Last year, when I produced a video describing the Staples/DEX Imaging scenario, many people said it would never happen. But to envision that scenario, it was just a matter of using some imagination.
In our industry, it’s imperative for leaders to use the power of their own imaginations. This article describes what I see as the expected probabilities based on the realities of the market in the aftermath of that Feb. 8 acquisition and how we can use it to inform our imaginations going forward.
Welcome to the Future
What’s an industry to do? First, it’s Staples/Essendant, then it’s Staples/DEX Imaging. So, who’s next? Two reseller distribution networks got disrupted and many people believe it’s just another day—that’s how disruptors gain momentum.
Staples has revenue approaching $10 billion, while its wholesale supply business unit, Essendant, checks in at $5 billion. When Staples adds its next copier megadealer to the family, it will more than likely put their print service footprint at over $1 billion. So, those who believe that printer manufacturers will tell a $16-plus billion-dollar distribution channel that they have to follow the rules of 1980 is highly doubtful. I am betting they don’t.
The print-selling status quo, along with the supply-selling status quo, has been completely disrupted. There is more to come, and manufacturers are going to look for every way possible to distribute what they make. The print market is declining, and manufactures will not say no to a billion-dollar channel based on some emotional noise from dealers.
Staples/DEX Imaging will indeed continue buying dealers. The venture-capital-backed megadealers have been waiting to cash in their investments. I would conclude that no one wants to be last as the equity partners go shopping. Most of these megadealers are in their fourth or fifth year with their VCs, and timing in a declining, changing market is critical. The industry’s leadership will have to open their minds to conjure alternative possibilities once thought unimaginable.
The document technology channel and office supply reseller channel became one and Staples—its first conglomerate—is so large that they will have an advantage. Maybe now those dealers who continue chasing revenue will realize they will never be more significant in revenue than Staples, and will instead pursue real diversification. Think about it, a $400 million copier dealer is less than 3 percent of Staples/Essendant.
By this time next year, the office-technology dealer’s past landscape will be covered over by a new model, with new players doing different things. Dealers should stop buying yesterday’s outdated print services models—it’s time for more creativity in the acquisition space.
I’m still amazed watching printer manufacturers buy dealers to grow their distribution with all the failures in that strategy. On Feb. 8, hopefully, all those buying more of the same distribution were awakened.
It won’t be long before all printer manufacturers open up channel sales in the way computer and other technology manufacturers do. The days of protected territories are over; manufacturers will learn they make things for others to sell, and building direct operations is a 1980’s strategy that is no longer viable.
Our friends at Ricoh were right in exiting the SMB space as a direct distributor. The value-add of print in the SMB space is more of a commodity than most will admit, and the cost to deliver to end users in the SMB space is too costly for manufacturers. The enterprise space is a different story.
Resellers and their product manufacturers must lower cost-to-market, especially during declining and consolidating markets. The independent office product dealers and those in the print services industry just got married, and those planning to marry based on 1980 rules of engagement should re-evaluate those relationships.
Oh, the Probabilities
How many office supply companies will start dating and marrying print-services companies? Who will be the next megadealer to sell to Staples or Office Depot? When, and to whom, does Thoma Bravo sell Continuum and ConnectWise? Could the buyer be Staples? Imagine what that implicates.
When, and with whom, will Best Buy enter the SMB services businesses? Maybe Thoma Bravo is in Minneapolis as I write this. Is Amazon visiting the offices of Staples? Is Konica Minolta visiting the offices of Cerner? Is Foxconn planning to sell Sharp’s copier/printer business? Or, do they buy Office Depot for Sharp? When does HP close the deal with Carl Icahn at Xerox?
When does an aggressive manufacturer become obsessed to replace the millions of oversold A3 MFPs with A4 MFPs? Will the office product resellers circumvent the document technology channel regarding A4 MFPs? Who is the first mega print dealer to exit production print based on the realities of its potential? When will the small leasing companies built for a different time sell off to the large ones? Who wins the ERP war? How long until the print service contracts stop counting pages?
There is a lot more to imagine and more to come. All resellers and those whose products they sell must use their imaginations instead of their memories when looking at possibilities. With today’s speed to innovative disruptions, what we can imagine as possible may indeed be probable.
The document technology channel changed on Feb. 8, and it’s time everyone started discussing the realities of the change. This market disruption is not about how Staples fits in this channel. The conversation is how the document technology channel must modify to fit into the realities of today’s marketplace.
“A company becomes obsolete when they focus on bringing the past to the future instead of delivering the future to the present.”
To my reseller friends in all channels—especially those in the office-supplies space, looking to understand how they can capitalize on print services—join me in Las Vegas at ITEX. I’ll be conducting a breakout regarding the Staples/DEX union and the opportunities it created. TEASRA is also co-locating their second secret summit at ITEX.
