• 1 •

COVER STORY

34 I 2015 Dealer Survey Results and Analysis (Part I of II)

Dealers with Multiple Lines .................. 34Manufacturer Distribution .................... 36Dealer Dedication ................................ 37Dealer Revenue................................... 40The $5 Million and Up Club ................. 42Printer Lines ........................................ 43Refurbished Machines ......................... 45Managed Print Services ...................... 46Managed Network Services................. 48Service Technicians and Sales ............ 48Revenue and Productivity.................... 50Machines in Field................................. 51Acquisitions ......................................... 52Dealer Opportunities and Concerns .... 53

DEPARTMENTS

14 I Japanese HeadlinesRicoh’s Future HouseJapanese Technology Titan Steps Outside the Office and into the Home

58 I Emerging Technologies: My 2 Cents Output Disruption In 3D Market Potential Estimates Fall By 75%

62 I In Memoriam: Cheryl “Kel” Gau: September 6, 1958–August 10, 2015

FEATURES

5 I The Cannata Report’s 30th Anniversary Dealer SurveyEvolution, Results, Methodology, Over-view and Additional Content

15 I Powerful Performance30 Years Surveying the Independent Dealer Landscape

32 I Playing for KeepsThe Expanding Impact and Evolution of Independent Dealers

33 I 2015 Dealer Survey Executive Summary Part 1Population Continues to Erode While Indi-vidual Revenues and MIFs Increase

• 3 •

THECANNATAREPORT (ISSN: 0889-5880) is published twelve times yearly by Marketing Research Consultants LLC, P.O. Box 180 Hamburg, New Jersey 07419. Phone: (973) 823-6314; Fax: (973) 823-6316; email: FGCannata@CannataReport.com. Editor and Publisher, Frank G. Cannata. All rights reserved. No part of this periodical may be reproduced in any manner in any language without the consent of THECANNATAREPORT. The information set forth herein and on its complementary website,TheCannataReport.com, has been obtained from sources believed to be reliable but is not guaranteed by THECANNATAREPORT and may be incomplete. THECANNATAREPORT’s expressed views and opinions are based on the foregoing and should be viewed in this context. Printed in the U.S.A. SUBSCRIPTION RATE for THECANNATAREPORT and TheCannataReport.com is $495 for one year. Subscribe at TheCannataReport.com/Register. POSTMASTER: Please email address changes to CJCannata@CannataReport.com.

EDITORIAL AND PUBLISHING

Frank G. Cannata President, Editor-In-Chief and Publisher

Charles J. CannataSVP, Brand Strategy and Development

Carol C. CannataSVP, Client and Creative Services

Doreen Borghoff Design Director

Sharon Tosto Esker Story and Features Editor

Walter Geer III Executive Director, Digital Strategy

Bob Ingoglia Chief Marketing Correspondent

Bob Sostilio Chief Technology Correspondent

Tetsuo Kubo Japanese Correspondent

Karen Stewart Executive Producer, Digital Video

Charlene Piro Executive Producer, Print

Cathy O’BrienSenior Public Relations Consultant

Matt Stauble Events Photographer

EDITORIAL ADVISORY BOARD

Keith AllisonCEO, Systel Business Equipment

Paul HannaPresident, Blue Technologies

Steve Reding President, C.A. Reding

Andrew RitschelPresident, Electronic Office Systems

Barry Simon President, Datamax

Mark SteadmanCEO, Stan’s Office Technologies

Subscriptions I Advertising I Licensing Reprints | Questions | Feedback

CJCannata@CannataReport.com(917) 514-9501

THECANNATAREPORT

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THECANNATAREPORT (ISSN: 0889-5880) is published twelve times yearly by Marketing Research Consultants LLC, P.O. Box 180 Hamburg, New Jersey 07419. Phone: (973) 823-6314; Fax: (973) 823-6316; email: FGCannata@CannataReport.com. Editor and Publisher, Frank G. Cannata. All rights reserved. No part of this periodical may be reproduced in any manner in any language without the consent of THECANNATAREPORT. The information set forth herein and on its complementary website,TheCannataReport.com, has been obtained from sources believed to be reliable but is not guaranteed by THECANNATAREPORT and may be incomplete. THECANNATAREPORT’s expressed views and opinions are based on the foregoing and should be viewed in this context. Printed in the U.S.A. SUBSCRIPTION RATE for THECANNATAREPORT and TheCannataReport.com is $495 for one year. Subscribe at TheCannataReport.com/Register. POSTMASTER: Please email address changes to CJCannata@CannataReport.com.

Visit TheCannataReport.comSeptember 2015

This Month

18 I Born in the U.S.A.: The Cannata Report’s 30th Anniversary Awards & Charities Dinner Milestone Event Yields Seven Award Winners and Raises Over $185,000

8 I INK: LDI Color ToolBox’s Elegant Anniversary Event Draws Top Industry Players and Diverse Customer Decision Makers; Continuum’s Navigate in Vegas Packs Full House, Announces Partner and Community Champion Awards, and Honors Veterans; Fraser’s Popular Fish Pond Fills to Capacity with Customers and Top Sharp Executives

PART ONE

Quote:“Calling a revolutionReady for real solutionsWe won’t accept excusesWe tolerate no abuses Because I don’t want my face to beThe poster child of being naïve...”

Janet JacksonAmerican singer, songwriter, dancer, actress, record producer, film producer, philanthrapist, author; taken from “Shoulda Known Better” released on Unbreakable, 2015 P

MT Business Technologies Headquarters Moving to Downtown Columbus

Toshiba Wins Six Awards in Four Weeks from Three Repu-table Organizations

Lexmark in Limbo: WSJ Underscores Unsettling Financial Realities

VIDEO

THIS MONTH ON

Take 30

Born in the U.S.A., The 30th Anniversary Can-nata Dinner on Thursday, October 1, featured seven awards, raised a record $185,000, and packed a full house of 250 decision makers across the dealer, manufacturing, leasing, software and services segments—and we got it all on video.

TheCannataReport.com

Check out these features and more in “This Week,” “Live Wire,” and “Video” at: TheCannataReport.com

NEW

S MACHINE

Ricoh and Nuance Expand Partnership to Offer Three New Worfklow Solutions

MANUFACTURERS

Presented by

SOFTWARE

DEALERS

LDI at 16 and Industry Icon Jerry Blaine’s 40 Years-to-Date Legacy

Marco Named on Notable 2015 Best Small and Medium Workplaces List

• 5 •

We have chronicled the migration of the independent dealer community from selling

unsophisticated hardware to providing managed print and network services for North America. Dealers, who were once derided as being unsophisticated marketers, are now considered extremely proficient in document management. In addition, they are providing workflow solutions for devices that do everything from copying, printing, scanning and faxing to serving as true information and communication hubs for the network.

The evolutionary cycle of technology does not stop here, and it will continue to improve the proficiency of businesses in every segment of the market. From the Enterprise to the SMB space, dealers continue to provide a state-of-the-art service capability like no other found in any other industry. Their mantra is simple: “Stay close to and satisfy the customer.” That has not changed in over 40 years.

Our 30th Annual Dealer Survey says a great deal about the dealers in terms of where they are in the ever-evolving shifts in technology. These results serve as one more piece of evidence that they have built sustainable business models and seem completely comfortable with addressing change on a daily basis.

Does every dealer think and act that way? Absolutely not! We have been very fortunate in that our dealer subscriber base represents the best and the brightest in the dealer community. We owe them much and sincerely hope that they understand what they mean to us and to our industry.

An Evolving Survey

We take great care in selecting each survey question in order to determine what we needed to eliminate and what new areas we should explore as we have done in the past. However, we continue to use a format similar to what we created eight years ago.

Three years ago, we took a decided turn from a presentation standpoint to a more digital orientation and publication that is now an industry trade magazine, as opposed to a newsletter or report. This shift has been an evolutionary process

I will share with you what CJ said to me prior to implementing these substantial format and editorial changes. “According to those I’ve spoken to so far across the industry, you have built a one-of-a-kind premier personal brand. What you publish under The Cannata Report banner should directly reflect what that brand represents.” That said, I think the changes speak for themselves and I must say I am very proud of what CJ and his team have done.

These changes crossed over into our the analysis and presentation of our survey results as well. Our ultimate aim, however, hasn’t changed. We strive to build upon the responses we received in the past that have provided a strong foundation for comparison as we look toward the future.

Based on prior years’ results, we wanted to continue probing the managed services (including print and network) area and the use of rebuilt machines. We also

continued our evaluation of leasing companies, as they provide an invaluable service to the industry.

Most importantly, we wanted to turn our focus to the dealers by addressing the areas that are most concerning for them, such as acquisitions, managed services and production print. One thing we did not do was add questions that dove into how dealers are approaching the four major issues of the day: big data, BYOD, cloud and security. Questions pertaining to those topics will play a substantial role in next year’s efforts.

In summary, each question has been designed to give us a clearer picture of where the independent dealer stands in 2015, based on performance in 2014.

