One Versus Many: A Single-Line Dealer Deep Dive

It ain’t easy being a copier dealer these days – especially if you are a smaller operator. You may not be getting the best available price or support from your OEM because their attention is often drawn to aiding their largest dealerships win that big state contract. Additionally, over the last year, they may be focused on their own survival. This is particularly true for a certain type of dealership that can usually count on their OEM brand to be supportive — single OEM brand shops. While it’s been a tough year for all dealers regardless of revenue size or the number of brands they carry, it has perhaps been even tougher for these dedicated dealers, many of which have revenues under $10 million and meet the general profile of a local small business – businesses that have suffered greatly during the pandemic. 

One Or Many

Shifting demographics

Based on BPO Media’s annual surveys, a consolidating imaging industry dealer channel has drastically thinned the ranks of all smaller dealers. This is particularly evident in the shifting demographics of the 2020/2021 Market Trends survey, which shows small dealer numbers are shrinking. In 2017, about 65% of all dealers surveyed reported revenues of $10 million or less; by 2020, that number was down to 49% – a 24% decline.

BPO Media’s surveys split the under $10 million group into “up to $5 million” or “between $5 million and $10 million.” In 2017, of the 65% under $10 million, 76% were in the under $5 million group, and 24% in the $5 million to $10 million group. By 2020, of the 49% under $10 million, 66% were in the under $5 million group and 33% were in the $5 million to $10 million group.

As the number of smaller dealers has shrunk over the years, the ranks of single OEM brand sellers taking the survey has declined even more. In 2017 it was 14%, in 2018, 12.3%, and in 2020 it was 9% — a decline of 37% since 2018

The decline in single OEM line dealers is one outcome from a longer-term trend of dealers adding more OEM brands to their line cards. The average number of brands carried went from 2.6 in 2017 to 3.5 in 2020.

It is also increasingly clear that single OEM line dealers have a shrinking revenue ceiling while our annual surveys show average dealer revenues consistently increasing. In 2017, 72% of single OEM line dealers had revenues under $10 million, but 28% reported sales of between $10 million and $100 million. In the under $10 million group, 78% had revenues under $5 million and 22% had revenues of $5 million to $10 million.

In 2018, 86% of single OEM line dealers had revenues under $10 million, but 14% reported sales of between $10 million and $100 million. In the under $10 million group, 52% had revenues of 0-$5 million and 48% had revenues of $5 million to $10 million.

In 2020, no single OEM line dealers had sales over $10 million, while 61% had revenues up to $5 million and 39% had revenues of $5 million to $10 million.

From 2016 to 2020, single brand dealers have represented an increasing percentage of all dealers in the $0 to $5 million revenue band — from 11% in 2016 to 20% in 2020. So while the overall number of dealers in the under $5 million revenue block has shrunk, the number of single line dealers in that group almost doubled.

Our assumption for the decline in single-line dealers is that those dealers added another OEM line, either directly or by gaining a brand when acquiring another dealership. 

The declining population of dealers with revenues under $10 million could also be caused by dealers increasing sales from non-print hardware such as applications or security software, or IT management services, to name two possibilities. In our surveys we have not asked this kind of specific question: “Have your revenues grown over $5 (or $10) million in the past year because you added a second OEM hardware line?” Through data analysis of the 2020 survey responses, we can tell you the following:

Dealers with under $5 million in revenues that carry multiple OEM brands carry an average of 1.4 brands.

Dealers in the $5 million to $10 million revenue club that carry multiple OEM brands carry an average of three brands.

Since the revenue model for both of those revenue bands shows print-related sales represent in the high 70% range (meaning other revenue sources are relatively small and therefore growth is less likely to bump dealer sales into the next level), taking on a second (or third) OEM hardware line is the most obvious suspect. Those readers who have seen our recent webinars about these survey results learned that across the entire dealer universe, the larger the dealer revenue base, the smaller the percentage of their revenues came from print/copy-related sales.

Why be a single line dealer anyway?

Why be a single line dealer when the dealer channel at every level is consistently expanding the number of OEM brands it sells? The advantages and opportunities to being a single OEM line seller can include:

  • Becoming an expert and effective seller in the models, attributes, and benefits that one brand offers
  • Very strong connections to the existing customer installed base and likely lower selling costs
  • Likely better-quality sales leads and support from the OEM
  • The sales stability that comes from selling a category of products in which users seldom change brands when upgrading an existing installed unit 

For single line dealers in 2020, the average renewal rate was 94.3% — among the best of all dealers surveyed, and much better than the performance of all multiple brand dealers in 2020, whose average renewal rate was 90.8%

Among survey respondents, multiple-brand dealers with 2020 revenues under $5 million had an average renewal rate of 88.5% — a huge negative difference compared to their single OEM line counterparts.

