Massive attack

The large format printer (LFP) market is buzzing in the Middle East. For the partners selling LFPs, the emphasis is now very much on solution selling and the provision of post-sales service and support to customers.

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By  Andy Tillett Published  May 29, 2005

A versatile market |~|Audaiattaie200lfp.jpg|~|Audai Altaie, product manager, business solution department at Canon|~|The large format printer (LFP) market is buzzing in the Middle East and vendors are queuing up to recruit the best partners to take their solutions to market. While many work through a one-tier channel of specialist integrators, the go-to-market model and commitment to building end-user demand continues to affect individual vendor fortunes in the Middle East market. With the advertising industry booming across the region, demand for the true giants of the printing world remains strong. For the partners selling LFPs, the emphasis is now very much on solution selling and the provision of post-sales service and support to customers. LFPs are certainly not cheap with some of the very high-end machines actually selling for several hundreds of thousands of dollars. The large format printing market begins at A3 size and extends up to the largest billboards and posters — often several metres wide. Vendors typically split the large format printing market into three distinct categories: construction (usually computer aided design [CAD] printers); indoor graphics and photography, and graphics for outdoor use. The route to market for large format printers (LFPs) is typically a single tier channel with product sold through a reseller or integrator direct to customers. While LFP volumes may be low compared to their commodity printer cousins, average selling prices are high, margins are strong and the potential for complementary services and products is a tasty treat for channel partners to enjoy. LFP remains a niche market, characterised by a long sales cycle and highly skilled resellers. Some vendors will appoint only one reseller for each country, even in larger markets such as the UAE. LFPs are much more than a hardware sale. Many units are delivered with Raster Image Processor (RIP) and graphics software, used to transpose images to the large formats required for printing. Because of the sub-categorisation in the LFP market, it is difficult to define a clear market leader. All vendors are quick to point out that their products and technology are category leaders, and all claim dominant market share in their respective category. Large format printing is a specialist area, with a number of vendors working in each of its sub-categories. This ranges from well-established printing vendors, that also make printers for the consumer market, such as HP, Lexmark, Epson and Xerox, through to specialist manufacturers like Oce, which creates printers aimed only at businesses and heavy industry sectors.The largest vendors offer portfolios that cover the graphics and the CAD markets, but individual vendors are strong in different areas. Epson and Canon have a strong reputation in the graphics sector, while HP and Xerox have a firm hold on the CAD market. Canon is a relative newcomer to the LFP space. “We wanted to complete the Canon portfolio by offering LFPs when we introduced them in 1999. Over the last five years we have expanded our product range dramatically and seen unit sales grow from a small number to hundreds in the space of five years. Our Middle East market share jumped from 10% to 17% in the last financial year,” comments Audai Altaie, product manager, business solution department at Canon. HP is an old hand in the LFP space having been active since the early 1980s. The vendor giant claims to have the highest share of the large format market in the Middle East, witnessing solid unit sales growth during the last two years in the region. HP operates a channel programme for large format printer resellers, with a total of 45 partners signed up across the Middle East ||**||Graphic sector expansion |~|Ernest-Azzam_200lfp.jpg|~|Ernest Azzam, business development manager, large format printing at HP|~|When it comes to sheer size, some LFPs truly live up to their ‘large’ billing. In the CAD and outdoor sectors, LFPs are heavy and bulky units. However, in the graphics sector, developments in technology have made colour printing much easier to provide and the unit size more manageable. Today it is possible to target an A1 printer at the small to medium business (SMB) market and even at demanding home users with a high-end printing requirement. Ernest Azzam, business development manager, large format printing at HP, explains why businesses do not need to outsource their printing anymore: “If a business has a happy hour or one day sale and needs signs, why give the print job to somebody else? Why pay over the odds to get your posters printed, when it is easy enough to do it yourself?” Ahmed Zeidan, technical support manager at Epson, which also offers a full range of wide format printing solutions in the Middle East for graphic and CAD use, adds: “Smaller businesses are seeing the advantages of buying a LFP. Our distributors are helping educate the customers. When they become aware of the solution and realise that it is not as big or expensive as they first thought, they want to invest.” Epson’s distributor in the UAE, Almoe, works extensively on the ground to take the product to customers and raise awareness levels. “Local knowledge and local presence make the difference. We go into all the towns and meet the people. It is hard to do with this product, but when we sit down and explain to customers how these printers work, and print their graphics — show them what they can get out of it — it works. We sell a lot of printers into schools and colleges this way,” says Shihab Zubair, sales engineer at Almoe. It is the relative lack of education in the market that makes it a great area for channel investment. Both resellers and customers are only now realising the true potential of LFPs. Demonstrating that buying an LFP is a more cost-effective solution for small to medium businesses (SMBs) than paying a copy shop can be a fairly simple process. Many large companies outside the Middle East already see the benefits of buying an LFP for each of their locations: “In France we have an agreement with Carrefour. They use our printers in every store to print every offer they have. We are also negotiating with Carrefour’s Middle East branches for the same sort of contract. More