Navigating The Climate

The tone of this survey tells us dealers have a sense of self-worth that has sustained them. They have been through some difficult economic times and once again seized the opportunities that were presented to them. A4 was once deemed a serious threat and for all intents and purposes, it has been integrated into the dealer’s portfolio of products. Although many dealers continue to consider A4 a disruptive technology, we believe an integration of A4 MFPs that does not exceed 15 percent of all revenue can ensure a balanced MIF that continues to feed a growing annuity stream.

In our recent round of conferences and meetings, we have urged dealers to expand or plan an exit strategy. The time has never

The Cannata Report’s 30th Anniversary Dealer Survey: Evolution, Results, Methodology, Overview and Additional ContentBy Frank G. Cannata and CJ Cannata

been better to do either. Larger dealers want to buy smaller businesses, either hardware dealers or IT VARs. Dealers with revenues under $5 million are challenged in providing tools for their customers that improve workflows and manage content. In our previous issue, we addressed an acquisition of Centric Business Systems in Owings Mills, Maryland that we consider textbook. Be sure to take a look at it, because if you are thinking about acquisitions, that is the way to do it.

This survey points out that opportunities still abound and for those who continue to invest in their business, the future has never been brighter. Growth by acquisition has become a fine art, and dealers have learned how to manage that. Some say it is too difficult to incorporate a disparate culture into their business structure, while others challenge and even empower those that they have acquired to produce positive results.

Methodology

Targeting Our Audience

This year, we provided all the manufacturers, except Canon, with the link to respond to the survey. For Canon, we have developed our own list of those channel partners. However, as you know, 79% of all dealers carry multiple lines. As a result, we do not tend to get the dedicated Canon dealer. To a lesser degree, we are still receiving returns from some creative dealers such as one who claimed his revenue in 2014 was $10.0 million with two salesmen and responsed to other questions that did not support that number.

In terms of format, we conducted this year’s survey online for the third time in an effort to deliver enhanced accessibility and garner more responses. To be candid, it remains a work in progress.

Examining Respondents

We netted a total of 280 responses after deleting duplicates, corrupted data and returns that were of little value due to the manner in which some dealers responded to the questions. This represents three

more than last year’s 277 usable returns, compared with 270 in 2013. Last year, we eliminated responses from those who reported manufacturers other than the Japanese “Big Six” as their primary A3 supplier. (These, of course, are Canon U.S.A. (Canon), Konica Minolta Business Solutions, Inc. (Konica Minolta), KYOCERA Document Solutions America, Inc. (KYOCERA), Ricoh Americas Corporation (Ricoh Family Group or RFG), Sharp Imaging and Information Company of America and Toshiba America Business Solutions, Inc. (Toshiba). This year, the number of dealers listing one of those six as primary manufacturers increased to 272. Then, eight other dealers who responded to the survey indicated Xerox (5), Muratec (2) and OKI Data (1) as their primary A3 supplier.

As we have in the past, the results of our annual survey are available to subscribers in our September and October 2015 issues, as well as on TheCannataReport.com. For our non-subscriber population, the results will be transmitted only to those who completed every single question and provided us with their names and addresses. We can not send results to people who do not identify themselves because the survey is blind, except for those seeking a free one-year subscription to our report from Everbank, Konica Minolta, Ricoh and Toshiba.

Maintaining Objectivity

One of the primary goals of this survey is to provide independent dealers with a forum to express their sentiments about their vendors and the industry in general. We are aiming to stay abreast of dealers’ performance parameters and to identify the areas of greatest interest for the dealer community. We believe the survey results help us better understand how dealers are performing and the areas their manufacturers need to address.

While some responses may skew to the negative, it is important to keep in mind that we are simply encouraging honest, candid answers to questions that may stoke

the proverbial fires for manufacturers and the industry. As always, we encourage productive commentary, regardless of whether it is negative or positive.

Acknowledgements

We would like to extend our thanks to our manufacturer partners—especially, Konica Minolta, KYOCERA, Lexmark Ricoh/RFG, Sharp and Toshiba—who encouraged their dealers to respond to our annual survey. We also want to thank Everbank, Konica Minolta, Ricoh and Toshiba who provided incentives for their dealers to respond. Their efforts provided for a very well-balanced return of surveys from dealers regardless of manufacturer.

We would also like to thank BPCA, CDA and SDG for asking their members to complete the survey. Their support certainly buoyed our number of responses, as well as encouraged a high-quality turnout. We at The Cannata Report are appreciative of the relationship we have developed with these three important organizations. As always, we are grateful for the opportunity to meet with them and learn from them.

More, More, More

For the first time ever, The Cannata Report has substantially expanded our annual dealer survey issues and corresponding online content as not to disrupt the flow of additional coverage regarding other important topics in a more timely manner during the fall, a key time of year for our industry and business in general, as well as during this exponentially evolutionary time overall.

Across the following two issues, we have incorporated regularly featured departments, such as “INK,” “Japanese Headlines” and “Emerging Technologies”—as well as additional features and editorial commentary—in addition to our evolved and enhanced survey coverage.

• 6 •

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• 7 •

LDI Color ToolBox (LDI) Founder and CEO Jerry Blaine hosted a 16th anniver-sary cocktail party on October 8 at New York City’s Apella Lounge. The purpose of the event was to thank strategic part-ners—from manufacturer suppliers to close business associates and loyal clients who came on board early—for helping LDI get to where the company is today.

The universally respected New York met-ropolitan area dealer drew a who’s who of attendees, representing the manufac-turer and software segments, including Mason Olds, SVP, Business Imaging Solutions Group and Junichi Yoshitake, SVP, Imaging Systems Group, Canon U.S.A.; Bernie Lepore, VP, Fiery Partner Alliance, EFI; Charles Lissenberg, SVP, Worldwide Sales, Imaging and Joe Hart-net, VP, Sales, Nuance Communications; Laura Blackmer, SVP, Sales and Mike Marusic, SVP, Marketing, Supply Chain and Service, Sharp Imaging and Infor-mation Company of America (SIICA); Matt Smith, VP of Sales and Marketing, Printing Solutions, Enterprise Business Division, Samsung Electronics Ameri-

ca, Inc.; and Toshiba Business Solutions’ President and CEO Scott Maccabe.

Clients in attendance included deci-sion-makers across diverse verticals, in-cluding architecture, corporate, fashion, luxury, real estate and a half-dozen part-ners from AMLAW top 100 firms.

LDI spent a year and a half planning the event to ensure an ideal location, time and circumstance that would communi-cate the dealership’s vision for the future, which builds on its unparalleled success and accomplishments to date.

The modern Apella, sleek and elegant Apella Lounge venue featured floor-to-ceiling windows that offered views of the 59th Street Bridge, New York’s East River and Long Island City. The grand circular staircase from the lobby led di-rectly into a reception area were guests were greeted, while a 60” high definition screen animated the timeline of LDI’s 16 years in business.

The commemorative event’s cocktail re-

ception featured a top-shelf open bar, which included a specialty gin, blue cu-racao, lime and Amaro Montenegro mar-tini cocktail in alignment with the event’s theme décor. Featured high-end beers in-cluded the local Brooklyn Brewery Pilsner and a Lagunitas IPA. Specialty gourmet hors d’oeuvres and food stations featured beef brisket, a cheese platter, cod tempura, fish and chips, grilled cheese and mush-room sandwiches, a raw bar, and the stand-out fried chicken and waffles with black pepper honey, among other items.

• 8 •

INDUSTRY AWARDS, ACKNOWLEDGMENTS & SIGHTINGS

LDI Color ToolBox’s Elegant 16th Anniversary Event Draws Top Industry Players and Diverse Customer Decision Makers

I N KBY CJ CANNATA

TOD PIKE, LARRY WHITE, SCOTT MACCABE AND FRANK CANNATA

CJ CANNATA AND LAURA BLACKMER

JERRY BLAINE

After the cocktail reception, top LDI brass ushered the crowd into a presenta-tion room, where Blaine delivered a mov-ing welcome prior to announcing a com-memorative video featuring an unscripted montage of employees speaking of their recollections, experiences and opinions of the company, bringing to life the pro-found effect LDI has had on everyone in-volved with the company.

Highlights included myriad speakers fo-

cusing on the caring environment, main-tenance of staff through the most difficult economic times over the past 75 years, the empowerment of a new breed of pro-fessionals helping to bridge traditional selling styles with changes and the emer-gence of millennials in the workforce.

Following the presentations, LDI treated guests to dessert— a cake station that in-cluded red velvet cake, funfetti cake and ice-cream assortments.

• 10 •

I NK

Continuum hosted its 2nd annual Nav-igate user conference from September 27–29 at the Cosmopolitan in Las Vegas. The industry’s only channel-exclusive provider of fully integrated managed IT services solutions attracted a sold-out crowd of over 600 attendees, including representatives from the following deal-ers: Advanced Business Systems, Applied Imaging Systems, Bauernfeind Business Technologies, Blu Zebra Tech, Business Electronics Corp., Digital Office Systems, Document and Network Technologies, Gordon Flesch Company, ImageQuest, JD Young Co., Les Olsen Company, Meridian Imaging Systems, PC Tech-nologies, Progressive Business Systems, ProSource, RK Black and Thomas Office Solutions. Other noteworthy attendees in-cluded Ed McLaughlin, former President,

Sharp Imaging and Information Company of America (SIICA).

