Demand for color MFPs perks up year-end sales

Susan Avery -- Purchasing, 1/13/2005

The copier market is alive, well—and healthy. But, in 2005, copier buyers will need to keep one eye on pricing, which promises to be competitive, and the other on copier manufacturers who are engaged in a battle for market share that could lead to some industry consolidation.

"People have said that the copier is dead," says Don Dixon, principal analyst with Gartner, Stamford Conn. "But we continue to see strong growth in shipments," because even though people are not copying as much, "they are using [copiers] to perform other activities such as scanning documents to e-mail."

Dixon's expectation is that when 2004 is completed, placements of monochrome copiers—bolstered by a traditional boost in the fourth quarter—will have increased slightly to 1.7 million units in 2004, up from 1.66 million units in 2003. But he says revenues will continue to decline, as the average selling price of units continues to fall.

Two big growth drivers: new software applications for managing documents and color-enabled or business color copiers that produce documents at faster speeds and lower costs. Shipments of these monochrome (black and white) devices with color-copy capability as a feature rose at a 30% clip in 2003 and attracted interest from corporate buyers, says Dixon.

"Customers want more speed and value. They are looking at color as a feature rather than a separate entity," adds Joy Lipari, manager, product marketing, Xerox Channels Group.

In addition, the growing market interest in copier software applications for document management, distribution and publishing, and user security have also been driving sales upward. Canon USA, for example, expected that when the final numbers were tallied that its software sales would reach $100 million in 2004.

Early in 2004, companies still had a "tight rein" on technology spending, says Dennis Amorosano, director and general manager of Integrated Business Systems, Canon. But "current demand is good. They've started to free up capital."

Buyers need to watch more than just how the products are changing. The reason? There are some soft mergers and acquisitions occurring in the industry, such as Hewlett Packard's recent purchase of Konica and Ricoh's purchase of some pieces of Hitachi's and IBM's printer businesses. That could set the stage for further consolidation in 2005.

In addition, some manufacturers are trying to increase market share with new products that eat into traditional products. For example, HP last fall introduced its LaserJet 4345 multifunction product at one-third the price of traditional copiers in its segment. While Gartner's Dixon doesn't consider the new device a copier per se—because it doesn't have an integrated platen—he says

HP will have some success at placing these machines in the enterprise because of the price.

For the most part, copier buyers should not be experiencing problems with supply or deliveries as they did last year. Indeed, in most cases, deliveries are within two or three days, says Cathy Lewis, senior vice president of marketing, IKON Office Solutions, a large independent distributor of copiers and printers. (There were some delays last year in the delivery of the Canon imageRUNNER 8500 and some tightness surrounding the Konica Minolta 8050, she says.)

"Earlier [in 2004] demand for the imageRUNNER 8500 [was] three and four times our run rate," says Canon's Amorosano. "We got it straightened out in late September."

Similarly, Kevin Kern, vice president of product planning and development, Konica Minolta Business Solutions USA, says Konica Minolta has stepped up production and is using alternative ports to ease delivery logjams on the West Coast where ports have become inundated with product delivered from China.

Until about 12 to 15 months ago, copier prices were eroding significantly. But, since then, they have stabilized. "We are not seeing the price erosion of a few years ago," says IKON's Lewis.

But Steve Rhorer, director of product marketing for Toshiba America Business Solutions has a different view. "Manufacturers are getting more aggressive—cutting prices by 7% or more on many devices in an effort to entice buyers to try their products. The big winner is the buyer who gets more features at a better price point."