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The Great Office Supplies Caper

The Aftermarket, Office Supplies and a Major Tipping Point (Part I)

by Ian M. Elliott | Oct 25, 2016 8:04:00 AM

Tipping Point Image with Bullets.pngFor veterans in the office supplies industry, patents and the potential for disputes has been a way of life for 25 years or more. I clearly recall my first experiences back in the early nineties and the steep learning curve that followed. Working for one of the larger aftermarket manufacturers at the time, patents and the potential for litigation became a daily concern. As 1995 rolled around we faced concurrent litigation from three global OEMs and, while never directly putting the company out of business, it became a major distraction for management and was certainly a contributor to an eventual Chapter 11 bankruptcy proceeding.

There have been many developments and changes over these 25 years.

There are three main points to consider;

  1. Throughout this period and despite these changes, every aftermarket manufacturer and reseller has had to continue to keep a watchful eye out for the constant threat of patent disputes. The industry has evolved to the point where only the largest manufacturers can afford the legal resources to locate, research and understand all the relevant patents. They alone have the engineering resources to develop design-arounds in order to safely bring high quality, competitive products to market. As a result, resellers in the developed economies of Europe and North America have mostly come to rely on these larger players in order to stay in business.

  2. Behind these manufacturers is a network of advanced technology companies supplying critical components along with their engineering resources that also help the aftermarket overcome ongoing intellectual property challenges. Overall, the depth of technical resources now supporting the aftermarket are quite remarkable.

  3. More recently there have been stunning advances in the capitalization of the top tier of Chinese manufacturers with multiple public stock offerings taking place during 2015 and 2016. Who would have thought that Ninestar, barely fifteen years from founding, would have successfully completed a multi-billion dollar offering for its Apex chip business?

With the occurrence of these developments and events, the manufacturing industry for aftermarket office supplies has passed a major tipping point and can no longer be litigated out of existence. The combination of its intellectual property advances, technological know-how, and its raising of large amounts of capital, now makes this all but impossible. In earlier years such an "extinction" event remained a possibility and may even have been one of the OEM motivations as a tactic to try and bleed the aftermarket to death.

The aftermarket has passed a major tipping point and can no longer be litigated out of existence.

However, although the aftermarket is here to stay, I'm not suggesting for a moment that the threat of patent litigation has diminished. In fact, if anything it's probably increased as will be explored later in this series of articles. Think about it this way, just like global giants such as Apple and Samsung litigate against each other, neither is going to put the other out of business. Some money may eventually change hands and the lawyers will rake in huge fees, but business continues.

A similar scenario to the Apple Vs. Samsung example referenced here now exists between the OEMs and the remaining global aftermarket players in the imaging supplies business. Litigation around patent disputes will continue but neither side is going to put the other out of business.

Reaching this tipping point is likely to have numerous ramifications for the OEM and aftermarket sectors as will be examined in subsequent articles;

  • OEM consolidation – i.e. Lexmark, Samsung, Sharp, Xerox

  • New-Build compatible cartridges, sidelining of the “First-Sale” legal barrier and the historical market share constraints

  • The battleground for market share and the impact on Amazon, DepotMax & Staples

In this upcoming series of blogs I'm going to be examining the potential for the aftermarket to significantly increase its share of the overall market in the western developed economies, particularly the United States and Canada.

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In the meantime, for additional reading on the state of the office products and supplies industry, and to help develop a better understanding as to why there are still great opportunities in the office products and supplies vertical, please click on the button below and download a free copy of our e-book. This contains valuable information on the industry, how to take advantage of the current conditions and to help understand a strategy for achieving profitable sales growth.

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Topics: Business Transformation, Information Technology, Industry News, Mergers & Acquisitions

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