Seven Continuum Partner Awards were presented to top performing managed ser-vice provider (MSP) partners during the event: “All-in-All Star” to Gordon Flesch Company; “Excellence in Business Con-tinuity” to WAMS; “Help Desk MVP” to CMIT Solutions of Cambridge; “Innova-tor of the Year” to ImageQuest; “Partner of the Year” to Vertical Solutions; “Rev-enue Growth Rock Star” to Securus Cor-poration; and “Rookie of the Year” to Me-ridian Imaging Systems.

In addition, Continuum presented four Community Champion Awards to indi-viduals for fully engaging in Continu-um’s social media networks and partner

forum communities. Winners included Charles Love, Big Sur Technologies; Bryan Sullo, Clocktower; Jeff Delmar, Garner IT Consulting; and Mark Wad-nizak, VoiceSmart Networks.

The event featured keynote addresses from author Verne Harnish, IT expert Robin Robins and Continuum CEO Mi-chael George. Navigate 2015 included over 60 speakers total, whose presenta-tions focused on helping MSPs increase growth in revenue and profitability over the short and long term. Examples in-cluded Chris Ryne and Mitch Morgan, Principals of Growth Achievement Part-ners (GAP), and Michael Dudek, Owner of Zygoquest Group, who cooperatively presented “M&A Discussion: For Buyers and Sellers.”

Continuum’s Navigate in Vegas Packs Full House, Announces Partner and Community Champion Awards and Honors Veterans

LIGHT NIGHTCLUB EVENT

MICHAEL GEORGE AND MAYOR CAROLYN GOODMAN

STEVE SCHLOSS

• 11 •

Fraser Advanced Information Systems (AIS) CEO Bill Fraser hosted the Canon and Sharp dealership’s popular annual Customer Appreciation Fish Pond Lob-ster Dinner event on September 30 at the Maidencreek Fish and Game Club in Blandon, Pennsylvania.

Approximately 120 people attended, which filled the venue to maximum ca-pacity. One of the most talked about in-

dustry events in AIS’s market, the dealer-ship’s largest and most valued customers and partners attended this event, as they have been for over 20 years.

Clients Attendees this year included de-cision-makers across diverse verticals, including: consulting, education, engi-neering, finance, healthcare, manufactur-ing, real estate, retail and transportation. Specific companies represented included

Boscovs’ Department Stores, FLSmidth, Hunterdon Health Care, Lehigh Valley Health Network, National Penn Bank, Penn State Health, St. Joe’s, St. Luke’s Health Network, The Reading Eagle and Sysco Corporation.

Sharp Imaging and Information Company of America (SIICA) executives in atten-dance included Doug Albregts, President, who made some brief positive remarks regarding the AIS-SIICA partnership; Laura Blackmer, SVP, Sales; Mike Maru-sic, SVP, Marketing, Supply Chain and Service; and Steve Oda, Vice President.

AIS hosts this fall event every year for one purpose, which is to thank their most valuable customers for continued busi-ness. As in years previous, the atmosphere was tastefully rustic, the cocktail hour featured a raw bar and a signature cock-tail—a cranberry and pear bellini. Cock-tail hour was followed by an all-you-can-eat lobster dinner, featuring fresh, whole lobsters, macaroni and cheese, and more. For dessert, AIS served fresh, homemade local pies.

Navigate 2015 also featured an announce-ment that the Mayor of the City of Las Vegas, County of Clark, State of Nevada, proclaimed September 29, 2015, as Con-tinuum Veterans Foundation Day. Estab-lished in 2012 by event host Continuum, the Continuum Veterans Foundation is a nonprofit organization providing financial support to local and national charities that

focus on helping veterans find jobs in in the IT services field.

Continuum presented a video honoring U.S. military veterans, during which George asked the 46 veterans in the audience to stand. Shannon Mayer, Continuum’s Senior Marketing Programs Manager, sang the Na-tional Anthem.

Other highlights included free CompTIA certificates and the LIGHT Nightclub event.

Navigate 2015 generated support from move than 30 sponsors and exhibitors, including: Webroot (Titanium), Autotask (Platinum), IBM (Gold), Intel (Gold), Malwarebytes (Gold), AT&T (Silver), CMIT Solutions (Silver), LogMeIn (Sil-ver), RapidFire Tools (Silver) and Intronis (Recharge Station). Exhibitor Sponsors in-cluded Aisle Eight, BVoIP, Computer Tele-phony Distributing, ConnectWise, MyDig-italShield, OpenDNS, TigerPaw Software and Vorex. Partner Pavilion Sponsors in-cluded CompTIA, Continuum University, Continuum Veterans Foundation, Growth Achievement Partners (GAP), Hire He-roes USA, HTG Peer Groups, Technology Assurance Group (TAG), Vertiscale and Zygoquest Group. Media Sponsors includ-ed CHANNELe2e, ChannelPro Network, ENX Magazine, ImageSource and The Channel Company.

I NK

• 12 •

Fraser’s Popular Fish Pond Fills to Capacity with Customers and Top Sharp Executives

2015 NAVIGATE AWARD WINNERS

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• 14 •

On August 21, Ricoh Company Ltd. (Ricoh) officially opened “RICOH Future House,” a com-

mercial facility for consumers. Opening ceremony attendees included the follow-ing distinguished guests: Ricoh’s Chair-man Shiroh Kondoh, Ricoh’s President Zenji Miura and Ebina City Mayor Ma-saru Uchino.

RICOH Future House’s site is in a new town near Ebina City, Kanagawa prefec-ture, also the site of the Ricoh’s largest R&D facility that employs approximately 7,000 employees. The area was formerly paddy fields (e.g., rural districts), but it is now being developed as a new town with a current population of 3,000 and features commercial facilities as part of Ebina City’s new “Town Planning” project.

Ricoh’s move to expand its business out-side the office includes camera, projec-tor, Unified Communication System and other products that target consumers and compliment sustaining development ef-forts with core products such as MFPs, printers and production presses.

The Ebina City Town Planning effort has also become a good opportunity for Ricoh to “create new innovations being close to customers,” said Shiroh Kon-doh, Chairman of Ricoh. RICOH Future House provides consumer business and document services close to the communi-ty, and it is also expected to be an active place for Ricoh to conduct active research in providing such services.

In basing the facility in this newly devel-oped town, the company is attempting to develop the easy-to-live-in environment that is required for “Town Development.”

As an example, operating service busi-nesses for residences will display electric usage in each room of the apartments that will be newly built in the development area. Facility provider services busi-nesses will do the same for surveillance cameras or streetlights (LED), as well as third-party products.

RICOH Future House is a four-storied building in shape of a house, where con-sumers can enjoy a sense of space with a completely glassed-in wall facing the road. On the first floor, the building fea-tures a café restaurant and a print shop that people can use freely. Other attrac-tions include an area where they can have figures of themselves created by scanning people’s faces and print with a 3D print-er that is not a Ricoh product. The sec-ond floor features an events and rental space. There is a dome where visitors can watch pictures and videos taken by the “THETA 360,” an entire celestial, sphere-type camera that is capable of shooting 360-degrees with one shot. The third floor includes a membership play area for children, its goal being to cultivate future

scientists. On the fourth floor, there are membership offices and a lounge.

After seeing how well done the RICOH Future House’s facility and infrastructure are, some other local governments have made several offers to build similar sites in their areas. However, Ricoh’s intention is for this initial location to serve as a pi-lot model from which the company can learn prior to potentially building similar additional facilities.

Ricoh’s Future HouseJapanese Technology Titan Steps Outside the Office and into the Home

JAPANESE HEADLINES BY TETSUO KUBO

Top: Ribbon cutting at RICOH Future House opening ceremony. Below: Ricoh Theta M16 360° Spherical Panorama Camera

CR

Questions About This Story? Contact CJ Cannata

Phone: (917) 514-9501

Email: CJCannata@CannataReport.com

• 15 •

In 1986, we published our first dealer survey, which reflected on the inde-pendent copier dealer’s performance

in 1985. In this initial effort, we only que-ried those who were our subscribers. Our readers were sanguine in their responses to our questions.

They averaged 18.4 years in the business, with many of them representing typewrit-er dealers who took on the copier ma-chines manufactured by companies such as Sharp, Panasonic, Canon, Mita, Ricoh, Konica, Minolta, Toshiba, Savin, A.B. Dick and Adler Royal.

In terms of revenue, they reported an av-

erage of $6.9 million, but bear in mind that only dealers who were subscribers participated. (The other half of our sub-scriber base comprised manufacturers, distributors, parts suppliers and financial services companies.) We were fortunate because then, as now, we enjoyed the support of a significant group of the more substantial copier dealers.

