Hardware Prices See First Increase in Years
For the first time in many years, document imaging device manufacturers have increased prices. In the past two to three months, the US branches of Canon, Konica Minolta, Ricoh, Toshiba and Sharp have all increased prices on the majority of their hardware by approximately 5 percent on average. The only U.S.-based branches that have not increased prices are KYOCERA Document Solutions America and Xerox, and neither plans to have an increase in prices, at least in the near-term future.
So why the increase? The chief factor is the weak U.S. dollar relative to the Japanese yen. Because the U.S.-based branches of the hardware manufacturers buy product from their respective Japan-based parent companies, the conversion rate results in higher prices.
The dealers we spoke with, to whom the manufacturers’ higher prices have been passed along, said that in addition to the weak dollar, manufacturers cited additional economic conditions and investments in research and development to maintain high quality products. Another factor could be the ultra-competitive market which has resulted in discounting for years. Still, prices will remain market driven, and dealers we spoke with feel they’re highly unlikely to be able to pass the higher costs on to their customers, thus impacting their bottom line. Some dealers are also seeing a trend in which it is becoming increasingly difficult to partake in some vendors’ discount pricing programs. As one dealer put it, his margins are also being squeezed by the certifications and documentation now required to partake in one vendor’s discount pricing program for major accounts.
Some vendors are working to offset price increases with more lucrative dealer programs. Sharp, for example, has increased the amount of money dealers get back on its payback credit card program, doubling the prior amount in some cases. In addition, Sharp has increased the amount dealers get back when they trade in older machines, by as much as $200 to $500 per trade-in. Consequently, while a dealer may not be able to increase pricing to offset their higher costs, the lost revenue can be made up for on the back-end with its payback credit card and equipment trade-in programs.
To offset the tighter margins on hardware, dealers need to expand their services offerings and work to become less reliant on strictly hardware revenue. Managed print services comes to mind. Another dealer we spoke with noted that Sharp is now offering electronic white boards to help expand dealer business beyond just copier/printer hardware. Still another dealer, already involved in managed print services, recently expanded into managed network services in order to manage customers’ computers, laptops and servers.