There was a time not long ago when auction and antique shows were huge on cable television. PBS, of all networks, set the standard with its “Antiques Roadshow.” The scripted drama “Storage Wars” has lasted about 15 years, including several iterations, and “American Pickers” has been a fixture for roughly the same period. “Pawn Stars” can be added to the group as well.
It’s always fun to watch, particularly when the experts provide a brief educational account on the item in question. The other party usually feigns interest as they listen politely. But what they really want to know, in the end, is how much the item’s worth, and what could they reasonably expect to haul in, either in an auction or retail environment.
Safe to say, when a dealer is pondering the addition of a certain ancillary item to the portfolio, the bottom-line question is a legitimate one. It’s important to know whether a product or service is worth the time and effort required to onboard it. That includes money expended on education, training and inventory.
Since we’re in polite company here, we won’t be talking hard numbers, but our panel of experts will provide general insight into the three diversification areas highlighted in our February State of the Industry report. While VoIP phone systems, postal equipment and EV chargers sound like the oddball guest table at a wedding, solid margins may prompt dealers to consider welcoming them to the family, should the upfront investment not be too onerous.
VoIP phone systems have provided strong margins for Wisconsin Document Imaging (WDI) of Green Bay. Cory Spice, president of WDI, points out that the typical deal will yield roughly half of what the company would realize on an office equipment sale. Spiffs make these deals more attractive to sales reps, and the company’s cut of the margin is recurring as long as the client sticks with the system.
“That recurring revenue adds up over time, so we are very comfortable that the profitability on these deals is worthwhile for us,” Spice said. “There is minimal upfront costs for us outside of the time to educate our team on the systems we offer. That was also very attractive.
“Adoption of the Zultys system for internal use actually saved us money over our old system month to month and our WDI team is certainly recognizing more efficiencies using the system.”
One area of particular interest for dealers is EV charging packages. There isn’t a lot of trailing data available, given the technology’s recent penetration in the office dealer space. Scott Brenton, director of mailing, security cameras and EV charging stations services for Pacific Office Automation, doesn’t classify EV chargers as a high-margin product.
As an early adopter, it will take the Beaverton, Oregon-based dealer time to reap a return on its investment. “It does fit our business model of being able to make money on the hardware and receive recurring revenue on the back end for servicing of the product,” Brenton said. “While we invested in a big way upfront, each program may have different requirements.”
The area of postal equipment is a bit tougher to characterize, as there’s volatility in the price ranges of the many devices that fall under this catch-all category. Image 2000 of Valencia, California, jumped on board with postage meters last year (courtesy of FP Mailing) in anticipation of the new Intelligent Mail Indicia (IMI) standard requirements that will provide greater security. The dealer also carries folder inserters, sealers and stuffers.
Postage meters are extremely inexpensive relative to other postal gear, according to President Joe Blatchford. And while some manufacturers require their reseller to purchase six figures’ worth of inventory and demo gear, the dealer was not burdened by the commitment level.
“That was a consideration when we got into this equipment,” he said. “We’re selling it in Nevada and all the way up in California, so we wanted to be able to do this on a large-scale basis without breaking the bank. There’s a recurring component, but it’s not a lot. You can make a couple hundred a month on a good-sized system.”
While the margins are OK, competing manufacturers such as Pitney Bowes have been cutting their prices. Although the manufacturer is not in all of Image 2000’s markets, its presence in others has deflated profits somewhat.
Another FP Mailing client, Offix of Gainesville, Virginia, also offers folding and inserting gear that can touch the $100,000 mark on its price tag. Stephen Valenta, founder and president of Offix, compares the postage meters to segment four printers from a margins standpoint. The machines don’t break down often, and resellers can do well with ink and postage supplies.
