Do you think that talking politics and religion can be risky at parties? Having worked in the Imaging Channel for as long as I have, I’ve learned there are certain topics that could land you in hot water even more than those. The decline of user print volumes, shrinking margins and the rise of the mega-dealer, to name a few. But above all these is this: We don’t talk about the rising cold war between the OEMs and those that sell re-manufactured toner. I’ve never been very good at keeping my mouth zipped up, so we’re going to talk about it anyway.
First, some history. Well, as I remember it anyway.
Anybody from this space during the glory days of re-manufactured toner? You know when I’m talking about! The late 1990s and early 2000s saw an industry take hold that simply didn’t exist before. “Drill and Fill,” as it was called colloquially, began to take big shares of market from the OEMs. Entire companies were born and made a ton of money. Multi-laser Solutions (one I actually worked for) and hundreds of others, like mushrooms, popped up everywhere.
At its peak, some say, re-manufactured toner accounted for nearly 40 percent of all toner sales! Needless to say, the OEMs weren’t really too thrilled, but times were good for them as print volumes were exploding so they didn’t do much about it at first. But that changed once OEM competition starting getting tighter and margins became slimmer. Some manufacturers like Lexmark pursued aggressive legal options to slow down reman. Others, like HP, decided to out-engineer the drill and fill folks by introducing newer cartridges every year that were harder to replicate and take apart. Soon the ratio of reman to OEM was 25:75 and the OEMs seemed to be happy with that.
But no longer. Fast forward to today, and the all-out war on reman vs. OEM toner is stronger than ever in the history of office printing. The reasons are pretty simple: People are printing less overall and new options for ink-based systems (Epson and others) are having a big impact on overall sales. Twenty-five percent is no longer an acceptable number in a shrinking market with different and more cost-effective options.
Office printing is a contracting pie and the OEMs are fighting harder than ever to make sure they remain viable. Some OEMs aren’t succeeding (remember Tally Genicom?), some are merging with others (HP meet Samsung), some are forming unexpected partnerships (HP and Xerox, anyone?) and others are knocking it out of the park (Konica Minolta is doing just fine, thank you very much). Although they are all in different circumstances and states of health, the OEMs are united in making sure every ounce of toner people buy going forward is 100 percent OEM.
The days of lawsuits against reman folks and out-engineering them are now passe. The new weapon of choice: Contract business and low prices. HP is leading the charge on this one, and they should be as they are most affected by reman and clone business as well as the cheaper ink-based systems. How they are dealing with the problem now vs. 10 years ago is actually quite genius: HP is giving pricing on OEM toner to dealers that is equal to or even lower than reman options, provided they are for end-user customers with term contracts.
Money talks and contracts make money talk even louder. Good for the OEM because of the loyalty that is forced through contracts. Good for the dealer because they get OEM product for the price of clones and reman. Good for customers because now they can save money without buying second market product. No lawsuits. No expensive over-engineering. Just great prices and term contracts. As the world is moving to subscription preferentially (think SaaS, Netflix, managed IT services, etc.) it seems a good time to take this approach.
As an office equipment dealer, you could have already started adjusting your offerings to favor OEM product in this new climate. And if you haven’t, well, not telling you what to do, but the times they are a-changing. Refreshing your offering is something you’ve always done to grow your business, so researching your options is nothing new.
It’s not just how you buy your toner that you need to think about, but also how you sell it. If CPP is your only offering, you’d best be looking at DBB (device-based billing) and SBB (seat-based billing) and other forms of subscription offerings for print. Konica Minolta is one of the first OEMs to do so, and others will follow suit. So do your homework and make sure you’re ready for the future of office printing. OEMs are watching you closely, make sure you pay them the same level of attention, your future could depend on it. And if you’d like to talk about how to leverage business transformation and convergence, request a demo of Tigerpaw One.
Of course I’m not the only one who has an opinion here. What do you think about the OEM vs. reman state of the nation? Are there things I’ve said you think are out of line? Have you seen other things that you think readers should be thinking about related to this? Share your thoughts in the comments section and let your voice be heard!