Recent Transactional Channel Trends May Have Buyers Looking Beyond E-Commerce and Retail

We’ve all seen the challenges presented by the ongoing effects of the pandemic. From office closures to inventory issues, the print industry (and the world for that matter) still hasn’t quite recovered. As we all know, lockdown orders forced many of us to work from home, pushing those of us who previously worked in a central office setting to purchase home office equipment essentially overnight. In the beginning, many employees were given the green light to purchase whatever they needed at the expense of the employer, creating challenges around remote technology products and managing ongoing costs. 

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Most in the industry would agree that office pages and the way people work won’t ever fully go back to pre-pandemic ways. It remains to be seen when (and how many) people plan to return to the office over time, as demonstrated by many large organizations like Microsoft, Meta, and Google that have flip-flopped their back-to-the-office policies. Regardless of in-office work requirements, a January 2022 survey from Pew Research Center found that 61% of people working from home said they’re not going into their workplace because they don’t want to while 38% said their office was still closed. These figures represent a stark contrast compared to October 2020 (before vaccines were rolled out) when 64% of people said their office was closed and 36% stayed home by choice. (Note: share of respondents who didn’t offer an answer weren’t included.)

The study further showed that 78% of people who are still primarily working from home want to make it permanent. Many employees have acclimated to remote life and have found that the benefits (no commute, more scheduling flexibility, fewer distractions, etc.) outweigh the disadvantages (increased isolation, maintaining an appropriate work-life balance, etc.), as this figure is up 14 percentage points from 64% in 2020.

Decision-makers may soon begin looking to upgrade office technology for those working remotely or in a hybrid environment. After all, this was only supposed to be a lockdown for two weeks, right? However, the potential need for an updated device or upgrade may not be easy to fulfill for those looking to purchase a product online or in-store. Transactional channels remain challenged by a range of issues that might have some decision-makers scrambling to find on-hand products with prices that fit within the organization’s budget and suit their equipment needs.

It’s hard to find products to buy online or in-store

While the elimination of mask mandates across the U.S. has made it feel like the COVID crisis is coming to an end, the effects of the pandemic are still felt when customers shop for office equipment. Dealers have shared feedback around ongoing challenges such as major inventory shortages, often telling their customers that there aren’t any hardware units or supplies replacements available for certain models. The same story is playing out in e-commerce and brick-and-mortar transactional channels.

In the weeks following stay-at-home mandates, printers and other home office equipment sold transactionally were observed with steep drops in in-stock availability, and the situation hasn’t improved for print. In Q1 2020, 58% of printer hardware sold through the e-commerce channel were in stock for purchase. Two years later in Q1 2022, that figure dropped by 30 percentage points to 28% of products showing in-stock status. In total, just over 7,000 printer listings showed in-stock availability in Q1 2022 compared to nearly 22,000 captured in Q1 2020.

When considering the inventory challenges that dealers and MPS providers are currently facing, it’s important to understand that they’re not unique to the channel and these customers would be challenged to find available printer inventory to purchase online or in-store as well.

Number of In Stock Percent of In Stock

Prices have gone up and promotions have all but disappeared

It’s no wonder prices have increased due to heightened demand compounded by strained logistics and manufacturing constraints, not to mention the overall rising costs of goods, freight, and transportation. In general, it’s rare to see consumer and home office printer hardware prices go up during a product’s lifetime (we usually see this on the supplies side every few years), but it’s something that has occurred gradually since the start of the pandemic. All major A4 brands have implemented upward hardware price changes to retain margins and respond to demand. Some OEMs have even adjusted pricing twice, and these increases have translated to higher street prices.

Entry-level devices were especially hard hit with higher prices at checkout. Overall prices for consumer and home office devices jumped 20% between Q1 2020 and Q1 2022. The technology split was relatively even, with inkjet prices up 20% and lasers up 21%. A different picture was painted for higher-end A3 and A4 devices sold transactionally, as prices dropped quickly during the first three quarters of 2020, but have stabilized to-date. Overall, street prices for business printers declined by 6%.

Average Net Prices

In rare cases, select printers saw prices plummet, driving attention to the seemingly discounted SKUs and leaving competing brands digging for more insight into these pricing actions. However, these rare price drop occurrences were aligned with products with no inventory on-hand, possibly encouraging customers to hold out for when the products would be in stock again or settle for a seemingly higher-priced item that was currently in stock.

Before the pandemic, it was typical for brands in certain product categories like PCs to increase the prices of their products just to discount them back down to the original price. This created the perception of a good deal to customers who did not know the product’s previous price. However, we haven’t seen this strategy deployed by printer brands after recent price increases were implemented, and the higher prices have instead stayed in place without promotional activity. There’s no reason to offer instant savings if few products are on-hand to sell. Online and retailer advertisements shifted from instant savings to those without incentivized offers, and pass-thru rebates captured through the distribution channel became nonexistent.

In addition to higher hardware acquisition costs, consumers have been met with rising supplies costs as well. gap intelligence supplies analyst Adrienne Spear noted that since October 2021, major A4 players including Xerox, Canon, Lexmark, and HP have implemented widespread price increases to their printer supplies portfolios. Just this month in April, Brother issued its first upward price adjustments to both toner and ink since 2016 and 2017, respectively (and in fact in 2019, Brother actually lowered supplies prices at its US website in an effort to align its direct prices more closely with its retail partners). With the ongoing semiconductor shortage and rising costs throughout the supply chain, it’s no wonder these manufacturers have been forced to raise prices in order to maintain profit margins.

In April of this year, HP also raised prices on its three lowest Instant Ink subscription plans by as much as 50%. The price changes led to some backlash from customers who found that the increases far outpaced the rate of inflation (which HP referenced in a message to customers regarding the changes). Still, HP’s Instant Ink has experienced record-breaking growth during the pandemic, climbing from roughly 6 million in January 2020 to over 11 million two years later in January 2022. The notable growth speaks to consumers’ increasing propensity for subscription-based purchasing, which has become the norm in other categories such as streaming services, meal deliveries, personal hygiene, and even clothing.

Many portfolios are overdue for a refresh

From a “speeds and feeds” perspective, many of the devices available to consumers haven’t seen major updates for some time. Sure, there have been some product introductions with incremental enhancements, but the majority of these launches have been mid-lifecycle refreshes with no major overhauls in years.

Launch activity diminished during the pandemic amid manufacturing challenges and component shortages. In 2019, a total of 206 devices intended for open channel distribution were introduced, but that number was nearly halved in 2020 when only 111 devices were launched. Portfolio refresh activity didn’t pick up in 2021 when less than 100 models were introduced, and 2022’s product launch levels to-date are roughly on-par with last year’s. However, it is possible that manufacturers could look to this year to refresh models sold through transactional channels. That said, products may still struggle to get into consumers’ hands as shipping delays remain an issue.

Cumulative Launches

Knowing these pain points may help guide conversations

Understanding these purchasing obstacles may help guide conversations around product upgrades and unit replacements. It’s also worth noting that beyond the above talking points, there are additional conversations to be had around managing costs, usage, and security, among others. While many employees will be just fine with their own entry-level desktop printer models, there are still opportunities to place more robust units in the hands of employees that will better align with an organization’s budget and management goals.

There doesn’t appear to be a clear end in sight for inventory issues or even a slowdown of rising costs. In fact, additional price increases are still being identified and rumors continue to circulate that there are more to come. And with ongoing delays and price increases on the horizon, now’s a good time to have conversations around updating equipment and beginning the purchasing process. 

Valerie Alde-Hayman, gap intelligence
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