December 22, 2016
As 2016 draws to a close I thought I would share a few insights with you. First of all, it is more than a year now since I took over as the Editor and Publisher, and it has been a real buzz, even though the year seems to have gone so quickly.
2016 has been a very news-rich year with the news that Apex was buying Lexmark, and then that HP Inc was buying the Samsung printer business. Xerox has split into software and print. In the aftermarket the introduction of new, reengineered cartridges that work in newer printers, but utilise older technology inside the cartridge, have garnered aftermarket interest. Utilising older technology does make it easier to remanufacture these cartridges.
The overall office imaging market continues to contract, as it has done over the last few years, and I think this will continue going forward. People are still printing, and this won’t change anytime soon, but they are printing less, and this is mainly because of the rapid growth in cloud storage capacity and better device access and connectivity, all leading to less printing.
Even in our business we collaborate on articles and features using online collaboration tools, and the amount we print in the office has reduced, but we have increased the amount of speciality printing we have done. This year we produced more photobooks that in the previous five years.
Looking forward, I think you can expect to see the office imaging sector continue to contract, with new printer sales typically displacing older printers. I think that Lexmark, under its new owners, will begin to roll out its brand across the Asia markets, and I think they will be very successful. Despite the battles, Lexmark operates in some of the strongest and most vertical channels in the US and Europe, and if it replicates this in Asia there is no reason why it can’t be one of the top three global brands fairly quickly.
Meanwhile, the HP Inc and Samsung deal will conclude next year, and that has the potential to be really disruptive and blur further the lines between the office copier and office printer channels. What this means for Canon and the other OEM brands remains unclear, other than that as the market contracts, the room for 25-plus global and regional printer brands to grow is challenging, and it wouldn’t be a surprise if some of the brands began merging and disappearing, so that there were around 10 major brands in a couple of years time.
The biggest challenge though is in the aftermarket. There remains too much capacity in the market, and while some companies like ITDL are growing and doing well, others are feeling the pressure. Every business needs to make money to reinvest in new products and technologies, but for too long the whole channel has been in a rush to the bottom of the price barrel, and I think that in 2016 we reached the bottom. So what happens now?
I think we will see production capacity being taken out of the market. If your business is scaled to produce 100,000 cartridges a month, but you are only selling 60,000, then you will stop trying to increase sales to maximise your capacity, but reduce your capacity. No, you can’t stop using 40 percent of your building, so you may well diversify to maximise your revenue and overhead. Or, if you have several buildings, close or sell one. I am certainly aware that one company plans to close its factory, sell off its manufacturing technology to another company and then buy back the products the new company will make – in effect moving from being a manufacturing company to a trading company. While another is realigning its remanufacturing capacity, and will see one factory close and some specialist work being outsourced.
2017 will definitely see more change, reducing capacity and seeing more focus on profitability. 2017 will also see us publish the 300th edition of The Recycler, and on behalf of the team we wish you every success for you and your business.
See you in Frankfurt.
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