Deans of Diversification: Taking a Closer Look at Three Popular Ancillary Products

One of the great attributes of the office technology dealer ecosystem is its resiliency. The reason many of these companies have been in business for decades (100-plus years in some extreme cases) is their willingness to recognize that technologies change and evolve. If your firm once solid typewriters and adding machines, you probably don’t need such encouragement. The fact of the matter is, there may come a day when the trusty multi-function printer isn’t the centerpiece of your business universe.

That may sound sacrilegious—after all, the MFP has been the bread-and-butter offering for several decades now, and many a dealer owner has made his/her fortune by peddling boxes. For all we know, as the evolution winds blow, MFPs may yet enter the 2030s as a primary offering. But you owe it to yourself—not to mention your clients, employees and the long-term health of your business—to cultivate ancillary offerings.

All you need to remember is one thing: While the number-one objective of any business is to make a handsome profit, we’ve long believed that’s accomplished by adapting to the evolving needs of customers. We hate to sound like a broken record, but most dealers strive to be a single-source provider for their SMB clientele. Whatever that looks like must be your guiding compass, and you’ve grown close enough to your customers to recognize when those needs begin to shift.

Our February State of the Industry report on top diversification opportunities with unified communications, electric vehicle (EV) chargers and mailing equipment (including meters and folder inserters, etc.) may not apply to your current client makeup, though we suspect at least one will. The main thrust, however, is opportunity identification. It’s about doing client reviews through various lenses to spot latent needs that can be matched with tools you either already possess or can easily obtain.

Too often, dealers are guilty of believing they’ve fully assessed a client’s office needs and have no other inroads that will yield more revenue opportunities. Think of your clients’ environments as Magic Eye images—you let your eyes relax and unfocus in order to see a hidden picture. We’re not saying you haven’t done sufficient research, but don’t let that stop you from assessing them from a different vantage point. Let’s take a look at some examples from your fellow dealers.

USPS Edict

When new regulations impact a given vertical/business sector, it can sometimes create the need for modifications among end-users in order to continue operating within accepted standards. It may help to be less nebulous: the U.S. Postal Service has mandated updates to all postage meters that will meet new Intelligent Mail Indicia (IMI) standards to incorporate better security measures and help prevent cybersecurity threats.

The upshot is that Mr. ZIP will decertify all Information Based Indicia (IBI) postage meters as of June 30 this year, and they will be phased out Dec. 31. Thus, all mailers with IBI machines need to change over to IMI ASAP.

Joe Blatchford knew this was coming. A little more than a year ago, the president of Image 2000 in Valencia, California, added postage meters to his stable of products via FP Mailing Solutions. The meters aren’t the only postal gear, as Blatchford looks to provide a comprehensive portfolio for mailing clients.

What he likes most about the postal equipment is that it’s not such a sharp turn away from the balance of his portfolio. The meters themselves aren’t cash cows, but the associated equipment and modest MRR make it more worthwhile.

“A lot of the stuff we produce or print is going to be folded, inserted and mailed out,” Blatchford said. “We’re selling the meters, folder inserters, sealers and stuffers. We’ve actually dabbled in [postal equipment] in the past, but we’d never done the complete package. It offers some residual business to a degree.”

Because of the support FP Mailing provides, I didn’t need a specialist on staff. In most cases, our techs can handle the break-fix end.

– Joe Blatchford, Image 2000

As this was largely a new field for Image 2000, the dealer relied on FP Mailing Solutions’ support. The dealer’s sales reps can use an FP app that informs them about the client’s current postage meter and whether it’s up to code. It’s been a significant tool to help reps who may be dealing with clients/prospects that have sophisticated mail merging systems. FP can also assist with presentations and providing demo equipment.

Blatchford also likes that the market isn’t saturated with a bevy of manufacturers; Pitney Bowes and Quadient are the other primary players. There are specialty providers such as Paitec, and Formax is one of the biggest name in the folder inserter realm.

“Because of the support FP Mailing provides, I didn’t need a specialist on staff,” he said. “In most cases, our techs can handle the break-fix end.”

Image 2000 is still working its way up to scale within its client base. Blatchford sees it as an easy sell, not nearly as sophisticated as a solutions-type offering, but reps can be slow to embrace it. Tying it into president’s club qualification is expected to help Image 2000 ramp up sales.