Today, our survey is open to all dealers, regardless of their subscription status, and we encourage participation of as many dealers as possible. In this 30th year of conducting the survey, the average reve-nue, which we calculated from a sample of 280 responding dealers is over $11 mil-

Our First EAB (1985–1986)To provide some context of our readers at the time, here is a list of the members of our first Editorial Advisory Board for 1985–1986, who also participated in our inau-gural dealer survey:

Michael DevittOffice Equipment of Canada

Art SchafferBusiness Services of Utica

Bill FraserFraser Advanced Information Systems (AIS

Joe GianascoliCopy Data Group

Ted SolomonWhite Business Machines

Dan DoyleDanka Industries

Don FrankGraphic Enterprise

John HeyDC HeyRon ShapiroAdvanced Image Systems

Jack FleigStandard Office Systems

Some of these former initial EAB member dealers like Bill Fraser and Dan Doyle were also charter sub-scribers who are still with us today. Additional charter subscribers also included Gordon Flesch and Les-lie Supply (now LDI ColorTool-Box). For the most part, the rest of the dealers on our initial advisory board and charter subscriber data-base have either sold out, retired or passed away.

Powerful Performance 30 Years Surveying the Independent Dealer LandscapeBy Frank G. Cannata and CJ Cannata

• 16 •

lion, translating into more than $3 billion in total revenue for a group and repre-senting approximately 12% of the entire independent dealer community. Among those respondents, three dealerships have revenues in excess of $100 million, and we know each and every one of them.

Going back to beginning of our survey, the mid-80s were difficult times for many dealers, as they were struggling to build a base of MIF (Machines In Field) to give them a positive annuity stream. Their rev-enue streams were hardware, service and supplies. A total of 48% came from hard-ware, 30% from service and 22% from supplies. I might add that interest rates were running as high as 23%.

The first Executive of the Year award was given to Bob Magrino of Mita. Canon was the leader among the copier manufacturers, Panasonic in typewriters and Ricoh in facsimile. Magrino, Can-on, Panasonic and Ricoh were the first recipients of the awards (which where in these categories) we gave out at the 1986 Nomda Show in New Orleans. From there, the awards most significant-ly adding evolved with the times, most significantly with the addition of a “Best Woman Executive” category in 2014 and the “Best Marketing Strategy” and “Best Software Developer” categories in 2015. (See “2015 Frank Award Winners” on page 21 for a complete list of this year’s categories and honorees.)

Communication Cycle

The early copier dealers had difficulty working with offshore manufacturers, and we found the overall communication between vendor and dealer to be poor. We asked a question about who was the best at providing sell-through marketing support, and 36% responded none. The next question addressed communication, and 34% said none. No matter what ques-tions we posed—whether it was service support, reliable parts inventory, sales training programs and the like—we found 34% consistently saying none.

In reading our initial survey results, you

get a sense that dealers were not very hap-py with their primary manufacturers or suppliers of copier products. The struggle was primarily due to the lack of under-standing of the Japanese culture on the part of the dealers and the unwillingness of the manufacturers to understand or ap-preciate the problems caused by many of the copier machines being manufactured in that era. Frankly, they performed very poorly. “Retrofit” was a common term used by the majority of manufacturers. It caused many problems for the dealers be-cause they felt they were never adequate-ly compensated for what it cost them to retrofit the poor performing products.

But the reality was that were it not for the Japanese manufacturers, the dealers would have had very little to sell. The American companies such as APECO, Saxon Industries, SCM and Royal even-tually went broke and exited the business. It was a rocky beginning.

In 1986, we were recommending that dealers share best business practices be-cause very few were doing so in that era, except within the Nomda Association (for all the products the dealers sold) and more specifically, for copiers, the CDA. Below is an excerpt from our 1986 survey issue.

What can we learn from this? We believe the answer is for dealers to have a more realistic understanding of what manu-facturers can and will not do. We believe that dealers must strive to articulate those problem areas of greatest concern. Last-ly, we believe that dealers must look at the more successful of their brethren and determine, for themselves, what it is they (dealers) are not doing.

We encouraged the manufacturers to

strive to improve communication and overall training of their own (DSM) train-ing because the same 34% indicated that the manufacturers calling on them did not employ professional reps. “They [the manufacturers] evaluate their marketing approaches and determine if they are pre-occupied with selling to rather than sell-ing through dealers,” we wrote. “They, too, must have a more realistic assess-ment about what a dealer is prepared or not prepared to do.”

We urged dealers and manufacturers alike to search for a common ground, which only made the best sense for them, and to find a way to increase success and dimin-ish failure.

We recognize that manufacturers pre-dominantly sell direct around the globe. This independent channel distribution we have here in North America is rather unique. The manufacturers [predominant-ly Japanese] now recognize that fact and are generally extremely supportive of in-dependent dealers, with one unfortunate notable exception.

Today, communication is not the main issue facing dealers. Instead, dealers at the head of the class must address how they can maintain a sustainable business model. For the mainstream dealer, I fear it will be increasingly difficult for those who do not develop a services capabil-ity over the next five years. Our hope is that dealers’ transitions to a more ser-vices orientation continue and that they recognize that there are still opportuni-ties for growth in the print environment. Dealers will be serving a different type of customer, and print solutions may very well have nothing to do with cut sheet. The remaining fact is there are still opportunities out there for dealers. All it requires is an understanding that they need to change their approach to the customer.

Dealers will be serving a different type of customer and print solutions may very

well have nothing to do with cut sheet.

CR

Questions About This Story? Contact CJ Cannata

Phone: (917) 514-9501

Email: CJCannata@CannataReport.com

BORN IN THE U.S.A.The Cannata Report

Sponsored by:

• 18 •

Milestone Cannata Event Yields Seven Award Winners and Raises over $185,000

This year The Cannata Report awarded seven Frank awards—as determined by the results of our 30th Annual Dealer

Survey—and officially announced all winners live at the event as opposed to beforehand for the first time ever. The seven awards included two new categories, “Best Marketing Strategy” and “Best Software Developer.”

We introduced the “Best Marketing Strategy” award for the manufacturing segment this year because, particularly in today’s increasingly cluttered and exponentially evolutionary market, dealers absolutely need to understand the direction of their major manufacturer partner in this vein so they can best leverage in tandem with their own variations or individual marketing strategies.

We introduced the “Best Software Developer” award because dealers now more than ever—as evidenced by our 2015 survey results and what we learned by communicating with and covering dealers this year—are increasingly moving from a commodity- to a solutions-oriented sale and an overall services orientation.

In introducing the “Best Woman Executive” award last year, Frank and I had decided to do that post survey completion so we, as opposed to our audience, selected the inaugural winner, my mother, best friend and business partner, who is responsible for the production of the Annual Awards & Charities Dinner (as well as all of The Cannata Report’s events).

However, this year, we took the award into account when compiling questions for this year’s

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Annual Dealer Survey and the winner was the first to be determined by our core audience.

We extend out congratulations and best wishes for continued success in the future to all seven winners.

2015 was a record-breaking year in terms of fundraising efforts in conjunction with The Cannata Report Annual Awards and Charities Dinner. The Cannata Report, along with substantial support from MWA Intelligence (MWAi); Nick Valvano, President Emeritus, The V Foundation for Cancer Research (The V Foundation); CDA and personal contributions; raised and pledged $186,415. Of that total, $166,140 will directly benefit the Esophageal Research Grant The Cannata Report initiated in memory of beloved industry veteran Bob Shields (formerly of Copytronics). The remaining $20,275 plus will directly benefit Adopt-a-Soldier Platoon (AaSP). Cost-of-entry fees and donations from notable industry dealers and other individuals donated and pledged by October 1 yielded $81,000 for the Research Grant. Valvano added $20,000 upon acknowledging receipt of the $81,000 to bring the total over $100,000 on the evening of the event. CDA pledged $10,000 shortly thereafter. As of press time, we received an another $23,400 in post-event cost-of-entry fees and additional donations from dealers, Tim Vellek, SVP, Marketing, Ricoh Americas Corp. (Ricoh)—who donated personally—and Ricoh who donated $5,000 in addition to their $5,000 cost-of-entry fee.

MWAi CEO Mike Stramaglio, along with a gang of industry notables that included MWAi Chief Solutions Officer Gavin Williams, MWAi COO John Brostrom and President of Industry Analysts Andy Slawetsky, raised over $31,740 via Rolling Thunder’s 2015 “Ride for Freedom,” specifically for The Cannata Report-established Esophageal Research Grant with The V Foundation.

Stramaglio and crew hit the rode on their bikes back on May 15, departing from Stramaglio’s hometown of Scottsdale, Ariz. for Washington, D.C., where the ride culminated on Memorial Day, May 25, 2015. Along the way, the group stopped at the following locations, most of which are dealerships: Muratec in Dallas, Texas, Milner in Atlanta, Ga., Advance Office Systems in Knoxville, Tenn., Cobb Technologies in Richmond, Va., and Memphis Communications in Memphis, Tenn.

Monies raised for AaSP broke down as follows. While The Cannata Report initially only arranged to donate proceeds from the event’s silent auction of American sports memorabilia to AaSP, an urgent need for funds arose a few months prior to the event. The Cannata Report responded to the call by reaching out to subscribers in partnership with U.S. Bank, who agreed to match any dealer contributions for the pre-event effort, regarding more immediate assistance.

