The Once-in-a-Decade Mailing Equipment Opportunity

What if you knew that a core technology relied on by many enterprise customers would need to be completely replaced on a specific date in the near future? Come December 31, 2024, that’s exactly what will happen with postage meters in the United States. This once-in-a-decade transition presents an opportunity for office technology dealers to diversify and tap into a new revenue stream with higher margins and recurring revenue. All of this and more was discussed during the “The Opportunity of Mailing’s Analog-to-Digital Revolution” panel moderated by Jim D’Emidio at the BTA’s Capture the Magic 2023 conference in Denver.

What’s happening?

Businesses – from mom-and-pop outfits to large enterprises – frequently rely on postage meters to handle the volume of mail they send out. A postage meter is a machine that allows someone to print their own postage for mail at a discounted rate and with expedited processing compared to normal stamps. Because these machines essentially print currency, the manufacturing of them is tightly controlled, to the point that there are only four companies currently authorized to manufacture and lease them in the US. 

The federal government’s regulations of postage meters don’t change often, with the last decertification in 2014. Organizations that purchased new devices then will again need to purchase new, IMI-compliant postage meters by the end of next year. As it stands, there’s still more than half a million postage meters that will need to be replaced in just over a year.

Increased margins in the short- and long-term

All three panelists – Scott Brenton of Pacific Office Automation, Patrick Cunningham of Cunningham Business Systems and Will Champlin of All Copy Products – highlighted several of the advantages of selling mailing equipment compared to office technology staples like copiers, MFPs, or security cameras. Up front, the profit margins tend to be higher than traditional office technology, according to Cunningham. With such a limited pool of manufacturers to lease equipment from, there aren’t many alternatives for businesses that need mailing equipment. 

When it comes to long-term recurring revenue, Brenton pegged his dealership’s as between 10% and 12% of the mailing equipment’s MSRP. Dealers can also get a commission from the manufacturer on each sale. The recurring revenue is also frequently helped by reduced maintenance costs and proprietary consumables that meters rely on. “The service revenue is much greater, they just don’t break like your MFPs,” said Champlin. “So you’ve got a lot of service contracts that you may have an annual contract for and never have stepped foot into that office for servicing.” 

Flying under the radar

The fact thatmailing equipment isn’t as well-known as other kinds of office technology is an advantage for dealers on two fronts. First, there simply aren’t as many dealers competing with postage meter contracts as there are for, say, managed print services or IT. You might find out you’re the only game in town, or close to it. And potential customers know this, with the panelists highlighting the fact that a lot of businesses either don’t know where to look for mailing equipment or don’t think it’s cost-effective to invest the time in seeing what’s out there. Second, selling mailing equipment doesn’t quite trigger the same defensiveness from potential customers. Getting in the door for a salesperson can be a lot easier when they’re selling mailing equipment. “There’s no mailing rep knocking on their door 15, 20 times a day,” explained Cunningham. “They’re willing to show you what they have.” 

How much training will be needed?

Selling a new product or technology can often saddle a business with the expense of additional training. Fortunately, the panel reported that getting experienced copier salespeople to transition to mailing equipment sales was largely painless, and the compensation models are also similar to traditional copier sales. That’s not to say there weren’t minor hurdles to overcome. Service technicians did have to get trained on postage machines, but “but it was a very quick transition,” said Champlin. 

A window of opportunity

Businesses will still be mailing huge volumes of letters and packages for years to come, but this decertification is a once-in-a-decade opportunity for office tech dealers. This window of opportunity is limited, but presents a golden opportunity to build stable, long-term relationships with clients that make it easier to sell other office tech to them.

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Michael B. Hannon is an executive leader with extensive experience within the mailing equipment and financial services industries. Taking on the role of managing director in early 2020, he is responsible for all aspects of FP’s North American regional operations. Having moved up through the company, beginning in sales in 2007, he has a very hands-on, customer-centric and sales-focused approach. Gaining knowledge of the industry throughout his career, he has been able to develop and implement numerous processes and programs, like FP Finance and sales process automation, that have improved both sales and operations, leading to FP’s continuous growth in the region.