are challenged to shift strategies to expand support for schools and teachers transitioning to the home-schooling environment.  Conversely, a strong presence in the medical sector may translate to a boost in sales as hospitals and health facilities support an influx of patients.  We are also seeing an increased number of OEMs donate printers to support the growing need among medical providers globally.

For dealers and manufacturers that provide managed IT hardware and services, IDC projects a slowdown in spending in the first half of 2020 across sectors, although by the second half of the year, IT spending could grow by 1%, representing a three-point reduction from the original 4% growth forecast.  The market could, however, provide increased sales opportunities for security-related products and software as organizations take expanded measures to secure vacant offices and networks as employees work remotely.

The previously robust M&A activity has appeared to slow in recent weeks, likely in part due to lenders and general financial uncertainties given the current environment.  Industry sources speculate that M&A (and the economy) could pick up again should the government implement new economic incentives and the approved stimulus package has already helped ease some concerns and drive the market up.

Ultimately, printing businesses overall will struggle due to a break in some production/manufacturing and operations to a certain degree across regions. Most manufacturers mentioned the coronavirus in their most recent earnings, but it’s not clear to what extent the delay will have on Q1 financial results. What happens in the next few weeks (in both the U.S. and Europe) will more clearly define the next few months, but if China is an example, people could be back in the offices in outbreak-free areas within Q2.  For some, this time can be viewed as an opportunity to make progress on a backlogged to-do list, create renewed strategies, and focus more closely on customer support.

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Lisa Brown is an industry analyst covering the MFP-copier and production print market intelligence services at gap intelligence. In her role, Lisa works directly with manufacturers, providing analysis and insight on current market trends in an effort to help OEMs respond to competitive changes. In her more than six years at gap, Lisa has worked exclusively within gap’s print categories, initially managing the data side of gap’s print consumables service, and she works remotely from the gap offices out of her home in Vermont.