Dan Doyle Sr., Chairman, and Dan Doyle, Jr. of DEX Imaging; Rick Bastinelli, President of Centric Business Systems; Alan Eklin, CEO of Advanced Business Systems; Bill Fraser, CEO of Advanced Information Systems; Paul Hanna, President, Blue Technologies; and retired industry veterans Mario Lenci (KYOCERA) and Paul Shulman collectively donated $7,500, with the Doyles themselves contributing $5,000.

We then raised $5,275 for AaSP via the event’s silent auction, bringing the total tally to $20,275.

The milestone event also attracted near-record 250 attendees (surpassed only by 2013’s event when The Cannata Report coordinated the Dinner’s timing with a CDA meeting in New York City). In addition to a continued strong showing across the manufacturing and leasing segments, at least seven new companies from the software and services segments were represented: ACDI, Clover Imaging Group, Digitek

Computer Products (Digitek), PaperCut Software (PaperCut), Psigen Software, Inc. (Psigen), SAP and Square 9 Softworks, Inc. (Square 9).

Not only that, but three out of those seven who joined us for the first time—Square 9, Clover Imaging Group and Digitek—were the event’s Official Sponsors. Thanks to them, who effectively absorbed all production costs, we were able to expand the breadth and scope of the affair while continuing to donate 100% of all proceeds to our designated charities.

In addition to their fundraising efforts—and their purchase of an event table at $5,000—MWAi contributed further to the event by hosting an after-party, featuring cigars and cordials on the event’s premises.

Sharp once again donated a whole team of audio/video professionals—along with all of the A/V equipment—who were very receptive to incorporating several new elements into this year’s program. These included larger video displays, enhanced video components and music cues for select presenters and award winners, among others.

Everbank also provided additional support by providing bus service to and from the hotel reserved for out-of-town guests, in addition to their purchase of two event tables at $10,000 total and their Official Sponsorship of our Annual Dealer Survey—the results and analysis of which determine all of the Frank award winners—for the second consecutive year.

Most importantly, more dealers attended this annual event for the first time in over a decade. To them along with everyone else who attended, made donations, contributed time and further enhanced the overall energy of our 30th anniversary event, we are sincerely thankful and look forward to seeing as many of you as possible next year along with more new faces.

CR

2015 Frank Award Winners*

“BEST EXECUTIVE”

Best overall indstury executive in exemplifying an unmatched standard of leadership and integrity

Rick TaylorPresident and COO, Konica Minolta Business Solutions, U.S.A.

“BEST WOMAN EXECUTIVE”

Best woman industry executive in exemplifying an unmatched standard of leadership and integrity

Laura BlackmerSVP Sales, Sharp Imaging and Information Company of America (SIICA)

“BEST MANUFACTURER”

Best overall product line, from desktop to digital press devices

Ricoh Company Ltd.

“BEST A4 MANUFACTURER”

Best overall product line and support of A4 MFP and Printer Devices

“BEST-IN-CLASS MANUFACTURER”

Best overall in receptiveness, support, responsiveness and value-adds

Toshiba America Business Solutions, Inc.

“BEST MARKETING STRATEGY”

Best defines, executes and communicates its marketing strategies to dealers.

Konica Minolta Business Solutions, U.S.A.

“BEST SOFTWARE DEVELOPER”

Best partner in helping dealers achieve their objectives aside from manufacturers or leasing companies

Square 9 Softworks, Inc.

Note: As always, all award winners are directly determined by the results of our Annual Dealer Survey.

• 21 •

Attendees, award winners, special guests, sponsors and hosts are identified in each photo from left to right unless otherwise indicated:

1. The Cannata Report’s October 1 “Born in the U.S.A.” 30th Anniversary Awards & Charities Dinner packed a full house of 250 guests.

2. Frank G. Cannata, President, The Cannata Report, introduces Nick Valvano, Chairman Emeritus, The V Foundation for Cancer Research.

3. The party begins as people begin filing into the cocktail reception space.

4. Frank G. Cannata shares a warm moment while introducing Denda Shields, Bob Shields’ widow, who delivered a sincere and moving tribute.

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5. SVP, Client and Creative Services, Carol Cannata and Frank G. Cannata, The Cannata Report; Adopt-a-Soldier Platoon (AaSP) Co-Founder Mary-Edna Krutchkoff; CJ Cannata, SVP Brand Strategy and Development; and AaSP Co-Founder and President Alan Krutchkoff.

6. Signed Joe Namath New York Jets jersey, one of over 50 American sports memorabilia items donated and curated by Bob Ingoglia, Correspondent at Large, The Cannata Report, and Frank G. Cannata for the event’s first-ever silent auction.

7. Bob Ingoglia and Frank G. Cannata, as Cannata acknowledges Ingoglia’s efforts in orchestrating the silent auction for and during the event.

8. Frank G. Cannata and Bob Goldberg, BTA legal council and event emcee, as Goldberg welcomes Cannata to the stage.

9. CJ Cannata welcomes the audience.

10. “Best Woman Executive” award winner Laura Blackmer, SVP, Sales, Sharp Imaging and Information Company of America, Inc. (Sharp) and “Best Executive” award winner Rick Taylor, President and COO, Konica Minolta Business Solutions U.S.A., Inc. (Konica Minolta), flanked by CJ Cannata (left) and Frank G. Cannata (right).

11. CJ Cannata, Rick Taylor and Frank G. Cannata.

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12. John Brophy, VP, Marketing, Ricoh Americas Corporation (Ricoh), accepts Ricoh Company Ltd.’s “Best Manufacturer” award as presented by John Lowery, President, Applied Imaging Systems.

13. Frank Grasso, CEO, TGI Office Automation presents Larry White, SVP, Sales, Toshiba Americas Business Solutions, Inc. (Toshiba) with Toshiba’s “Best-in-Class Manufacturer award.

14. Phil Boatman, Business Alliance Manager, Lexmark International, Inc. (Lexmark), accepts Lexmark’s “Best A4 Manufacturer” award as presented by Ken Copeland, President, ASI.

15. Official Event Sponsor Square 9 Softworks, Inc.’s (Square 9) Lauren Ford, Marketing Communications Manager, accepts Square 9’s “Best Software Developer” award as presented by CJ Cannata.

16. Konica Minolta’s SVP of Marketing Kevin Kern, VP of Strategic Business Development Kay Du Fernandez and EVP of Sales and Business Development Sam Errigo accept Konica Minolta’s “Best Marketing Strategy” award flanked by CJ Cannata (left) and Frank Cannata (right).

17. Laura Blackmer accepts her “Best Woman Executive” award as presented by Carol C. Cannata.

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18. The Cannata Report’s 2014 inaugural August Women lnfluencers Issue cover subjects Kay Du Fernandez; Sue Wilson, VP, Operations, Toshiba; and Laura Blackmer, flanked by CJ Cannata (left) and Frank G. Cannata (right).

19. Anne Marie Woessner, Director, Supply Chain Management Group, Konica Minolta; CJ Cannata; and Dino Pagliarello, Director, Product Marketing, Konica Minolta.

20. Sharon Tosto Esker, Story and Features Editor, The Cannata Report; Larry Kirsch, Principal, Merit Business Systems; Kim Louden, Director, National Accounts, GreatAmerica Financial Services (GreatAmerica); CJ Cannata; and 2015 Women Influencer Issue subject Danielle Wolowitz, VP, Corporate Marketing Group, KYOCERA Document Solutions America (KYOCERA).

21. Dave Scibetta, EVP and CIO, Copier Fax Business Technologies, and CJ Cannata

22. Official Event Sponsor Digitek Computer Products’ Paul Martorana, CEO; Jeff Karnes, VP, Sales; Aaron Dyck, Senior Director, Solution Sales; and Matt McGuire; Director of Solution Sales.

23. Rob Parker, SVP, Equipment Finance, Wells Fargo, enaged in conversation with Luke Goldberg.

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24. CJ Cannata, flanked by after party host MWAi Intelligence’s (MWAi) Jenna Stramaglio, CMO (left) and Mike Stramaglio, CEO.

25. Frank G. Cannata; Brent Hoskins, Executive Director, BTA (hidden); Larry Weiss, CEO, Atlantic, Tomorrow’s Office; Mike Stramaglio; and Luke Goldberg.

26. Matt Smith, VP, Printing Group, Samsung Electronics America, Inc. (Samsung); Patricia Ames, President and Editor-at-Large, Office Technology Group, BOP Media; Brian Gertler, SVP, LDI Color ToolBox (LDI); and Eddie Costillo, Director of Product Marketing, Print, Samsung.

27. Jim Coriddi, VP, Dealer Division, Ricoh; Ray Fuentes, Edwards Business Systems; and Sal Camilleri, VP, Dealer Sales, Konica Minolta.

28. Art Schwartz, President, Image Systems, flanked by Frank G. Cannata (left) and CJ Cannata (right).

29. Phil Buysse, SVP and GM, Office Equipment Vendor Services, U.S. Bank, and Lou Usherwood, President, Usherwood Business Technology.

30. Dawn Abbuhl, President, Repeat Business Systems, and Jim Corridi.

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31. Frank Cannata flanked by Jerry Blaine, CEO, LDI, and Gavin Williams, Chief Solutions Officer, MWAi

32. Tom Frederick Salerno, CEO, Zeno Imaging Texas, and Joe Rubino, Channel Director, America, PaperCut, flip through 2015’s Women Influencers Issue.

