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Looking Back, Viewing The Future

 

“Survival of the fittest”. It is a simple act of nature. Species evolve or they become extinct.  As with any living organism, businesses must also adapt to current and future needs or they too will disappear.

Charles Dickens might agree, the printer and compatibles business is simultaneously experiencing the best and worst of times.

+ The worldwide economic downturn has encouraged ink and toner users to look to a lower cost product than the OEMs offer
-  OEMs have aggressively increased the protection of their patents through litigation
+ Managed print services have created a new group of savvy buyers and users of compatible products
-  The overall decline of print on paper is forecasted for the foreseeable future
+ The use of compatible color products continues to increase
-  Increased competition continues to drive prices down
+ New compatible products being offered increases the overall selling inventory
-  Labor and freight costs continue to increase
+ Millions or new customers have access to Internet purchasing of compatible products
-  A multitude of new competitors continue to persuade buyers to change vendors

In hopes of putting a new perspective on the trials and tribulations of the makers of compatible supplies for office equipment, a walk down memory lane may add perspective. Those who sell the office equipment hardware that uses the toner, ink and parts that compatible makers sell have already experienced a century of continual transformation. Only those who were willing and able to make the necessary changes to their business model remain in business today. Those office equipment dealers who could not, or would not, adapt their businesses to the new, governmental and legal entanglements and laws of supply and demand, no longer exist.

Over the past century, the office equipment industry has continued to change. A look back at the history of today’s Business Technology Association members enables an overview of the changes that have been made in the United States over the past 85 years. BTA’s roots began in 1926 when a group of typewriter dealers gathered together to join with a local group of dealers in Kansas City, Missouri. The group’s written mission and purpose was to educate its members to use salesmanship, instead of price cutting, to sell their services and products. Dues were $10 a year. This framework eventually grew into the National Office Equipment Dealers Association (NOMDA) which was managed by member volunteers.  

In the 1920s office equipment dealers sold typewriters and adding machines. OEM vendors included Remington, Smith Corona and Victor. The onset of the 1930’s depression era brought hard times and a lot of commission-only typewriter sales. In 1933, the National Typewriter Association quickly grew to be the National Typewriter and Office Machine Association (NTOMDA). Member dealers were selling and servicing check protectors, adding machines, check writers, time clocks, cash registers as well as an array of typewriters. Dealers also sold used and refurbished equipment.

As the nation began to recover from the depression, in 1936, NTOMDA’s continued growth required the hiring of a full-time salaried employee. In 1938, the first official publication, DEALER TOPICS was sent to over 500 OEM sales branches and independent dealers on the NTOMDA mailing list in the USA and Canada. Underwood introduced a new student-model portable typewriter.

World War II brought drastic changes to the office equipment industry. After March of 1942, there were no sales or deliveries of new or used typewriters allowed. The US War Production Board had designated typewriters as vital to the war effort. They could only be rented or sold to concerns engaged in the war effort. All typewriters previously being rented had to be returned to the dealer stock. Rental rates were frozen at $3 per month.

At this time, NTOMDA sent a committee to Washington, D.C. to protect the rights of their dealers. Eventually, the government orders were modified and current rentals could stay at an increased rental rate. But new rentals or typewriter sales could be made only to businesses involved with the war effort. All the current type writer factories had been converted to war work. NTOMDA made a recommendation to the government that they buy rebuilt typewriters from their dealers. Upon approval, NTOMBA created a patriotic campaign urging business, schools and other sources to sell or donate surplus typewriters to dealers to rebuild and sell to the government.

Over 320,000 typewriters were rebuilt and sold to the US government. Over $30,000,000 was earned during WWII by dealers from selling, renting, rebuilding, and servicing typewriters. The US military set up 288 office machine repair shops on military posts. Rocky Jones, a NTOMDA representative, wrote the Typewriter Mechanical Training Manual which was published by the USA War Department in 1944.

The end of WWII required adjusting from a war to a civilian sales mode. Laws had to be changed; price restrictions had to be corrected. Customers were unhappy with having to pay a higher price for equipment and service once the war-required price freezes were removed. Soldiers returning from war had to be retrained and returned to the national work force. Disposal (repair-resale) of surplus office equipment had to be considered in a new post war business plan. It took over 15 years to remove a war excise tax on office equipment.  

By the end of World War II, many of the large office equipment OEMs had gone out of business. The National Typewriter and Office Machine Business Association decided to expand their offerings of products and changed their name to the National Office Equipment Dealer Association (NOMDA).  By the 1950s, new OEMs with branch offices were making a steady 40% profit on equipment sales. New products were being sold by NOMDA members. These included compact tape recorders, portable adding machines, air circulators, wire recorders, electronic typewriters with plastic margin controls, bookkeeping equipment, dictation equipment, legal forms, punched tape equipment, integrated data processing, electronic computers, photo copiers and duplicators.