For multiple OEM brand dealers with 2020 revenues from $5 to $10 million, however, the average renewal rate was 95.3% – an achievement that bests the impressive rate of their single OEM line counterparts. 

The disadvantages or risks for single OEM line only sellers can be many:

  • Despite the reality that users don’t switch brands often in the print/copy universe, buyers enjoy the luxury of, and have become accustomed to, modern marketing norms, which means having more choices in any buying process. This can mean such buyers may react negatively to being presented with only a single brand option.
  • Selling opportunities can be limited by the competitiveness of the OEM product line – what if the OEM’s products fall behind the market or if that OEM doesn’t offer a “hot” feature in a major segment? Most everybody reading this article has had that experience sometime – it’s deflating at the least.
  • Direct competition for the same OEM’s client base if that OEM expands its dealer network in the same territory or, even worse, decides to take an account direct because of its value
  • A scramble to stay in business if the OEM is acquired (Samsung, Muratec) or reshuffles its distribution lineup (Ricoh, Konica Minolta, Xerox) — essentially the classic risk of having all your eggs in one basket. This industry is undergoing transformative change, and it is unwise to assume that long-standing “rules of the road” won’t change. They are, every day.
  • So, there does seem to be real business value to being a single line dealer in the crucial metric of renewal rates, though one wonders for how long these benefits will outweigh the lost opportunities granted to those with more comprehensive and flexible portfolios of both hardware and services.

Snapshot of single brand dealerships

In the March BPO ACLive! Part 1 webinar, we highlighted some intriguing data points about single brand dealers from the latest survey:

Of the single OEM line dealers in the 2020 survey, 75% were BTA dealers, 8% were IT VAR/MSPs, and 17% were copy/print dealer agents, proving that agents can still play a role in the distribution mix in our industry.

Of single OEM line dealers, 67% are one location only, but the average for the group is 1.8 locations, similar to the overall small dealer (under $5 million) cohort. For all dealers in the survey, the average was 4.5 locations, an average that has grown every year.

Single line dealers reported average revenues of $4.5 million, making them lower tier citizens of the overall small dealer segment, equaling approximately $2.5 million sales per average location.

What OEM brands are single line dealers offering?

Brand 2020 2018
Konica Minolta 33% 19%
HP 25% 14%
Xerox 17% 19%
Canon 17% 10%
Kyocera 8% 14%

Ricoh has been substantially restructuring its dealer channel the last several years. These results show that within the narrow world of single line dealers, Ricoh’s shift has benefitted Konica Minolta, HP and Kyocera among others.

While 92% of the single OEM line dealers indicated they sold to firms with less than 250 employees, the average company size sold to was 865 employees — an indication that while small, they win some sales at larger companies, though this is much smaller than the average employee size of 1,403 for all dealers.

Though our 2020 survey included choices for dealers to select among 13 different vertical industries that they sell to, single line dealers sold to only six of these, in this order of importance: healthcare, government, finance and banking, education (K-12), legal services and manufacturing. This picture of a narrow distribution channel selling to a narrow customer base is another possible element in a strong renewal rate.

For single line dealers as a group, the average combined click decline for 2020 for both mono and color was 16%, a bit worse than the overall dealer average. 

For monochrome clicks in single line dealers, 91% reported declines, 9% stayed the same and none increased. The average decline was 14.4%. It is noteworthy that none increased mono clicks, as we did find an (admittedly small) base of dealers that increased their mono clicks in 2020.

The full survey showed other dealers did a bit better: 89% reported declines, 6% stayed the same, 5% increased. The average decline was 14.8%.

Color clicks for 2020 were a bright spot for single line dealers compared to the survey average.

Of single line dealers, 73% reported declines, 18% stayed the same, and 9% reported increased clicks. Of those reporting increasing color clicks, the average increase was a very healthy 17%.