33. CJ Cannata and Frank Cannata, flanked by GreatAmerica VP, Sales Carrie Witham; Director, National Accounts, Alecia Kramer; VP and GM, Office Equipment Group, Jennie Fisher; Director, National Accounts, Kim Louden; and Josie Heskje, Director of Strategic Marketing.

34. CJ Cannata and John Hey, Partner, Strategic Business Associates and member of The Cannata Report’s first Editorial Advisory Board.

35. Joe Rubino; Megan Forsberg, Territory Manager, NE, ACDI; CJ Cannata; and Mark Hart, Director of Professional Services, ACDI.

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36. Kim Louden and Glenn Johnson, President, Psigen Software, Inc. (Psigen)

37. Mimi Evenson, U.S. Channel, MPS Manager, and Grad Rosenbaum, VP and GM, Managed Services Americas, HP Inc.

38. Carol Cannata and Jennie Fisher, VP and GM, Office Equipment Group, GreatAmerica Financial Services.

39. Frank G. Cannata, flanked by the next generation (from left to right): Tanya Flores, Director of Marketing, ESP/SurgeX; Jessica Schiffenhaus, Product Manager, Buyers Lab Inc. (BLI); Matt McGuire, Jenna Stramaglio, Aaron Dyck, Josie Heskje and CJ Cannata.

40. Continuum Consultant Ed Mclaughlin makes a bid during the silent auction.

41. Carol Cannata and Elaine Adler (wife of Steve Adler, President, TGI).

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Thank You…

...Square 9, Clover Imaging Group and Digitek for their Official Sponsorship of the Anniversary Event.

…Everbank, for their Official Sponsorship of the Annual Dealer Survey and for once again providing guest transportation. …MWAi for their $31,740 contribution to our Esophageal Cancer Research Grant and for hosting the after party.

...Sharp for once again providing all requested A/V support.

...LDI Color ToolBox for once again providing the blow-ups, badges and table cards.

…U.S. Bank for their $7,500 contribution to Adopt-a-Soldier Platoon.

…Rick Bastinelli, Centric Business Systems; Jerry Blaine, LDI Color ToolBox; Roger King, EO Johnson; Jim Orrichio, Coordinated Business Machines; Loren Davis, Davis Business Machines; Bill Fraser, Fraser AIS; John Kuchta, SoultionOne; John Lowery, Applied Imaging Systems; Andy Ritchel, Electronic Office Systems; Art Schwartz, Image Systems Group; Charlie Tiernan, New England Copy Specialists; Tim Vellek, Ricoh; Larry Weiss, Atlantic, Tomorrow’s Office; and Ricoh for making donations in lieu of attending or going above and beyond their cost-of-entry fees.

Watch a three-minute documentary short featuring event highlights and guest soundbites and view a slide show featuring additional photos at: TheCannataReport.com/Dinner30.

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42. Ron Petrucci, SVP, Business Development, Clover Imaging Group, and Greg Ross, Sales Manager, Muratec America (Muratec).

43. The Cannata Report expanded our series of “Frank” award categories from five to seven this year.

44. Frank and Carol Cannata.

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Questions about next year’s event?Contact CJ CannataPhone: (917) 514-9501Email: CJCannata@CannataReport.com

42

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Q

As larger dealers have acquired their smaller counterparts, the larger firms’ revenues have bal-

looned. Consequently, we continue to look deeper into a group of independent dealers with revenues greater than $5 mil-lion. Four years ago, I would have said at least 600 dealers were members of that illustrious group. Today, I’d estimate that number is closer to 750. While the inde-pendent dealer community is contracting, one fact is certain—we are left with a sol-id core of independent businesses.

It is important to note, however, that most of these independent businesses are no longer in the top 30 markets. Outside the realm of those 30 major markets, we are finding a strong population of successful, thriving dealers, who have shrewdly de-

veloped their skills and resources. These dealers are firmly entrenched in their re-spective areas, with the end result being that they are able to serve as major com-petitive factors in smaller markets, if not dominate them.

It has always been my view that there will always be a place for independent distri-bution, at least in North America. Around the world, the business is mostly direct. I was puzzled by this until a wise man said to me that access to capital is what brings people to our shores. In no other country in the world can young aspiring entrepre-neurs raise the necessary funds to start a new business venture or find investment capital for an existing one. That is one of the things that makes this country so spe-cial. It is called opportunity.

We also want to emphasize the critical role of smaller dealers, especially for the man-ufacturer segment of the industry. These smaller dealers are buying lower-segment products at a relatively high average unit price. For a manufacturer, these sales in-crease their overall profit margins from the lower segment machines.

Expansion And Acquisition

Today, the top manufacturers have seri-ously slowed their acquisition of dealers and use that tactic as more of a defensive strategy. They tend to buy dealers when there are no other alternatives in these secondary markets. From what we have seen recently, those acquisitions tend to be by manufacturers acquiring a compet-itive dealer.

Two years ago, we highlighted the number of dealers being acquired. We think these statements still apply to today’s market.

Look at the number of acquired dealers whose businesses virtually evaporated over a number of years. Of course, there were success stories, particularly where the former owner continued to operate the business. One only has to look at the success of Global Imaging Systems to understand what Tom Johnson and his team accomplished. They set a standard

and developed a game plan that has been proven right time and again. When Xerox acquired them in 2006 for $1.3 billion, it was the best integration of an acquisi-tion we have ever seen. GIS continues to thrive because it was mandated from the top (by Anne Mulcahy, and now Ursula Burns) to “let Global be Global.”

Secrets To Success

Generally speaking, for dealers, the ideal balance for business is 60% imaging with 40% services. Achieving that delicate bal-ance should be the single most important objective for dealers.

In the past, dealers have always heavily relied on the power of the brand or brands they represent. However, in looking at IT services providers, they do not align themselves with any single brand. They are service organizations that are there to provide the software and solutions that make sense for the client. They have built their businesses on that foundation, and in virtually all cases, they deal at the highest levels with their clients. That is exact-ly where independent dealers need to be driving their businesses towards.

That said, business model solutions will ultimately be different for every dealer. For smaller dealers that are facing stiff economic headwinds, especially among those in the $3 to $4.5 million revenue range, the answers aren’t very clear. For certain of these dealers, the answer to resolving shrinking revenues may lie in expanding their offerings into managed print services (MPS). MPS is where larg-er dealers have employed acquisition strategies as a means to expand their busi-nesses with a great deal of skill and ur-gency. For other dealers, the answer may be in operating their own leasing division or group. Another group of dealers may find their solutions in creatively financing transactions for long-time customers.

• 32 •

Playing For KeepsThe Expanding Impact and Evolution of Inde-pendent Dealersby Frank G. Cannata

CR

Questions About This Story?Contact Frank G. Cannata

Phone: (860) 614-9501

Email: FGCannata@CannataReport.com

• 33 •

u The population of independent dealers continues to erode. Companies such as Xerox’s Global Imaging Group (GIS) and Konica Minolta acquired some of the best dealers out there this year. Konica Minolta’s recent acquisition of SymQuest in Vermont was a major coup for the company. Meanwhile the larger dealers such as Marco and RJ Young are acquiring smaller dealers and in Marco’s case, specifically IT companies.

u Dealer acquisitions have slowed somewhat, but we have 33% of dealers actively engaged in acquiring smaller dealers. In 2014, 9% of our survey respondents acquired firms, representing $43.4 million in total revenue.

u Average dealer revenue increased by 12.4%, and overall revenue from our respondents exceeded $3 billion for the first time. In 2014, total revenue equaled $2.7 billion.

u The percentage of dealers reporting increases in revenue over the previous year did decline to 8.9% in 2014 from 11.4% in 2013 and 11.2% in 2012.

u Revenues are growing, evidenced by the 78.1% of dealers who reported revenues in excess of $5 million.

u The CPP margin crunch and conflict between dealers and direct branches is exacerbating. Dealers reported that prices are deteriorating about 6% per year, while manufacturers have increased their quotas by 12%.

u 39% of dealers reported that competing against manufacturer branches is their “greatest area of concern.”

u Average machines in field (MIF) increased by 7.4% over the 2013’s result.

u Dealers continue using rebuilt, reconditioned or refurbished machines in order to provide a low-cost option to the price-concerned consumer. At the same time, these same machines can be used within fleets of MPS contracts.

u Use of a single A3 MFP source decreased to 33% from 2014’s 38%.

u 81% of dealers are now carrying an average of 1.89 MFP lines, slightly fewer than reported in last year’s 2014 survey, in which dealers reported carrying an average of 1.91 lines. In addition, they reported representing 2.0 A4 MFP lines per dealer.

u Sharp leads all A3 manufacturers in the area of dealer dedication.

u While HP lost its leadership position among dealers in the A4 MFP space, it remains No. 1 in desktop printers, with 23% of dealers indicating HP as at least one of their A4 print providers.

u Combined revenues from MPS and MNS represent an average of 7% for the independent dealer.

u Despite claims that MPS provides for a dealer’s greatest opportunity for growth, the number of dealers actively engaged in it declined 7% from last year’s 2014 survey.