In the 1960’s, discount houses offered equipment at substantial savings. Independent dealers and OEM branches had to change their business models to focus on service and professionalism in order to earn acceptable profit margins. Major OEMs were now IBM, Burroughs, NCR and Remington Rand. Economy Lines of products were being advertised by OEMs. Model Dealer Franchise Contracts were introduced by OEMs. There was a new focus on technical training and Professional Business Decision Analysis Management by independent dealers. Sharp was the first major Japanese OEM to sell through an independent dealer network.

In the 1970s, more independent dealers were becoming authorized resellers of OEM equipment. Contract negotiations and lawsuits began to emerge. Independent and authorized dealers brought legal actions against OEMs to provide repair parts, eliminate price fixing, honor warranty claims and adhere to the terms of their dealer agreement. The proliferation of new OEM products and required services frustrated and bankrupted many dealerships. The need to balance diversification and profitability increased.

Dealerships and OEM branches were required to offer word processing equipment. OEMs were being accused of inadequate field testing of new equipment prior to being released. Independent dealers struggle with the cost of selling equipment that did not work up to customer expectations. OEMs feigned ignorance of any equipment problems.

In 1980, NOMDA successfully sued Monroe Calculator for violation of anti-trust laws. Monroe was mandated to sell parts, schematics, manuals, and catalogs to independent dealers. Competition between OEM direct branch sales, distributors and authorized independent dealers begin to escalate. Newly revised contracts and litigation increased. Copiers, computers and software become an ever increasing part of dealer sales. In 1983, IBM mandated that typewriters would be sold and serviced by independent dealers. Printers, color copiers, faxes, mailing equipment, office supplies, PCs, software, network administration, image scanners and telephone systems were added to the office equipment dealer’s sales portfolio. Availability of grey market products and overlapping OEM authorized territories increased pressure to discount pricing on products.

In 1994, NOMDA changed its name to Business Technology Association (BTA), signifying the ongoing extension of the office equipment dealer sales to increase their area of expertise and influence within the business office atmosphere. BTA was joined by LANDA (Local Area Network Dealers Association) and AIMED (Association of Independent Mailing Equipment Dealers). Retail office superstores, OEM open distribution and OEM retail branches were in intense competition with independently-owned dealerships.       

All three associations realized the need to provide the ‘One call does it all’ business model for their customers. BTA dealers increased their area of coverage to include: portable office equipment, multi-functional products, and remote diagnostics of equipment, peripherals, power protection, laser printers, notebook computers, local and wide area network administration, inkjet printing, fax-on-demand systems, white boards, telephone systems and in-house drinking water systems.
By the mid-1990’s, the technological change from analog equipment to digital equipment marked a huge need to transform the duties of the service technician. Educating and training the technical staff created an enormous cost to the industry. OEMs were not ready to provide equipment that functioned properly. Dealers’ and OEMs’ technical staff were not yet knowledgeable enough to trouble-shoot malfunctioning equipment. Was it the design, implementation, end-user or an individual piece of equipment causing the problem? The first five years of analog to digital was difficult and costly for all concerned. Many dealerships were sold to IKON and Danka.

The used equipment market almost disappeared. Customers didn’t want to buy used analog equipment. The first and second generations of digital equipment were not worthy of reselling. Third and fourth generations of digital products of the 2005 era had a history of working so well that end-users stopped buying service agreements. Leases were being bought out by customers at the end of the lease. Users chose to keep their old equipment that was still functioning properly. Consequently, new equipment purchases and leases declined.

Today, dealers can no longer depend of the 3-5 year sales hardware cycle. Managed Print Services offered all equipment, supplies and service for 1¢ to 2¢ per click. BTA Channel Dealers are now offering software that can manage, store and retrieve electronic documents in 1/10th the time of paper filing. Environmental concerns encouraged people not to make images on paper. Travel and freight cost have more than tripled in the past 10 years. Traditional copier dealers are now actively selling and servicing printers under MPS agreements.

The only constant in the office equipment industry is the need for change and knowing that someone is being sued or is suing a business or vendor. Every time I see or hear the term intellectual property, I know that there is a big dollar sign with a lot of zero closely attached. In the 20th century, I used to say I was in the “office equipment industry”. In the 21st century, I am in the “litigation watching business”.

In the 2010s, we are experiencing an increased need for technology, intense competition with Internet commodity priced sales, a worldwide recession, the rise of low cost imports, ecology minded buyers and sellers, a world population in excess of 7 billion humans, and an opportunity to succeed and prosper in the field of your choice. Twenty years ago there was little knowledge or concern with the products we all use to help earn our living and improve the quality of our lives.   

Species evolve or they become extinct. As with any living organism, businesses must also adapt to current and future needs or they too will disappear. Cherish change. The best is yet to come.

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