We’ve seen a lot of changes in the print industry over the past several years, some of which have been more impactful than others. From declining pages to the growth of MPS, to improved security and solutions, end users and IT departments are constantly required to decipher between what trends to follow and what’s the most advantageous, from both a workflow and financial perspective, for their businesses. One of the more recent shifts emerging in the print industry is the growing adoption of A4 (letter) versus A3 (ledger) devices in channels that have traditionally been dominated by copier-based systems. This shift has become more evident as end users are printing fewer A3 pages (and fewer pages in general) leading to businesses evaluating their printing budgets. As a result, we’ve seen a shift in buying habits within the industry as companies try to balance the cost of their printer hardware and usage. This has ultimately led to traditionally copier-centric manufacturers adjusting their portfolios by strengthening their A4 lineups with faster print speeds and enhanced features (to reflect the higher-end A3 MFPs) in an effort to capture new revenue opportunities.

Within the US dealer channel, companies that have traditionally operated as copier-focused brands, including Ricoh and Canon, recently released A4 devices that have similar features compared to an A3 model. Although this trend is not yet necessarily an industry wide shift (some manufacturers and dealers are staying very loyal to A3), the decision for these manufactures to move in this direction is one that was likely very strategic and designed to take advantage of these market shifts.

What Trends are Driving the Market Changes?

We’ve heard analysts and manufacturers talk about declining page counts for a long time. It almost seems that this discussion has been occurring as long as I can remember, but really became more of a serious trend since the recession started in roughly 2008. As businesses became more conscious about print costs and as paper prices increased, the financial implications of printing drove companies to adopt a renewed focus on balancing the cost of printer hardware and number of printed pages. The strain on printing costs and the rise of new technologies have led businesses to shift how they operate with more and more processes turning to digital.

Additionally, due to gradual changes in the economy and demographics, the business landscape has shifted and so have user preferences. With the recession nearly ten years behind us, a new era has emerged with major changes in the US workforce. Millennials and Generation-Z are becoming the IT and executive decision makers, more employees are working remotely, and bring your own device is becoming the norm in the workplace. With that, print habits and perceptions around print costs are changing.

Changes to Portfolio Offerings

gap intelligence MFP Placement chart

The culminating market shifts have driven manufacturers to look for new revenue opportunities outside of their traditional strategies. gap intelligence data indicates that manufacturer portfolios for dealer/direct distribution have shifted over the past several years. The dealer channel has traditionally been very A3-centric as the copier dealers’ business model largely revolves around margin opportunity with higher hardware prices and long-term service contracts. Over the past eight years, we’ve seen an uptick in the number of A4 devices that have emerged within manufacturer portfolios designated for the US dealer/direct channel. Within the data, A4 color MFPs have seen the most growth with an increase of roughly 173% and A4 B&W MFPs have increased by approximately 141%. Ultimately, A4 MFPs are becoming more prevalent in the market and are beginning to replace A3s in some scenarios.

With the aforementioned workforce changes and shifts in printing habits, the target customer has also changed. The new younger workforce is more digitally connected, as well as price conscious (and more price sensitive about print costs) than ever before. With that, users are digitally storing more data and documents, and as a result, are printing fewer pages. With lower page volumes, it may not make sense to the IT manager, who happens to be a millennial, to justify the purchase of a $20,000 A3 MFP when the company can buy a similar-speed A4 MFP for half the price and that better fits their printing needs. Furthermore, managed print services (MPS) have become more prevalent and A4 MFPs generally offer a strong value proposition for MPS installations with a lower acquisition cost, fewer service interventions, and reduced service costs, which is helping drive this demand for A4s.

Additionally, with the new revenue opportunities within the A4 segments, copier-centric manufacturers are adapting their portfolio strategies to account for this shift. With some of the recently introduced higher-end A4 MFPs, vendors are adding more robust features, such as faster scan speeds, increased support for solutions and apps, and improved connectivity for Wi-Fi and wireless printing. These models are equipped with many features that were previously reserved for A3 MFPs, making the A4 devices very attractive at a lower price point than an A3 option, although still priced much higher than what most people expect from an A4 MFP.

People at work with a printer

digitaltrends.com

Another element to note is that in many scenarios, the dealer/direct sales rep decides what product they offer to the customer, so the sales rep is incentivized to sell a higher-priced A3 MFP than a lower-priced A4. Recent high-speed A4 launches from Ricoh (50ppm MP C501SP Color MFP) and Canon (75ppm imageRUNNER ADVANCE 715iF II B&W MFP) may influence sales reps to sell more A4s if they can ensure a contract win with adequate commissions. Continued manufacturer investment in these higher-end A4 MFP segments will likely help drive A4 growth over the next few years.

The Dealer Conundrum

The growing adoption of A4 MFP devices has posed new challenges for US dealers as the shift effectively challenges the foundation of their business/profit model. Print dealers earn revenue by selling printer supplies and servicing devices as part of click deals where the service and supplies are bundled into a per-page rate (or billed by seat/individual, but that’s a whole other industry trend for another blog). The laser-based A3 copier devices typically have a larger footprint (vs. A4 models), a lot of moving parts (toner, waste unit, fuser, maintenance items, etc), and often require regular servicing, which a dealer can add into the click rate, and ultimately turn into a profit margin. The A3 devices also have traditionally come with a range of high-end features (internal finishers, faster scan speeds, solutions-enabled, etc.) and a much larger suggested retail price compared to their A4 counterparts. With that, print dealers have developed a profitable financial business model around selling and servicing A3 devices, while the A4 models haven’t necessarily offered the same margin of opportunity (they are smaller, less expensive, and with fewer robust features).

Understanding the revenue model for dealers, manufacturers will need to present similar service and click-rate scenarios with the stronger A4 MFPs if they want more dealer adoption, and in turn, dealers will need increase their comfort level with A4s and branch out of their traditional A3-focus. Or dealers need to decide if maintaining this model is potentially worth the sacrifice of not meeting the changing needs of the market.

What Does the Future Hold?

All in all, we are still a long way from having A4s take the place of A3 devices in channels and office environments that have traditionally been A3-centric. US dealers remain very focused on selling A3 models and many businesses still require A3 devices for their workflow needs. That being said, I believe that we will continue to see stronger A4 MFP models emerge within manufacturers’ dealer-designated portfolios as manufacturers take advantage of the opportunity to create more dynamic lineups that truly fit the need of the current workplace. This is a positive shift, albeit slow, as the print world is looking ahead and working to evolve with the changing needs within their customer bases. They have to balance customer demand and dealer satisfaction and that is an ongoing challenge. With that, dealers will need to let go of their A3 centric mindset, understand that this shift is happening, and adopt a new financial business model that enables them to earn a suitable margin.

For more than 15 years, gap intelligence has served manufacturers and sellers by providing world-class services monitoring, reporting, and analyzing the 4Ps: prices, promotions, placements, and products. Email us at info@gapintelligence.com or call us at 619-574-1100 to learn more.