Of all dealers surveyed, 78% reported declines, 10% stayed the same, and 11% reported increased clicks. Of those reporting increasing color clicks, the average increase was 11.7%

Asked to rank six important end user issues, the responses were:

Issue Single-Line Dealers All Dealers
Scanning/digitizing documents 1 3
Network security/hacking 2 2
Reducing print costs  3 1
Simplifying document/process workflow  4 5
Highly secure printers/copiers 5 6
Integration of printers/copiers with software applications  6 4

 The logical conclusion here is that clients of single line dealers are more concerned with an application’s functionality than price/cost. Of note is that both groups of dealers ranked network security and hacking as substantially more important than highly secure printers/copiers — a possible indication that dealers believe that client security concerns have to be addressed first at the network level and not the hardware level. 

Dealers were asked to indicate if customers have asked for any one of four solutions presented that addressed issues related to the pandemic.

Customer Looking for this capability Single Line Dealers All Dealers
Printer/copier bundles for work from home employees 1 1
“Touchless” print release solutions 4 4
Remote work collaboration tools 2 3
Work from home network and document security solutions 3 2

Some other observations from the survey

• 40% of single-line dealers indicated they are seeking to add A4 printer/MFP hardware — a tie at 40% with managed print solutions. Is this an indication they may be serious about adding an OEM line to their mix? Only 29% of all dealers wanted more A4 hardware; their top choice was MPS at 39%.

• 83% of single line dealers said total clicks (mono & color) declined in 2020, all said mono clicks declined and only one dealer had a color click increase.

• 2020 was much tougher on single line dealers than our full dealer population: Zero reported a business increase for 2020; 90% declined and 10% stayed the same; the average decline was 10.6%. Meanwhile, for all dealers, 11% reported a business increase for 2020; 83% declined and 6% stayed the same; the average decline was 8.6%. It appears that the straightjacket nature of being a single line dealer rendered them unable to adapt to the pandemic’s business shocks.

• 40% of single line dealers don’t offer managed IT services, and half of those indicated they don’t because they are not interested; however, the remaining 60% of single line dealers offer managed IT services. Our 2020 survey found that overall, dealers offering managed IT services weathered 2020’s downturn better than those that don’t.

• Single line dealers received 79.5% of their revenues from printer/MFP/copier hardware and associated service and supplies, compared to 71.8% for the average dealer surveyed – meaning these dealers are more heavily dependent on the traditional click-driven print/copy business model, and therefore likely at greater risk of sinking revenues if clicks lost during the pandemic period don’t recover. So not surprisingly, when single line dealers were asked what their top business concerns are over the next 12–18 months, the top two choices were declining clicks/page volumes and increasing sales/business growth. 

• Only 12% of single line dealers in the $5 million to $10 million segment said they were planning to sell their business in the next five years, while 27% of dealers in the 0 to $5 million group had such plans, an indication that it is increasingly tough to be a very small seller in this industry.

Single line dealers have been a notable presence in the office technology industry for decades, long before anybody was worried about WFH solutions or sanitizing work surfaces. By definition, single line dealers have limited product offerings but have brought value because they specialize in those offerings as a competitive edge, or they offer strong and long-standing connections with key clients in their territory. Does a role still exist for single line dealers? Their very strong renewal business says of course. That acknowledged, overall industry/technology and accompanying channel trends inevitably lead one to forecast a continued decline in the number of single line dealers – an outlook which may become more evident as we learn how well various sectors of the industry recover from the pandemic, with some weathering the storm better than others.  

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serves as a senior analyst for BPO Media. With more than 40 years of experience in the printing industry as an analyst, product developer, strategist, marketer, and researcher, he has covered the printing and supplies sectors for prominent market research firms such as Lyra Research, InfoTrends, and BIS Strategic Decisions, and served with major OEMs such as Samsung, NEC, and Diablo Systems/Xerox. McIntyre is the former managing editor of Lyra’s Hard Copy Supplies Journal and has conducted research and consulting engagements examining issues such as market and business strategies, product positioning, distribution channels, supplies marketing, and the impact of emerging technologies.

John McIntyre

serves as a senior analyst for BPO Media. With more than 40 years of experience in the printing industry as an analyst, product developer, strategist, marketer, and researcher, he has covered the printing and supplies sectors for prominent market research firms such as Lyra Research, InfoTrends, and BIS Strategic Decisions, and served with major OEMs such as Samsung, NEC, and Diablo Systems/Xerox. McIntyre is the former managing editor of Lyra’s Hard Copy Supplies Journal and has conducted research and consulting engagements examining issues such as market and business strategies, product positioning, distribution channels, supplies marketing, and the impact of emerging technologies.