companies are following suit, not just chain stores, but businesses of all sizes,” explains Altaie at Canon. This creation of a new market for desktop LFPs has forced many vendors to look towards a traditional two-tier channel capable of selling into both the SMB and small office home office (SOHO) segment. This new range of LFPs, alongside the software and peripherals offered with them, is less specialised and available at a lower price creating the potential for significantly higher volumes. “I think growth from the SMB sector will be much higher than the growth from the enterprise. I believe the consumer sector will grow too, but slowly. It is a new concept, but as more people get used to it, and the word spreads, the market will increase. We are particularly targeting the SMB sector now to create awareness, and in turn generate sales,” says Sherifa Hady, marketing manager, imaging and printing group at HP. The SMB sector has now become a prime target market for HP, building on its existing position of power in the CAD sector. ||**||One tier channel|~|Zubair_Shihab_200lfp.jpg|~|Shihab Zubair, sales engineer at Almoe|~|At the A1 level, LFPs are still predominantly sold through a one-tier channel of specialist large format printing solution providers. These resellers are spreading education and awareness of these products in the market and enjoying the benefits of higher margins that their value-add efforts warrant. “We use our desktop A1 printers to break accounts. It is a good entry point for us to approach customers with. From there we can work on upgrading them,” explains Zubair at Almoe. Higher specification LFPs aimed at the graphics market are still required in three main areas: proofing, printing graphics and printing photographs. Professional photo studios, production companies and advertising agencies, and even copy centres themselves, are still investing in these LFPs. The other markets for LFPs — CAD and printing for outdoor use — are enjoying a boom, spurred on by the growth of both the construction and advertising industries across the Middle East, epitomised by developments in fast growing cities such as Dubai. “Wherever you look around and see a crane, there has to be an LFP involved in the project. No matter where you look in this city [Dubai], you can always see a crane. If you want to even move a brick you need a drawing to tell you where it goes, and that has to be on a print out,” says Shobit Mathur at NTC, an authorised UAE distributor for both Canon and Oce. In the field of CAD the market remains slightly different. The LFPs themselves are more industrial, designed to cope with the specific demand of the sector. Most of these printers are only needed to print in black and white. CAD printers, such as those offered by vendor Oce, are increasingly sold as all encompassing solutions, incorporating built-in scanning and copying functionality. The outdoor sector is also very healthy in terms of its potential for large format printing. Distributor Graphic International claims that demand for LFPs for outdoor graphics has boomed during the last six years. “We hear new projects being announced every other week. Real estate businesses and advertising are soaring in the Middle East. We are getting more and more enquiries all the time from the market for LFPs now,” claims an upbeat Jaimin Patel, marketing manager for Graphic International. A hard market Large format printing is a hard market for new resellers to penetrate, because it remains a highly specialised sale in most cases. Resellers frequently need to make a large up-front investment in training on product sales and services. Making a sale takes between one and two months according to Epson, and companies have to be able to cope with this lengthy sales cycle and spiky income flow. One of the ways in which resellers typically break into this market is through product diversification. If a reseller focuses on one niche area of scanning and printing to start with it can then diversify into other products once it has built up skills, experience and a reasonable customer base. Almoe started out distributing geographical information systems (GIS) and then started selling scanners. The next logical step for Almoe was to offer a full large format portfolio. ||**||Margins and consumables |~|Zeidan_Ahmad_200lfp.jpg|~|Ahmed Zeidan, technical support manager at Epson|~|Technological advances have meant that margins on LFP hardware have come down. High-end printers that would have cost US$25,000 five years ago can now go for as little as US$7,000. Graphic International mostly sells LFPs for outdoor use for vendors Rex Rotary and Seiko. It claims to sell its hardware pretty much at cost with value-added services pulling in the margin. National Trading Centre (NTC) claims a margin of between 15% and 25% on the Oce specialist CAD printers it distributes. In the graphics sector, Canon claims margins vary across the region depending on the tax imposed, but reckons partners can get around 30% to 40% on LFPs. While up-front hardware margins vary, consumables, spare parts and services are the real cash cow in the LFP space. These machines are mission critical devices for their owners and downtime is not appreciated. If an LFP breaks down or goes offline, it needs to be repaired fast. Resellers generally have 24-hour or 48-hour repair or replacement policies supported by vendors. Other services, such as colour correction, require a trained engineer to address them. LFP users are also much more likely to turn to the authorised channel when it comes to purchasing supplies and consumables. While commodity printer users may be prepared to take a risk on cheap alternatives available in the market, LFP users realise that it is not worth risking a machine worth thousands of dollars for a few dollars savings. This propensity to purchase authorised supplies assures the channel of a solid recurring revenue stream from their LFP sales. Large and small format printers exist at opposite ends of the product spectrum. LFPs, frequently sold through a one-tier channel are low volume high margin products with lengthy sales cycles. The margin is there but the sales process requires effort. For channel partners it is definitely an area to consider. With margins on low-end commodity printers tending towards zero and the channel often stuffed full of this product, the allure of selling a few high-margin LFPs and getting out of the box-shifting madness is there for all to see. ||**||

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