Printers & MFDs: Against All Odds

FY12 was surely a challenging period for the IT industry. The printer segment was no exception. The turbulence started around 2-3 years ago, after the Lehman crisis 4 years back, and affected the industry badly. The industry's upward ride came to a standstill. Just as it was on the recovery path, a natural calamity in the form of Japan's tsunami brought in the realization of how vulnerable the IT industry was.

Before it could even limp back, the Thailand floods administered another blow on the manufacturing clusters leading the IT industry to ponder about separating the IT clusters to avoid such a scenario in the future. If all this was not enough, the last blow was still to hit the Indian IT industry (which according to market research reports is 85% import-centric)-read rupee devaluation. This also had an impact on the prices of printers which witnessed a rise of 8-12% across all brands during FY12.

Under the Scanner

The Ministry of Environment curbed the imports of second hand devices which helped in increasing sales and proved to be a silver lining. Apart from that, the reconditioned market players came across loopholes owing to which around 30,000 units found their way to the Indian shores. This loophole was later plugged by the ministry and further damage prevented. India was the hub of competition as Japanese companies like Konica minolta and Toshiba increased activities. Other vendors like Panasonic, Brother, etc, also recorded growth in their businesses. Even Dell, though a new entrant in the market has been able to give others a stiff competition.

MFDs have managed to attract maximum interest owing to affordable price bands and the attractive features offered by this segment of printers. The prime features and characteristics of MFDs like printing speed, price range, features, and value for money quotient have enabled it to strike a charm among the customers. These devices are also gaining popularity owing to the fact that usage of these devices save time, space, cost, and are ideal for small businesses as well as consumer segment.

Technology Angle

Technology grows and creates new propositions. In the laser multi-function segment, new technology was introduced. HP and Canon both launched ink efficient inkjet models. Technology to ensure cloud computing compatibility was also introduced. On the customer-user behavior front, medium size enterprises are adopting managed document services. A lot of importance is being given to printing cost as companies have become more sensitive towards it. Owing to general inflation and high interest rates, there was a standstill on investments in expansion which is evident from the fact that the national retail chains like Croma did not expand much.

Continuous ink supply based systems like L100 and L200 provided litmus to Epson's growth. Canon witnessed a shortage of IP 2770 in the inkjet SF printer segment in H2 FY12, whereas their new model, E500 in the inkjet multi-function printer segment helped Canon increase sales due to low cartridge cost. Samsung's market presence was strengthened by the launch of its chipless toner based printers ML1676 and SCX-3201G.

There is an increased level of awareness in relation to document outsourcing as people are now making an effort to print less copies. With the entry of smartphones, tablets, et al ruling the roost document outsourcing is assuming center stage. Even the concept of e-copy is assuming importance, especially in the telecom, automobile, healthcare, banking, and insurance sector as they offer huge opportunities. This is driving many vendors but being riddled with the opportunity is the risk of the confidentiality of the data stored, which necessitates security to be treated with importance.

Though the fundamental technology hasn't changed much, the addition of cloud printing, managed print services, and the nascent introduction of mobile printing allows printers to follow their users onto their tablets, smartphones, and other mobile devices.

Green Quotient

Green printing primarily refers to the usage of cost saving and environment-friendly methods of printing. In the recent past, enterprises and SMBs have started focusing on green printing as it helps in diminishing the cost of printing and also helps in maintaining a healthy and sustainable environment.

Companies across verticals are now insisting on paper and ink cartridge recycling which, in turn, is forcing vendors to manufacture green printing-oriented printing devices. Taking this trend into consideration, numerous benefits have been offered by green computing to customers and the demand for green printing is sure to get a boost in ensuing years.

Cloud printing, though at a nascent stage, has shown prominent signs of gaining foothold in the recent times. Despite of being at the initial stages, it has tremendous potential for gaining wide spread acceptance among the SMBs and enterprise segments. Some of the prime factors driving this are enhanced productivity, seamless workflow of mobile and remote sales force, and unprecedented flexibility.