Plugged In

The buzz around electric vehicle (EV) charging stations, associated equipment and software could be felt throughout the industry in 2023. ACDI was the first vendor to market in our space, and its ACDI Energy Services has signed on a number of prominent dealerships, not the least of which is Pacific Office Automation (POA) of Beaverton, Oregon.

EV chargers (for short) have naturally gained more widespread attention as the number of automobile manufacturers that offer electric-powered vehicles has increased. How quickly adoption accelerates will be the key variable driving installations (OK, enough of the bad puns) as we progress into 2024. Our friend West McDonald wrote in ENX last fall, citing statistics from InsideEVs, that “the number of public electric charging stations in America must quadruple by 2025 simply to meet the needs of the new EVs hitting the roads every day…S&P Global Mobility figures the EV market share will rise to 40% of all new vehicle sales in the U.S. by 2030.”

Dealers are quite justified in taking a wait-and-see approach, as it’s an ancillary product that’s as far removed from the mainstream office as we’ve ever seen. But if those aforementioned figures are even moderately accurate, there will be a substantial need to scale the charging infrastructure. And for any client that has ample parking capacity—schools, doctors/health care systems and retail environments, to name a few—the opportunity to infiltrate the account from a different vantage point is fairly lucrative.

POA has been offering EV chargers for about 12 months, according to Scott Brenton, director of mailing, security cameras and EV charging stations services. The dealer found the offering fit with its business model of hardware and recurring revenue with service. Much of the optimism centers on clients’ plans to use EV as a perk for both employees and clients. The hospitality sector (more specifically hotels) sees it as a drawing card that differentiates it in a competitive field.

What’s impressive is the fact that dealers such as POA can lead with EV and open the door to other offerings in its catalog. It didn’t take the dealer long to fly on its own, so to speak.

“We had terrific early interest from customers and excitement from net-new customers we’d been having conversations with—talks that were started because of the EV offering,” Brenton said. “We had the manufacturer involved in the initial month of sales engagements; from there we’ve engaged the manufacturer on an as-needed basis.”

It’s an offering, however, that can test the patience of sales reps. The traditional copier rep is accustomed to having an MFP delivered and installed in short order. However, until dealers cultivate relationships with third-party electrical services providers and get more transactions under their belts, the process can be somewhat plodding. On the plus side, a company such as POA with a strong technical service competence can address maintenance issues.

We had terrific early interest from customers and excitement from net-new customers we’d been having conversations with—talks that were started because of the EV offering.

– Scott Brenton, Pacific Office Automation

“There’s a fair amount of detail required for installs, and getting electrical contractors onsite to quote and install has been a challenge,” Brenton added. “From a break-fix standpoint, our service team is able to handle many of the basic service-related calls.”

Missing Link

Cory Spice considered getting into unified communications for quite some time. The president of Wisconsin Document Imaging (WDI) in Green Bay kept prioritizing other growth initiatives, which relegated it to the backburner. But in recent years, the demand for phones steadily increased, particularly from managed IT clients, and as Spice sought to be that single-source provider, he felt it important to close that gap in his catalog. Thus, WDI inked an agreement with Zultys to offer VoIP systems in the fall of 2022.

Every dealer has his/her own checklist for viable ancillary offerings, and Spice is no exception. The demand must be clear, the company must be capable of fulfilling it with an existing or new vendor partner, and the technology itself must be proven and reliable. That third aspect probably trumps all. Spice finds it necessary to take a pragmatic approach.

“In the technology space, a lot of attention is given to ideas that are brand new and cutting edge,” Spice noted. “I admire those entrepreneurs and innovators for taking that leap to develop and implement new technologies to make business/daily life easier. We need their ingenuity to progress. However, as a small business, we don’t always have the luxury to be cutting edge; we have to be lean and efficient with our resources so clients can count on our offerings to work the first time and team members can count on a paycheck.”

Spice also follows the teachings of Jim Collins, who noted in his work “Great by Choice” that early adopters who are first to market with an idea generally don’t see the greatest profitability levels. Similarly, being among the adoption laggards is an unwise practice. As VoIP had long been established as a technology, the only thing Spice needed to do was select the optimal vendor.

He notes the early returns have been terrific; it took the dealer about six months to sign off on its first deal, during which time his team became proficient with the offering and educated its sales force. “As most leaders will agree, the best way to get buy-in and understanding from your team on a product/service is when the team is using it themselves,” Spice noted. “After our adoption of the new system and our employees better understood the daily workings and benefits, sales gradually increased over the rest of this year. We’re now landing multiple deals a month and expect that snowball growth to continue.”