2015 DEALER SURVEY Executive Summary Part 1

Line

s pe

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lers

hip

20 25 3015 20 2010 15 1020142015201601020

30

0.0

0.5

1.0

1.5

2.0

20152014

1.89**1.91*

In 2014’s survey, we altered the question about the different lines that dealers carried specifically to segregate A3 and A4 MFP product categories.

In previous years, the total number of lines carried reported by dealers was greatly influenced by dealers selecting an A4 provider as a second, third or fourth

line. By separating A3 and A4, we can effectively show the impact of A4 MFP. As a result of our change in methodology, the number of lines carried appeared to decrease significantly in 2014. To continue to show a trend, we are including the chart for the combine A3 and A4 average MFP lines, as well as showing new trend charts to show A3 and A4 separately.

A4 MFPs

To analyze our A4 MFP results this year, we took a different approach. In looking at the completed survey results, we found that 77.8% of dealers representing A3’s Big Six manufacturers listed their primary supplier of A3 as “one” of their A4 providers as well.

In Exhibit 1.7, we removed the Big Six manufacturers to show the other highly competitive A4 providers, with the exception of KYOCERA. In our opinion, these companies are doing the best jobs of selling their A4 MFPs to the industry

• 34 •

2015 Dealer Survey Results and Analysis (Part I of II)Dealers with Multiple Lines

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0.0

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1.0

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201220112010200920082007200620052004

1.79

2.392.402.482.28

2.101.992.01

1.801.77

2013

Exhibit 1.1: Average MFP Lines per Dealer (2004–2013) – Combined A3 and A4

Exhibit 1.2: Average A3 MFP Lines per Dealer

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201520142013201220112010200920082007200620052004

51%

64%66%57%55%

76% 74%84% 83% 81%

62%67%

Exhibit 1.3: Percentage of Dealers with Multiple Linesby Year (2003–2015) – Combined A3 and A4

* This number reflects the results coming only from dealers of the Big Six. We eliminated the “other” category in 2014.

** This number includes results coming from dealers of the Big Six, plus eight additional dealers who averaged $2.5 million in revenue, five of whom indicated that Xerox was their primary A3 MFP supplier.

• 35 •

at large. Please note, we are only showing the top five providers indicated in our survey results.

Tallying the A3 and A4 Impact

Overall, our 280 dealer respondents reported marketing a total of 561 A4 MFPs, which tallied out to 2.0 lines

carried per dealer. Only 22% of dealers indicated that they were dedicated to selling the A4 MFP product produced by their A3 MFP manufacturer.

To compare, 24% utilized their A3 MFP provider for their A4 MFP placements in 2014. In addition, average lines per dealer for A4 MFP in 2014’s survey was 1.9.

The fact remains dealers are heavily engaged in selling A4 MFPs. In our opinion, they have successfully substituted replacing the old Segments 1, 2 and some 3.

To arrive at a combined number of lines dealers are carrying across A3 and A4, we are taking the 2.0 for A4 and adding it to 1.89 for A3 to equal 3.89 lines per dealer.

To come up with a statistic that demonstrates the strength of a particular manufacturer’s distribution, we started with the number of dealers who listed an individual manufacturer as a first, second, third or

fourth choice. We then added the number of dealers (by manufacturer) who reported generating over $5 million in revenue. This combination of numbers and volume makes it clear who the dominant players are.

Perc

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20152014

67%62%

Exhibit 1.4: Percentage of Dealers with Multiple

A3 Lines

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33%

38%

Exhibit 1.5: Percentage of Dealers Dedicatedto a Single A3 Line

Exhibit 1.7: A4 MFP Lines per Dealer (2015)

Manufacturer Percentage of Dealers Selecting Primary A3 MFP as A4 MFP by Manufacturer (2015)

Canon 81%Konica Minolta 78%KYOCERA 94%RFG 89%Sharp 83%Toshiba 46%

Exhibit 1.8: Leading A4 MFP Suppliers

Manufacturer Percentage of Dealers

Canon 81%Konica Minolta 78%KYOCERA 94%RFG 89%Sharp 83%Toshiba 46%

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2.01.9

Exhibit 1.6: Average A4 MFP Lines per Dealer

* For our 2014 survey, we began removing the A4 MFP vendors to single out the percentage of dealers carrying multiple A3 lines.

• 36 •

The problem now becomes how to determine what percentage of revenue dealers are giving to the manufacturer that they indicated was their primary supplier. We can only assume that the primary manufacturer represents more than 50% of a dealer’s total revenue. We admit this could be a faulty assumption. However, we are comfortable that this benchmark of measurement that we have historically applied provides a general snapshot of the top players.

Those manufacturers normally considered to be “secondary” suppliers have carved out a growing and substantial slice of the independent copier dealers’ product offerings pie.

For example, Lexmark continues to make significant strides in replacing HP as the “it” A4 supplier, at least across the independent dealer channel. The continued presence of HP as an MFP supplier is demonstrated, but the

company’s prowess is now less than it once was, as shown in Exhibit 1.9.

In our 2008 Survey, HP MFP representation, from all positions, was 3% of the universe. In our 2010 survey, HP MFPs (all positions) represented 5.8% and that increased to 10% by the 2011 Survey. Today HP is at 6%.

Lexmark has also made dramatic strides in a five-year period, and that is particularly impressive. When you consider that Lexmark was able to accomplish such dramatic growth in the middle of a recession, it is noteworthy.

We believe Lexmark is at some sort of plateau and do not see them increasing at the same rate over the next couple of years.

At the same time, Samsung has built a presence. However, Samsug’s presence is one that gives indications that the company’s overall approach to the market is not a sustainable one. Therefore, we ultimately believe Samsung will not be successful in its attempts to increase penetration of the A3 MFP devices via the dealer channel..

5%

10%

15%

20%

25%

Lexmark

HP

201520142013

Exhibit 1.9: Percentage of Dealers Indicating HP or Lexmark as “Secondary” Manufacturers

Manufacturer DistributionThe Leader In Second Position (A3)

Who are the leaders in the secondary po-sition? That is a question we have tried to answer in the past with a lot of estimat-ing and little success. This year’s findings confirmed our previous opinions with one added surprise.

In previous surveys, we observed but not had not commented on which manufac-turers were the leaders from the stand-point of a secondary position.

However, we feel the numbers can now speak for themselves and they are fairly consistent. KYOCERA and Sharp have the stronger secondary positions within our dealer universe. This year, these two manufacturers were joined by Canon,

Perc

enta

ge o

f the

Uni

vers

e

0%

5%

10%

15%

20%

25%

MiscToshibaSharpRFG KYOCERAKonica Minolta

Canon

27

8

46

2632

23

60

32

57

33

50

31

4623

No. In Primary Position

No. In Secondary Position

Exhibit 1.10: Manufacturer Distribution Strength

* The dealers who fell into the miscellaneous group listed Xerox, Muratec and OKI as primary suppliers. In searching for those three manufacturers within the returns of dealers from the Big Six manufacturers, we found those same manufacturers collectively represented 16.4%. In addition, Samsung was selected as a secondary source by 8.6% of dealers and 0.7% of dealers selected National Distribution as their secondary supplier for A3 MFPs.

• 37 •

which could be attributed to the fact that this year’s universe is more evenly bal-anced across dealers than it has ever been in years prior.

With the greater number of Ricoh, Toshi-ba and Sharp dealers responding, we not-

ed a larger percentage of dealers calling out Canon in a secondary role.

In a traditional sense of evaluating the in-dependent distribution channel, we would definitively have to say that KYOCERA and Sharp both continue to be extremely

strong secondary sources for dealers in terms of revenue.

If a manufacturer is trying to capture mar-ket share from a competitor, being in sec-ond place within many dealerships is not a terribly bad spot to be.

1.5

2.0

2.5

3.0

Toshiba

Canon

Sharp

Kyocera Mita

Ricoh

Konica Minolta

2013201220112010200920082007

Toshiba

Canon

Sharp

KYOCERA

RFG

Konica Minolta

Aver

age

Line

s

Exhibit 1.11: Average Lines per Dealer by Manufacturer (2007–2013)*

Dealer Dedication

*Includes both A3 and A4 results.

Exhibit 1.11 Dealers who feel very secure in their re-spective marketplaces are becoming rare. The number of lines per dealership has been very consistent. It’s important to note that the number of lines per dealer means different things for different vendors. For some it is a positive, and for others, a pos-sible negative.

When manufacturers add to their distribu-tion, they are normally taking on dealers who carry at least one other competitive line. In the case of a dedicated dealer de-ciding to take on another line, it must be considered as a loss of revenue for the original manufacturer. In simplest terms, that original manufacturer loses shelf space. A prime example is how the A4 manufacturers have impacted the number of lines per dealer.

Last year, we stated we saw a distinct dif-ference in the mixture that dealers are cre-

ating to place themselves in a more com-petitive position. They seem to recognize A4 is not a threat, but rather compatible with their A3 offerings. Some might say it is even ancillary. However, this year

we are seeing some instances where A3 devices are facing some headwinds with the introduction of new A4 products. For example, the latest A4 MFP introductions by KYOCERA are disruptive by nature of

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2015

2014

Other*ToshibaSharpRFGKyoceraKonica Minolta

Canon

Exhibit 1.12: Average A3 Lines Only per Dealer by Manufacturer

*Oki Data, Muratec and Xerox

their A3-like finishing features and long-life duty cycles.

