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Channel Trends Study 2005: How Equipment Resellers can Increase Profits

Introduction

In 2005, InfoTrends, in collaboration with U.K.-based Channel Info magazine and Italy-based A&V Printing magazine, set out to find what office equipment resellers thought about equipment, supplies services, and software. Research consisted of Web-based interviews with leading office equipment resellers in the U.K and Italy. The results can be found in a new study entitled Channel Trends Study 2005.

The study provides an understanding of each product category and how it relates to company revenue and profits, provides insight into the types and needs of end-users, identifies channel incentives and gross margin trends, determines investment and business trends, and investigates requirements for new functionality.

How Equipment Resellers can Increase Profits

The office equipment market is experiencing continued price erosion and pressure on margins. Office equipment resellers in Western Europe need to focus on inventory management as well as services and software to improve margins and profitability in this highly competitive market.

On average, office equipment resellers indicated that 35% of their business is low-margin. They need to focus on adding real value to customers’ businesses through understanding their entire document process workflow and addressing needs through integrated hardware and software solutions.

Figure 1: Approximately what percentage of your 2004
revenues can be attributed to the following categories?
By expanding their focus in these areas, resellers will drive revenue through the complex but more profitable solution sales model.
Services and software represent the prime target markets for higher margin business. Services are currently offered by 67% of respondents, and another 12% are considering an investment in the future. The average gross margins are highest for services (break/fix) and professional services (integration and consultancy). Respondents in Italy attributed a higher proportion of their service revenues (29%) to service than those in the U.K.
The focus on selling software is less certain. Software is currently sold by 50% of respondents, and a further 25% are considering offering software in the future. Half of Italian survey respondents reported selling document management software, and the same was true for only 35% of U.K. respondents. The level of cautiousness in this market is emphasized by the fact that 24% of respondents have no intention of entering it.
Figure 2: Which of the following best represents your sales
plan for the following product areas?

Resellers must focus on providing complete solutions that include equipment, services, and software. They should position themselves as value-added resellers rather than resellers that focus solely on equipment sales. This is the best way for resellers to differentiate themselves from mass retailers.

Inventory management is another area where resellers can operate more effectively. A high percentage of survey respondents indicated maintaining inventories of black & white office printers, fax machines, and black & white copiers. In comparison, over half of respondents do not maintain a stock of colour products. Resellers should move to a just-in-time purchasing model for monochrome products as they have for colour products to improve cash flow, margins, and prevent the risks associated with over-ordering inventory.

The preceding is an excerpt from InfoTrends’ report entitled “Dealer Channel Study 2005.” The complete document is available immediately. To learn more about the report or to make a purchase, visit our online store or contact Nicole Shown at +1 781.616.2100, ext. 207 or nicole_shown@infotrends.com.

Copyright © 2006 InfoTrends. All rights reserved. Reproduction or reuse of InfoTrends materials is strictly prohibited without prior written consent. If you are interested in referencing InfoTrends’ content, please submit your request to allison_jones@infotrends.com.

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