Thinking About The Second Quarter As Third Quarter Will Be Published Soon

Thinking About The Second Quarter As Third Quarter Will Be Published Soon

"Blind Optimism Takes Realities Out of Focus"

Well, the document Imaging Channel just finished another quarter, and soon the numbers will hit the street. One does not need a degree in finance to realize the numbers again won't be pleasant. The question is, will the manufacturers discuss the realities of the numbers? And will those dealers who bet on those manufactures for their deliverable (meaning their livelihood) look harder at the numbers?

We can all remember in the second quarter of 2020. To sum it up, it sucked. However, for the most part, the industry expected a disaster; after all, the globe is in a pandemic. In the third quarter, we should not expect much better. However, I hope we see more analysis from the industry on the realities facing the legacy BTA Style dealer.

As an example, I want to share a visual I have seen numerous times. This visual clearly shows where Sharp was the only manufacture in the Document Imaging Channel, which had positive numbers in the second quarter of 2020.

On the surface of this chart some, Sharp dealers are cheering! However, what are they cheering? The document Imaging Channel dealers need to keep in mind that all the manufacturers on the chart above have numerous options to distribute products to end-users. The growth in one distribution area probably came at the loss to another distribution area.

All manufacturers saw huge bumps in their A4 distribution and saw bumps to business services, such as IT services or equipment such as display or compute.

Every dealer knows that it's the pressure on the A3 deliverable, which is of greatest concern creating the need for diversification One must also take into account the starting point of all numbers.

The questions for Sharp and all the other manufactures are simple. What was the percentage increase in products distributed outside the BTA or legacy dealer channel?

The question I ask my dealer friends is this. What is your strategy to accommodate a competitive landscape as to ensure that as those outside the legacy dealer channel continue taking end-users from you and as they gain momentum with your key manufactures, will you, in fact, be positioned to compete? Or will you continue losing market share to alternative distribution? 

Another couple of questions to ask, as you look at this chart and the new one coming out soon, highlighting the quarter just ended is this.

What are the manufactures cutting as they align cost to battle the losses in revenues? As we see with our friends at Xerox, some manufacturers started cutting excessive costs in the third quarter of 2019 pre-virus, and of course, the massive cost restructure of Ricoh back in 2017 as it shed the excess cost of direct operations.

The realities of needed cost cuts have been apparent for at least a half-decade. However, most of the industry's actors ignored this reality. During this time, we witnessed the mega dealers building up market share by buying each other. I have always questioned that approach without an absolute determination to cut overhead and exceeded 30% in a diversified deliverable as quickly as possible.

The dealers in the Document Imaging Channel must pay attention to what they are losing in revenues based on others replacing them. This need in awareness should prioritize what they are losing based on the deliverable as it was pre-virus.

Everyone knows that the A3 business model will take substantial hits, especially as government customers freeze budgets and businesses realign technologies to accommodate a remote work force and a quicker path to digitization. Those two things make a great argument for A4 over A3, and as all the dealers understand, A4 can easily be delivered in lieu of them.

It's nice that our friends at Sharp had a positive growth number, although the dealers should focus on where all the numbers come from, especially as the entire industry must plan for what will inevitably be a massive consolidation of manufacturers and convergence of reseller channels.

As the final quarter of this horrific year unfolds, all dealers need to remember that the manufacturers they sell and service products have options. The marketplace for print equipment, its supplies, and its services is not exclusive to what's known as the BTA dealer network.

It will be critical that dealers follow their end-users' movements and understand how the manufacturers they support can bypass them if needed. As dealers work to align themselves with remaining successful, it will be important to focus on what they lose, why they are losing it, and, most importantly, whom they lost to.

"One of the greatest threats to a company's willingness to innovate is its perceived stability."

Sometimes it's easy for the Document Imaging Channel to miss the warnings signs which threaten its core competency the A3 deliverable. As they are exposed to growth outside of that core without a clear definition of that growth's numbers and mistakenly find false comfort in a perceived security.

"Status quo is the killer of all that will be invented."

Ray Stasieczko

CEO/Founder TEASRA,The Innovation Channel and Host of The End of The Day With Ray! https://www.endofthedaywithray.com/