Segment Support

According to Netscribes, the overall printer shipment figures in India stood at around 2.7 mn units in CY 2011 and is anticipated to leap forward to reach about 2.9 mn units shipment by CY 2012.

The printers market in India gets a significant boost from the prevailing SMB space by virtue of its extensive volume and steady increase in IT expenditure. According to Netscribes, IT adoption among SMBs is anticipated to witness a CAGR of 24%. A major chunk of their expenses has been spent on computational expenses followed by internet, IT services, networking, security, software, and storage expenditure.

The wide presence of SMBs apart from home, government, education, and SOHO (buyers of single function devices) currently forms a pivotal support for the printers market. In order to target the growing demand in the education segment, vendors like HP and Canon launched inexpensive printers. Even Ricoh launched printers targeting SOHOs and tier-2 and -3 cities. But for some companies like Canon, BFSI offered big bulk business opportunities in the face of a largest deal (implementation of 800 document scanners for digitization projects). Canon was awarded the largest managed document services contract with a multi-national bank.

While the government segment did not grow fast for some companies owing to delay in approval of contracts and rupee devaluation leading to government projects posing as a loss making debacle. This led to many companies adopting the refrain mode. Though the telecom sector has been going through a bad phase, digitization is taking shape in the telecom industry. Even the e-business segment has pulled the margins for Canon cameras and inkjet printers.

Multi-function printers witnessed increasing acceptability in the SMB, home, and retail segments. SMBs prefer a mix of single function and multi-function printers to attain overall printing solution efficiency. Even the decreasing price gap between single function and multi-function printers in the same technology space also prompted a set of customers to move to the latter category.

Services Angle

Managed print services showed wide traction among the small and medium businesses in India. The adoption of MPS eliminates hardware costs comprising capital required to purchase printers and other multi-function devices. Companies mainly opt for pay-per-page services in order to leverage on cost reduction benefits. Another important factor driving the adoption of MPS is the lack of knowledge on the requirement of printing infrastructure among users and hence outsourcing these services proves to be a profitable solution.

The MPS segment is assuming great significance, which even the vendors are recognizing. On the MPS front, Xerox has a remarkable presence coupled with the efforts of OEMs like HP and Canon. Even WeP Peripherals and HCL have started taking steps in this direction in order to offer end-to-end solutions. But the challenge on this front remains localizing these end-to-end services. Companies like HP, Canon, and Xerox have understood that while providing end-to-end solutions to customers, they also need to understand the needs of the organization to whom these services are provided.

Vendor Perspective

In order to grab a better picture of the fiscal that breezed past, let's put the top players under the scanner:

HP: HP intends to partner with channel partners to address the SMB and mid-market space to offer MPS. There are approximately 35 mn SMBs in India (the second largest number after China). It is targeting about 350 mid-market accounts for MPS in metros and plans to extend the services in a phased manner to other tier-1 and -2 cities. HP has included its printing solutions as part of its Partner Managed Print Services (PMPS) customer engagements. In the next fiscal, HP expects to record growth on the back of latest generation of printers that bring affordability, energy efficiency, and mobility (through technologies like HP ePrint) to home consumers, SOHOs, SMBs, and large businesses. It intends to continue to focus on cloud-led and web connected innovations.

Canon: At an investment of $1.1 bn, Canon acquired approximately 99% share of Océ's total assets. The acquisition has resulted in the integration of Canon's and Océ's business aspects in sales, service operations, and distribution networks. This acquisition also enabled Canon to strengthen its production line. Small towns continued to build traction with focus shifting to smaller cities and 50 new channel partners were appointed to help the company expand its reach. In relation to managed document services, Canon's client base increased from 50-70 large clients.

Canon is also on an expansion drive on retail network front. From 70 stores it is on track to create 300 stores by 2014. Retail stores contributed approximately `150 crore to Canon's kitty this year. The supply chain system continued to pose a challenge as it affected margins. Hence it spread its supply chain location from Singapore to 25 different locations to tackle this issue.

