The impact that COVID-19 is having on dealers’ outlooks is staggering. Coming into 2020, our Market Trends survey showed almost every dealer was expecting to grow in one fashion or another, with 45% of dealers expecting single-digit growth and another 43% expecting growth between 10% and 20%. Only 4% thought that they’d be flat at worst. Now, most of them would be content with losses in the single digits.
In that survey, fielded in late 2019 and early 2020, dealers’ top three business concerns were “increasing sales/business growth” (71%), “declining prices and margins on hardware and CPPs” (52%) and “staffing/hiring challenges” (39%). When we asked them the same question in April, their concerns were much different. Now, dealers’ three biggest worries are “declining clicks/page volumes” (61%), “increasing sales/business growth” (59%), and “the U.S. economy enters a recession” (55%). Take note that declining clicks/page volumes and fears of a recession in the U.S. were ranked eighth and ninth, respectively, when our initial survey wrapped up in February 2020.
Three months ago, dealers wanted to make their rocket ship go at the speed of light. Now, they just want the damn thing to fly.
A closer look at the struggle
In the April survey, we asked dealers, in an open-ended question, to describe the impact COVID-19 is having on their business, and a few themes started to emerge. A lot of respondents said that page volumes are declining, and that they have to reduce salaries or furlough/lay off employees because business has slowed down. COVID-19 also has some owners reconsidering their business model, as well as the technology they provide. But some are seeing a silver lining in the chaos and pondering what the future will be like when this is all over.
A few reported no losses in revenues, and that it’s business as usual. One dealer described the last few weeks as a pause more than a loss, while another said, “The business may not come back all at one time, but leases will still need to be replaced and new opportunities will grow from this event.” Another respondent was proud to report that they didn’t lay off or furlough any of their employees, and that their sales and business admin teams were working safely from home.
For those who can weather the storm, the slowdown is a regrouping period. Many folks are positioning themselves to make a strong comeback when conditions improve. “We have training initiatives for our staff and are making plans with our vendors to come back strong,” said one dealer.
Others are thinking about how they can reshape and expand. One respondent said the crisis “forced some initiatives we’ve been working on in the background, like leading with managed services, streamlining business processes, and restructuring organizationally to the forefront.” Another saw it as an excellent opportunity to retool the business. “We looked at our business like a rowboat, and [we’ve] got to throw all the dead weight overboard.”
Some dealers pondered what the post-COVID world would look like. One noted that print volumes are down between 40% and 50%, and that they don’t see volumes recovering to pre-COVID levels when this whole mess is sorted out. However, another expects revenue to dip 15% in 2020, with recovery and growth in 2021.
Dealers seem concerned about how the nature of work will change after we return to normalcy. One dealer said that they are “concerned with the long-term structural changes that it is having on how people work and the impact that will have on our business model.” Another said “I believe the pandemic has forced people to learn to work remotely and use more technology. Therefore, I think clicks will decline a little over time as people embrace the new way of doing business.”
Some criticism was pointed at the manufacturers’ responses to the COVID-19 crisis. “I wasn’t surprised by their lack of agility and understanding,” said one respondent. During a time when making a sale is harder than ever, manufacturers fixated on YoY Q2 sales numbers and how dealers plan on getting there might not be the most helpful and supportive response. This comes at a time when manufacturers are rumored to be taking away promotions, leaving little incentive for customers who are already reluctant to spend money.
The virus is accelerating some industry trends that have been gaining traction for years as businesses will be increasingly reliant on technology. Think of the thousands of times you have heard the phrase “digital transformation” in our pages. Like it or not, it’s here, and the ones still getting paid are managed service and solutions providers with recurring revenue streams. The survey results show this is a good time to take a hard look at diversification and portfolio expansion, eliminate dead weight and redouble efforts to move forward with digital transformation.
Want more information? The recent Analyst Corner Live! webinar, “2020: A Tale of Two Years” compared data from the 2019/2020 Market Trends survey and the April 2020 survey. Catch the replay here.
Patricia Ames is president and senior analyst for BPO Media, which publishes The Imaging Channel and Workflow magazines. As a market analyst and industry consultant, Ames has worked for prominent consulting firms including KPMG and has more than 15 years experience in the imaging industry covering technology and business sectors. Ames has lived and worked in the United States, Southeast Asia and Europe and enjoys being a part of a global industry and community.
