Consumables culture

Consumables sales are commonly seen as a high-profit business for companies in the IT business, particularly with end-customers printing increasing volumes of content and considering their printing infrastructure in a strategic light. But is the market really all it's cracked up to be?

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By  Julian Pletts Published  March 13, 2008

Consumables sales are commonly seen as a high-profit business for companies in the IT business, particularly with end-customers printing increasing volumes of content and considering their printing infrastructure in a strategic light. But is the market really all it's cracked up to be?

Channel Middle East canvassed opinion from George Saliba (GS), sales manager at Medmark; Dekshin Karthik (DK), sales manager at Al Suwaidi Computers; Khaldoun Borini (KB), general manager at Integrated Standard Solutions; Faisal Jamal (FJ), purchase manager at Despec MERA; Khalil El- Dalu (KE), sales and marketing manager at Epson Middle East; and Amr Hassan (AH), regional general manager IPG at HP Middle East.

In the past we had generic consumables resellers. Today, even within the enterprise space, there are many sophisticated users requiring a reseller that will understand their business model.

Consumables have a reputation of being expensive, especially in comparison to printer hardware. Is the high end-user price reflective of the margins and profit that the channel makes from selling consumables?

GS: There is no profit at all in printers, we're trying to make the profits from consumables. Margins are very low though - often 1% or 2%. It is not enough to cover overheads.

We make the most profit in laser printers, and in business and high-end consumables. Margins with these can go up to 5% or 6%. The volume is less because these printers are for specific accounts.

We also have many factors that we have to combat like counterfeits and imports. This affects our margins.

FS: Broadly speaking, the distribution channel makes the same margins from consumables as printers and other IT hardware.

The high end-user price isn't reflective of the margin the channel makes. The perception is that the price is high because OEMs have fought to bring down the price of the hardware.

However, in respect to the whole printing package, it's more cost effective now than ever before. In real terms, the price has gone down compared to the last 10 years.

On top of that, printing has become more convenient; we can print at home, hardware is cheaper, quality higher and output better.

The cost per page is also improving. So the high end-user price is not reflective of the margin or the profit, but of what the customer is actually getting.

AH: With regards to the channel, the past fashion was to make high margins from hardware and reasonable margins from supplies.

This has changed because as the products have become commoditised, the pressure on margins has increased.

Today, product margins are very thin, so each reseller is trying their best to provide a portfolio of services that will give them a competitive edge in the market.

KB: The margins are slightly lower because we face a lot of competition in the market and with consumables you can see that for every brand there are many distributors and many resellers.

But I don't know where the argument for the consumables being expensive comes from. Generally speaking, they are not that expensive.

DK: Consumables are indeed expensive. There are two types of consumables business: genuine, from the vendor, and counterfeit or grey.

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