Epson: It saw client wins for dot matrix printers from the state governments and BFSI sectors. In the POS category, expansion of retail chains, hospitality sector, governments, textile showrooms, and entertainment zones added clients to its kitty. Inkjet category was witness to the launch of innovative M-series printer and traction from the SOHO segment and DTP centers. On the technology front, Epson launched genuine ink tank which cuts the cost of printing.

Samsung: Samsung India plans to further scale up its business in 2012. In 2011, the company focused on consolidating the printer business with a distinct product strategy and strengthened its distribution channel with an increased focus on its B2B business. With the launch of advanced printer models in the laser printer, multi-function printer, network printer categories, wireless printers including the world's smallest laser printer-ML 16663201, and Samsung SCX printers, it has strengthened its position in the market.

Xerox: Xerox India expanded its channel base in tier-2 and -3 cities with a focus on top 200 cities and over 25 towns. For FY12, Xerox also put its best foot forward on the technology front with Emulsion Aggregation toner-breakthrough technology for producing black and color toner. Another energy efficient technology, namely solid ink-a proven sustainable color printing technology was incorporated by Xerox.

Xerox also intends to strengthen its Phaser, Workcenter, Docucolor, and iGen range of products and digital presses and also launch a new range of office automation devices and digital product equipment in 2012. In the future, Xerox intends to expand its partner base on pan-India basis and particularly in places which are not adequately covered. Xerox is moving towards providing managed print services as it is garnering an increased share from this front.

Ricoh: Ricoh forayed into managed document services which is a combination of managed print services and document management solutions. For India it has a 3-pronged strategy, namely strengthening its product line, focus on Ricoh innovations, and expanding sales and service support. In order to strengthen its laser printer business, it intends to increase the number of distributors and resellers. This year, it plans to increase partnership base by 500. Despite making remarkable moves, Ricoh was not able to break the monopoly of HP and Canon.

TVS Electronics: Dot matrix printers contributed a major share (90%) to the revenue pie, while the thermal printers generated the remaining. Approximately 70% of its revenues is generated from the channel business. TVSe's customers are mainly from the banking, government, retail, and dairy segments among others. Bluetooth, Wi-Fi, RoHS, and continuous improvement in speed and throughput, used across printers like direct thermal, impact printers, and thermal transfer printers emphasis its efforts on the technology front.

WeP Peripherals: During FY12, WeP Peripherals launched scanners and also entered into a tie-up with a Europe based company to launch card printers. After the acquisition of Elnova (power business), its UPS business has been made a separate entity that offers both brands of Elnova and WeP (UPS). FY12 was also witness to client wins in POS printers (Bridgestone Tyres). Dot matrix printers comprises 30% of the turnover.

Consumables Perspective

The consumables market is less profitable as people prefer to use compatible or third party products. Owing to this, companies like Canon could not increase their prices but it launched small capacity cartridges. It increased efforts in relation to Original Ink Center in around 2,000 areas. According to a market research, customers use non standard consumables to achieve a lower cost of ownership. This was adversely impacting the performance of printers.

In order to target Indian customers in relation to consistent printer performance and ensure low-cost of ownership, Ricoh launched ‘Genuine Refill Programs'. This initiative is consistent with the Ricoh's policy of harmonizing with the environment through products that reduce environmental impact. Taking into consideration the disadvantages associated with the usage of compatible or third party products, lot of awareness needs to be spread and also companies need to consider enhancing their product portfolio to offer cost advantage, add more products, etc.

Road Ahead

According to Netscribes, the massive PC base (increased penetration in D or E class markets) coupled with declining hardware prices is providing a growth opportunity for the overall printers market in India. Rapid increase in content creation and ongoing demand for enterprise mobility further fueled the growth in the market by a large extent. Presence of active industry verticals such as manufacturing, media and entertainment, retail, and government also acted as the crucial drivers for the market. SMBs play a pivotal role in revenue generation for the printers market in India.
On a final note, it can be concluded that Indian market is equivalent to the Chinese market scenario approximately 10 years ago. And with the products becoming more customer-centric, with much more intelligence built into them, and with the companies' ability to manage uncertain times, the road ahead appears promising.