Much has changed with the way commerce is conducted around the world over the last 20 - 30 years but it seems not much of that change has been embraced by the small to medium size independent office products and office supplies dealerships.
Of course there are exceptions but, of the estimated 10-15,000 independent resellers in the office products vertical in the United States, there are many struggling to deal with headwinds impacting their prospects, not least that the overall size of the market for office products is now starting to decline. In this environment unless a business is increasing its market share, then its revenues must be declining at least in line with the overall market.
Another significant headwind, is the proliferation of low cost off-shore compatible ink and toner cartridges finding their way to market through resellers swarming to the Amazon marketplace. These cartridges are blending average sell prices down so, combined with the declining overall market, there's a double whammy on the top-line – decreasing units and decreasing average sell price. Unless a business owner can reduce fixed costs at the same rate as the decline in the top line then it means there's an unavoidable decrease in profitability.
STEP BACK AND TAKE A LONG LOOK
The office products market in the United States has annual retail sales of $50B+ with at least 50% of these sales consisting of ink and toner cartridges. So, despite the now declining market, it's still a very big market and there remains a lot of potential for small independent dealers to take market share.
In order for smaller dealers to position themselves to take market share they have to present themselves to their customers and prospects as professional and efficient enterprises and in order to accomplish this they must leverage information technology and the Internet.
The Internet is the backbone of modern information technology but, its’ how it’s used and how businesses focus on the components that can make a difference, that will determine whether or not under-performing businesses can be transformed.
THE VALUE PROPOSITION
Despite being a mature industry the office products vertical has great potential for small businesses to increase market share. It’s an anomaly that OEMs still control 80% market share in the $25B+ ink and toner category. When it’s common place to purchase a new printer for $400 yet pay as much, or even more, for a set of four replacement cartridges then something doesn’t seem quite right.
It seems even less right when an online search results in thousands of aftermarket products that cost significantly less than the original OEM supplies. It seems there should be ample opportunity for resellers to convert their customers and prospects from OEM brands to aftermarket alternatives. In doing so, they can save their customers money and they can make decent margins on the sale creating a win-win for themselves and their customers.
However, although his win-win potential is well known it’s still very difficult to convert customers from OEM brands to aftermarket.
One of the major reasons for this difficulty is down to the millions of OEM marketing dollars funneled into a branding message that strongly influences consumer’s mindsets about the dangers of third party compatible products. My goodness, they may literally blow up and destroy a $400 printer!
The remanufacturing and compatible aftermarket manufacturers have come a long way since the first aftermarket cartridges entered the market in the 1980s yet still the OEMs marketing message targets its customers with reminders of the toner "bombs" and ink "leaks" from the 1980s and 1990s.
THE AFTERMARKET AND ITS VALUE PROPOSITION
The aftermarket needs professional marketing to help their customers understand and embrace the benefits of high quality alternatives. Let’s face it – if consumers are willing to pay less for auto insurance in return for acknowledging a repair may be carried with aftermarket parts, or purchase generic drugs or store brand groceries, then isn’t it time the same consumer awareness and acceptance was accomplished for ink and toner?
In order for acceptance of aftermarket office products to be increased resellers have to develop their credibility and earn the trust of their prospective customers. If this can be successfully developed then there will be a higher chance to convert a customer from OEM to aftermarket supplies.
VENDOR SELECTION & RESEARCH
Where's the first place a prospective customer is going to look before deciding whether or not to place any business with a new supplier? Well, we all know it's by going online to reviewing websites and social media accounts. For this reason alone, these are the platforms that provide small independent businesses with the opportunity to present their knowledge and authority on their business and products and to build their reputation and establish trust in the market.
If a customer prospect can see evidence that a reseller has credibility and authority within its sphere of influence then there’s a greater likelihood that prospect will place its trust in the reseller and eventually become a customer. This is not an overnight process as it takes time to nurture a lead to become a customer, but, if the online presence is built to achieve this objective then the resellers’ chances of success are significantly improved.
WHERE TO START?
The software tools all exist to enable a small business to build an information technology platform that puts it on a level playing field with much larger enterprises. Once this platform has been built and deployed then small businesses can leverage their personal presence in local markets along with their flexibility and faster decision making to build a competitive advantage over their larger rivals.
1. It's possible for small independent dealers to take market share in the office products vertical but only if the necessary investments are made in deploying an information technology infrastructure necessary to compete efficiently with much larger companies and in order to provide the services and products customers are demanding.
2. In doing so the small business is simultaneously educated on how to do business in this Internet dominated age. It invests in an upgraded Internet presence and learns inbound digital marketing techniques that bring in new leads and new web-traffic.
3. Once this requirement has been accomplished then the foundation for a major business transformation is in place that should enable small businesses to take market share from their larger competitors and convert business from expensive OEM products to lower cost, high quality aftermarket alternatives.
4. Without a strong Internet presence and e-commerce capability small businesses will not survive.
5. Accomplishing these objectives represents a business transformation and is likely to create a healthy outlook for growth and loyal, satisfied customers.
For a comprehensive overview of the office supplies industry and a road-map for deploying the infrastructure to grow revenue and increase market share in a declining market please download our free e-Book.