The money is in the toner, silly

SPEAKING TO A PRINTER VENDOR is a little like listening to your mum reminding you to eat your vegetables. “How many times do we have to tell you? The money is in the consumables,” my dear old Mum used to say. “If your printer customers are going down to the stationers to get their replacement cartridges, you’ll miss out on all the margin,” she would warn.

For a small business, the price of office printing can run as high as one to three percent of total business costs according to some research. That’s a serious chunk of change and it makes the purchase of a printer a considerable decision for many. That translates to time and sales effort on your part. And that’s before you get the new printer installed and set up for them.

All that translates to effort for a surprisingly small amount of money. “Okay, so maybe selling printers is not a total waste of time, but surely there’s more money to be made from it than this,” my Dad used to add.

And the printer vendors would point out that they reduced the device costs as much as possible to make the initial purchase more affordable. Then they make their gross profit on the cartridge sales over the five-year life of the printer.

It’s a simple business strategy that works for razor blades, payTV and drug dealers. So why haven’t printer resellers retired on the annuity from all those printers they sold in the Y2K rush? Because OfficeWorks, Corporate Express and a thousand other stationers are all reaping the benefits, while the reseller is doing the hard yards convincing another customer to outlay for a new piece of hardware.

Without that fat annuity of regular consumables sales, the printer business is just part of the full service offering you provide your SMB customers. If you can get on that three-, five-, or even seven-year gravy train of toner sales after the printer hits the desktop is an entirely different matter. Printer vendors will explain that even though this has been the business strategy for a decade: “Getting resellers to understand that is one thing. Getting them enthusiastic about acting on the knowledge is another challenge entirely.”

Hewlett Packard is a case in point. CRN spoke to Luke Duggan, commercial and enterprise manager for HP’s South Pacific, Imaging and Printing Group. What this leading printer vendor had to say about the past few years was as telling as it was instructional.

Hewlett Packard historically has a three- tier strategy and has mostly been a good (if not perfect) partner to the channel over the years, but Duggan admitted the company was more interested in taking printer business direct earlier in the decade. He said it was because HP just couldn’t get resellers to sell printers the way HP believes they should be sold.

hardware in is money silly the toner