The Game's Just Begun

Summit gobbles HP scanners for lunch," screams the advertisement for Umax scanners. Summit Data Products, distributor of Umax scanners in India, is having a party hitting out at Hewlett-Packard (HP) in the scanner market. Of course, not without reasons.

For the past two quarters-April to June and July to September-Umax scanners have managed to stay put at the top and edged out HP as the numero uno in the scanner market. "We were expecting this in India as we have already beaten HP in the US market since September 1997," comments George Tsai of Umax Data System, Taiwan. Statistically, Umax has sold 4,429 scanners in JAS '98 as compared to 387 in AMJ '97-a compounded annual growth rate (CAGR) of 62.8%. For the same period, HP has increased its unit sales from 2,375 to 3,204, representing a CAGR of merely 6.17%. The only solace for HP: it still retains the top position in value terms, with 43.8% share compared to Umax's 42.9% for JAS '98.

So what's going wrong for HP, which has lost out its near monopoly (78%), and right for Umax, whose market share has been heading north? (see graph).

Breaking the Rs10,000 barrier

Umax has hit out at HP's Achilles' heel very effectively. HP, till recently, did not have a scanner catering to the low end of the market, the sub-Rs10,000 segment, which has been the fastest-growing segment of the scanner market. Agrees Aditya Pant of IDC, "Not only is it the fastest growing segment in the scanner market, it is an area where HP has been scrambling to get its act together." For JAS '98 this segment constituted nearly 50% of the market, up from 45% for AMJ '98. Adds Ashwini Aggrawal, Marketing Manager (Consumer Hard Copy Products), HP, "Without doubt, the low pricing by Umax scanners has expanded the market and added it as a mainstream peripheral for computers." The low pricing has given scanners a mass appeal and Umax with its early entrant advantage has managed to chip away HP's share. While HP did have a scanner in the segment, it was only a sheetfed scanner with lesser appeal than the popular flatbed scanner. The cheapest flatbed scanner in the HP stable till JAS '98-Scanjet 5100C-costs around Rs14,000 compared to Umax's range, which starts from Rs5,500. Umax has three models catering to this segment. Rakesh Kapoor, Managing Director of Summit Data Products, however, disagrees that price has been the winning factor. "At the same price point we are delivering a much better product with more features and this has been the key factor for our increased market share."

Another important reason has been the channel strategy, read dealer margins. Product availability and visibility advantage due to its huge dealer and reseller network is not working well for HP's dealers and resellers in the scanner market. If one wants HP scanners, chances are that nearly 1,000 people are willing to sell the same. In such a fiercely competitive scenario, the only differentiation between two sellers would be the price and hence dealer margins are increasingly under pressure. As Kapoor puts it, "We ensure that when my dealer sells a Umax scanner, he has enough margin required to make his business profitable. So dealers are enthusiastic in selling Umax scanners rather than HP scanners."

Pant of IDC adds, "Chances are that if one walks in to a store and asks for a scanner the dealer will try to push a Umax scanner."

Of course, how long Umax manages to retain its newfound numero uno status remains to be seen. The spurt in unit sales of other brands, notably Microtek and Modi Xerox, will be a cause of concern for both the top players. In fact, Umax and HP have lost marketshare of units sold compared to the previous quarter (see graph) due to the whopping jump of over 900% in Mictrotek's unit sales (807 in JAS '98). Also, HP is building on the October launch of Scanjet 4100c with an estimated street price of around Rs6,500. Another recent addition is the Scan5P priced at Rs9,500. Moreover, as the scanner market is still in the early growth stage, it remains to be seen how long the players can survive catering to the low-end segment. If the scanner market in the US is any pointer, local players need to rework their strategy. Umax and Microtek, the major players in the low-price segment, posted major losses in the US as nearly every scanner maker competing in the low end of the market is getting badly bruised due to wafer-thin margins.

YOGRAJ VARMA,

in New Delhi.

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