Christian Pepper
The document imaging industry is an industry of entrepreneurs and many smart, talented people. One of those smart, talented people is Christian Pepper, Director of Marketing, LMI. He joined LMI in July of 2014 after fourteen years with Printersdirect in both the USA and UK. Before that, he spent four years with Lexmark. Clearly, Christian knows document imaging.
I’ve had the opportunity to interview Christian twice during the past two months and as we prepare for the Sept. 22 Actionable Intelligence/ENX magazine Webinar on the color aftermarket, I thought it would be interesting to get a couple of leading aftermarket players, including LMI, to give their take on the color aftermarket.
Not surprisingly LMI sees a promising market for aftermarket color laser toner.
“The opportunity in color is overwhelming,” contends Pepper. “The timing is perfect for companies in the aftermarket like LMI and our resellers for a number of reasons. First, the OEM has over 90 percent market share. Right now we have an absolutely huge opportunity to win business for our products from the OEMs. Second, is that by nature of what color is, companies like LMI and our reseller partners are insulated to a certain degree from competition from less desirable aftermarket organizations.”
Pepper points out that one thing that has given the aftermarket a bad name is low quality, cloned or counterfeit, infringing product that typically originates from overseas.
“If you look at the market, an OEM cartridge is anything from between two and four times more expensive than an aftermarket cartridge,” explains Pepper. “When you think about that, how can the OEMs enjoy over 90 percent market share when I can go online and find such cheap aftermarket toner alternatives? When you follow that to its logical conclusion you have to conclude that people need and will pay a hefty premium for quality.”
“With a monochrome cartridge, black is kind of black and gray kind of gray,” he says, “and as a result it’s easier to overlook a lower quality product when it comes to monochrome.”
“In terms of the nature of color—four cartridges, light penetrating through those layers of color—you buy a color cartridge because that print is important to you, your business, and your customers,” says Pepper. “The overwhelming OEM market share proves this. That’s great news for our resellers because we can produce a high-quality product and offer it at a considerable savings over the OEM.”
He adds that at the same time, those low ball, low quality providers can’t make quality color because they’re focused on making it at the cheapest price.
“From the OEM market share, we know ‘cheap color’ is an oxymoron,” states Pepper. “You can’t invest in quality color components, color formulations, and R&D processes required for producing high-quality color. That’s why this represents a great opportunity for our resellers who can gain a competitive edge in their markets because we have invested in creating a high-quality product and their competition are either using low-quality aftermarket product that customers reject, or high priced OEM that lowers their profitability and competitiveness.”
And high-quality color aftermarket toner cartridges also represent other opportunities.
“If you look at MPS or transactional sales, most resellers sell monochrome aftermarket print cartridges, but most are using OEM color because they don’t trust the quality and yield,” says Pepper. “If they work with us they’ll find that we can produce high-quality color products with the same or greater yields that are as reliable as our monochrome products. That enables a reseller who sells transactionally or through MPS to move away from just selling OEM color.”
Once a reseller has success with a high-quality aftermarket product, that tends to be good news for a company like LMI.
“Our resellers are used to buying high-quality remanufactured cartridges and they’ve become very loyal to North American manufacturers like LMI that have invested in quality,” says Pepper. “Rarely have you seen a reseller who bought our cartridge going back to buying from oversees. Resellers are well positioned to educate their end users and show them there really is an alternative to buying OEM color.”
New build compatibles is another area of contention for aftermarket suppliers and Pepper has an opinion on that as well.
“This has been a pivotal year for the OEMs to enforce the litigation they have won regarding counterfeit and IP-infringed product,” he says. “They’ve stepped up their activity with the authorities to inspect and seize incoming products into the marketplace that are found to be infringing. From our perspective this is great news and we support their work 100%. Obviously LMI also faces increased scrutiny because we have facilities in Mexico that do some of our manufacturing so we know how intensely they’re looking at it. If they’re looking this closely, there must be huge pressure on the Asian importers.”
Pepper says this can have a positive effect on suppliers such as LMI.
“From a customer perspective it keeps low-quality products out of the market, which give the whole aftermarket a bad name by association. Because of that lack of supply, it turns consumers and resellers inward toward companies like LMI that invest in a high-quality product that doesn’t infringe,” emphasizes Pepper.
Overall, Pepper feels that the climate in the marketplace is very good for LMI.
Of course there’s one more issue that can’t be overlooked and that’s declining print volumes. Is LMI concerned?
“HP just launched a new monochrome series in April 2015 that was little more than a reiteration of the previous models. There was a lot of rejoicing in the aftermarket that this was pretty much the same cartridge as the old cartridge, but that’s not the story. If you look at the technological changes at HP (the new Jet intelligence series, for example), color is where they’re putting their R&D dollars. Color is the mainstay of their Laser series and in wide format inkjet. The OEMs, because they’re staffed by very smart people, have looked at declining page volumes, which are roughly three percent per annum. Historically their output is mostly monochrome. If pages are declining by three percent per annum, how do they counter that so they don’t lose revenue? Color. If they can migrate pages from monochrome to color they can charge more and eat up the slow decline of three percent per annum. That same opportunity applies for LMI and our reseller partners.”
Overall, he says, print volume decline will become more manageable as customers migrate pages from monochrome to color. “No one is predicting at that rate of 3 percent annual decline, printing is going to go away,” adds Pepper, which means, at least from LMI’s perspective, there’s still plenty of market opportunities for color.
For additional free information on how to present remanufactured color toner to OEM customers, click here for this guide.
