Andrew Ritschel
I can always count on Andrew Ritschel, president of Electronic Office Systems (EOS) in Fairfield, New Jersey, to tell it like it is, and not only that, encourage me to print it. That’s always an offer I can’t refuse so when he e-mailed recently wanting to talk about the three biggest threats facing independent dealers I embraced the opportunity to hear what he had to say. So let’s get right down to it for an overview of those three dangers. Next week we’ll delve more deeply into Threat #2 and the following week dig deeper into Threat #3.
Threat #1: Manufacturer’s Irresponsible Down-the-Street Pricing. This is one that Andrew and many other dealers have railed about in the past and some of us have been under the impression that this problem has been addressed by most manufacturers, but maybe not all of them across the board. “This has caused them to lose millions and hurt their own profitable distribution channel—independent dealers,” laments Ritschel.
Threat #2: Customers Declining to Take Maintenance Agreements on Their Equipment. Ritschel sees this as the greatest emerging threats to the industry. The primary reason why customers are foregoing maintenance agreements is that the equipment is more reliable than it’s ever been.
“People are looking to save money so when those maintenance agreement renewals come up, if they’re not tucked away in pass-through leases as part of a lease payment, they’re apt to say ‘We’ll do without,’” says Ritschel. “A maintenance agreement is basically our cash flow and our profitability. [Not having one] unties the customer from us for supplies and allows them to go onto the Internet and start buying supplies at whatever ungodly price suppliers are selling the supplies for, possibly buying generic brand supplies and using them with the equipment that we place that eventually we might have to service.”
If customers just bought the equipment at the discounted purchase price or leased it at the discounted purchase price Ritschel says he’d be out of business very quickly. “We, like everybody else, are putting the equipment out there to capture the service and supply business. The amount of profit we would need to make if we weren’t selling maintenance agreements and supplies would have to be much greater than what we’re making right now.”
Threat #3: Insanity in Pricing MPS. Dealers and Manufacturers have what Ritschel calls “MPS fever” and are buying printer MIFs without fully understanding what their costs are to service those MIFs.
“A lot of people are haphazardly quoting and in essence paying the end user customers for every print they’re outputting,” contends Ritschel. “In other words, I see them pricing themselves below costs, giving money to end users for their printing. I see that over and over again. We know what the cost is on HP generic products and what it costs to do a service call and what the expected service call time is yet we see people selling MPS clicks considerably below what it costs them. It’s okay as long as you’re not buying MIFs and losing money doing it or breaking even. And when they do break even or lose money, they’re not only hurting themselves, they’re hurting their competition, they’re hurting our industry, and they’re hurting the end user customer.”
Ritschel continues to sound the alarm.
“Where they talked about cost per copy death 15 -20 years ago, there are suppliers promoting MPS death right now. People will throw out a figure –1 cent, 1.3 cents, 1.5 cents without having any clue of the base of printers. In a base of printers we’re seeing 80-85 percent of the marketplace is HP printers. Are these HP 1000 Series printers, 2000 Series, 3000 Series, 4000 Series, 5000 Series, 8000 Series, or 9000 Series? If they’re guessing wrong on how many of each series are out there and if they’re data collection agent is not picking up the customer’s PC-connected printers and they’re basing their quoting rock-bottom pricing they might be making a tiny bit of money by not collecting the meters manually, but in reality they’re losing huge amounts.”