Zultys was selected for the reputation of its quality customer service as much as system functionality. As the dealer has long worked with the Technology Assurance Group in developing its managed IT platform, the organization’s endorsement of Zultys convinced Spice it was the optimal choice.

While the entire WDI sales force can sell VoIP, the company’s managed IT sales specialist has served as the sales guru. This follows the dealer’s MO of having a specialist in each discipline.

After our adoption of the new system and our employees better understood the daily workings and benefits, sales gradually increased over the rest of this year.

– Cory Spice, Wisconsin Document Imaging

Perhaps the biggest challenge WDI encountered was understanding the cadence of the implementation process, the steps along the way and which parties have oversight for individual aspects of the process. Plus, systems can be tailored toward the needs of the end-user, so it’s not a 100% repeatable process. Still, Zultys has proven to be an ideal partner for WDI.

“Zultys provides outstanding resources and support, and it’s been much easier than rolling out other new office equipment products we’ve added in the past,” Spice noted. “Our in-house tech team is capable of fixing many of the phone system adoption issues we might encounter. However, presently we’ve chosen to only be an agent and outsource most of those issues to Zultys. We do have the option from Zultys to add providing service to our customers down the line for a larger percentage of the deal profits if we so choose.”

The servicing option was another reason Spice opted to partner with Zultys. Still, Spice’s preference is to remain a Zultys agent and allow the service department to focus its attention on other growth areas.

Door Opener

The decision to offer mailing equipment answered the age-old question for Offix of Gainesville, Virginia—how does one find an inroad into certain accounts that have remained out of reach from a print penetration standpoint, while simultaneously providing another offering to go wider and deeper with existing clients? That was the plan nine years ago when Stephen Valenta, founder and president, decided to make the plunge.

However, the offering has taken on a life of its own. Offix now has a full-fledged catalog that includes equipment from FP Mailing Solutions, Formax, Duplo and Data-Pac (an FP Mailing brand of high-end equipment). The dealer’s offerings range from meters to sheet feeders, pressure sealers, sheet cutters, envelope sealers and inserters. Offix is in the process of developing a complete mailing division with dedicated account representatives.

“We initially brought on mailing equipment because it’s similar to copiers in that you have residual income on the service and supply sides,” Valenta noted. “Regardless of the product we bring on, it must have that residual income coming in from the service side. We won’t bring on a product line unless there’s something to it—it has to be more than just selling a product.”

When Valenta acquired Frank Jones Mailing, Offix found itself with some esoteric offerings far off the beaten dealer path, such as Bunn tying machines. The acquisition was also a gateway into Formax folder inserters that carry a six-figure price tag. The aforementioned Data-Pac high-end mailing equipment includes high-speed envelope printers that can range from $50,000 to $100,000. The postage machines are actually the least expensive units, generally selling for under $15,000.

This year will see the biggest sale of mailing equipment in probably the history of mailing.

– Stephen Valenta, Offix

Offix has a mailing specialist/manager on staff—Valenta scooped up his former FP Mailing rep (not a poach). The technology and training aren’t terribly complicated, but in the early days of the offering, there were a lot of details to absorb.

“When you don’t know much about postage, you have to learn all about First Class, parcel, scales and software to check ZIP codes. We certainly learned a lot,” Valenta said. “The training side for service isn’t that difficult. It’s teaching your reps everything they should know about postage.”

Valenta agrees with Blatchford’s assessment that the major USPS changes are going to make for a monumental year. “This year will see the biggest sale of mailing equipment in probably the history of mailing,” he said.

The challenges that have confronted Offix are fairly universal—it’s the difficulty in finding experienced sales reps and technicians from the mailing discipline. For the past year, the dealer has been operating with 12 to 15 job vacancies, although there’s more stability among the technicians. But Valenta is also faced with another unfortunate (and commonplace) reality in that his service staff will be seeing a fair share of retirements in the next 5-10 years, which only intensifies the need to cultivate younger prospects who are mechanically inclined.

Working with vocational schools is one source the dealer has been cultivating. Offix also opened a new office in Lynchburg, Virginia, last August, and Valenta has a manager there who’s assembling a strong technical team. He feels it’s easier to build a tech, so to speak, than to hire one. Team members who join the firm as drivers, for example, are groomed and moved into training for tech service.

“We’re a bit selective,” Valenta noted of the hiring process. “We don’t just want to fill seats.”