Lastly, we’d like to highlight that it is no accident that Sharp dealers consistently reported some of the lowest numbers of lines per dealer in our surveys. Sharp has recognized the value of retaining its better dealers by offering them an inducement to stay dedicated. That effort is reflected

in the limited number of lines Sharp’s dealers are carrying. Despite Sharp’s cur-rent, short-term difficulties, dealers have remained loyal to the Sharp label.

Dedication Plateau

Exhibit 1.15:The results from our 2013 and 2014 an-nual surveys demonstrate a slight varia-

tion that we believe is a direct result of dealer contraction, causing manufacturers to heavily promote competitive dealers to take on their lines. The other factor is acquisitions. Generally speaking, every time a dealer acquires, he or she adds an-other line. For example, Centric Business Systems acquired Corrigan Manning, a Sharp and Lexmark dealer in Eastern Pennsylvania. Centric carried Sharp but

• 38 •

Perc

enta

ge o

f Ded

icat

ed D

eale

rs

(A3

and

A4)

0%

10%

20%

30%

40%

50%

20132012201120102009200820072006

43%

38%36%

24% 25%

20%17%16%

Exhibit 1.13: Penetration of Dedicated A3 and A4 Dealers (2006–2013)

Perc

enta

ge o

f Ded

icat

ed A

3 D

eale

rs

20 25 3015 20 2010 15 1020142015201601020

30

0

5

10

15

20

25

30

35

40

20152014

33%

38%

Exhibit 1.14: Penetrationof Dedicated A3 Dealers

0%

10%

20%

30%

40%

50%

Canon

Konica Minolta

Kyocera

Toshiba

Ricoh

Sharp

20132012201120102009

Perc

enta

ge o

f Dea

lers

Dea

dica

ted

Toshiba

Canon

Sharp

KYOCERA

RFG

Konica Minolta

Exhibit 1.18: Degree of A3 and A4 Dedication by Manufacturer (2009–2013)

• 39 •

not Lexmark. In next year’s survey, Cen-tric will likely report one more MFP line than it did this year.

In the past—and we’re talking 15 years ago—it was the norm for manufacturers to have 50% or more of their dealers ded-icated to a single line of copiers.

Today, however, we have more compet-itors playing in landscape such as Mu-ratec, OKI, Samsung and HP that are being named as primary MFP suppliers. With more manufacturers being used, the level of dedication is spread thinner, and this is one reason the level of dedication to a single provider continues to decline.

By tapping into more suppliers, dealers are more able to offer customers multiple solutions to their complex business verti-cals. For example, dealers can rely on A4 products for more than just low-cost al-ternatives for color. Dealers can use these A4 products as vehicles that can enable them to capture clicks by upgrading print-ers to a full MFP, or by replacing multiple printers with a greater concentration of A4 MFPs. When dealers add fully func-tional MFPs to replace printers, they can reduce the number of output devices. To boot, dealers can also provide a scanning function that can become digital on-ramps for the network.

Using multiple suppliers also allows in-dependent dealers to offer stronger MPS capabilities and makes printers a far more important segment of the business.

Exhibit 1.16 The relative increases we see in levels of dedication over the last two years are the results of separating A3 and A4 MFPs. However, traditional leaders such as Sharp and Toshiba are fairly consistent. KYOCERA’s level of dedication was an anomaly in 2014, and we believe the 22% reported in our current survey is a truly accurate reflection of this compa-ny’s distribution.

This year, Canon, Konica Minolta and KYOCERA decreased in their levels of dedication. I was surprised by the Konica

10

20

30

40

50

60

70

80

Canon

Konica Minolta

Kyocera

Toshiba

Ricoh

Sharp

20152014

Perc

enta

ge o

f Dea

lers

Dea

dica

ted

Toshiba

Canon

Sharp

KYOCERA

RFG

Konica Minolta

Exhibit 1.16: Degree of A3 Dedicationby Manufacturer

Perc

enta

ge o

f Dis

tribu

tion

0%

10%

20%

30%

40%

50%

60%

70%

80% Y2015

Y2014

ToshibaSharpRFGKYOCERAKonica MinoltaCanon

38% 39%

52%

30%

44%

25%

0.0

0.2

0.4

0.6

0.8

1.02015

2014

2015

2014

2015

2014

2015

2014

2015

2014

2015

2014

22%17%

22%

33%

63%

40%

Exhibit 1.17: Dealer Dedication to a Single A3 Manufacturer (2014–2015)

Exhibit 1.18 The increases in revenue versus previous years is truly amazing. We continue to perform our due diligence by removing submissions that make no sense at all, in more ways than one.

One factor playing into these revenue numbers is the increase in personnel, which have been more geared to the ser-vices side of the business. Another factor weighing in here is the higher average unit selling prices.

The only manufacturer whose numbers

• 40 •

Dealer Revenue

$6

$9

$12

$15

2015201420132012201120102009

$ M

illio

ns

Exhibit 1.19: Average Revenue for A3 Dealers Only

$0 $5 $10 $15 $20 $25 $30

Y 2015

Y 2014

Y 2013

Toshiba

Sharp

RFG

KYOCERA

Konica Minolta

Canon

2013

2014

2015

Number of Lines

$18.6$20.8

$26.8

$8.7$10.6

$11.4

$5$3.9

$5.4

$13.6$16.4

$20.1

$6.1$10.5

$7

$5.5$4.4

$6.2

Exhibit 1.18: Dealer Revenue by Manufacturer ($ Millions)

Minolta results but not by the KYOCERA numbers. For many years, the strength of the KYOCERA product line has been the lower segments, and the company has not touched on production print. The more successful KYOCERA dealers have opted to take on a second line to fill out that lack of a product offering.

Top Dealer Distribution

In order to answer the question as to which manufacturer has the strongest independent dealer distribution, I would have to say Canon, Ricoh and Konica Minolta in that order. It is interesting to note that of the Canon dealers report-

ing in this year’s survey 37% claimed Ricoh Family Group or Konica Minolta as a secondary supplier. Of our Ricoh dealer respondents, 35% listed Canon or Konica Minolta as secondary sourc-es. Meanwhile, 30% of Konica Minolta dealers selected Canon or Ricoh as sec-ondary suppliers.

• 41 •

0%

10%

20%

30%

40%

50%

60%

70%

80%

2015

2014

2013

SameDownUp

62.2%

73.3%

12.3% 13.1%

23.4%

14.6%

66.7%

14.6%18.5%

Exhibit 1.20: Direction of Dealer Revenues: Up, Down or Same

$6

$9

$12

$15

2014201320122011201020092008200720062005

0.8

1.0

1.2

Exhibit 1.21: Historical Dealer RevenueIncreases (2005–2014)

0%

3%

6%

9%

12%

15% % Down

% Up

OtherToshibaSharpRFGKYOCERAKonica Minolta

Canon

14.7%

7.9%

11.5%

7.6%

9.5%8.6%

0.0

0.2

0.4

0.6

0.8

1.0% D

own

% U

p

% D

own

% U

p

% D

own

% U

p

% D

own

% U

p

% D

own

% U

p

% D

own

% U

p

9.6%

4.0%

8.1% 7.6%

% D

own

% U

p

11.0%

6.4%

10.8%

7.5%

Exhibit 1.22: Dealer Revenue Gainsand Losses by Manufacturer (2014)

were off from last year were Sharp’s. The difference can be attributed to the fact that approximately half the Sharp dealers responded this year versus last year. That drop in dealer responses resulted in Sharp reflecting a lower average revenue per dealer. In analyzing the results, we did note that a number of better-performing Sharp dealers did not respond this year.

Exhibit 1.18The results over the past three years have shown a slow recovery for dealers over-all. However, for those generating more than $15 million in revenue, they have experienced very strong growth that has far outpaced the U.S. economy.

Our 2013 survey showed 14% of deal-ers reporting “same,” compared with this year’s 18.5%. For the most part, that difference between this year and 2013 consisted of dealers reporting less than $3 million in revenue. In this case, we believe the results represent a continued separation of those that have the capabil-ities to take advantage of new developing technologies for long-term sustainability and those that cannot.

*Other includes: OKI Data, Muratec and Xerox.

• 42 •

0%

2%

4%

6%

8%

10%

12% % Down

% Up

Other*ToshibaSharpRFGKYOCERAKonica Minolta

Canon

6.2%7.1%

11.5%7.6%9.5%

8.6%

0.0

0.2

0.4

0.6

0.8

1.0% D

own

Y-O

-Y

% U

p Y-

O-Y

% D

own

% U

p Y-

O-Y

% D

own

Y-O

-Y

% U

p Y-

O-Y

% D

own

Y-O

-Y

% U

p Y-

O-Y

% D

own

Y-O

-Y

% U

p Y-

O-Y

% D

own

Y-O

-Y

% U

p Y-

O-Y

9.6%8.3% 8.0%

7.3%

% D

own

Y-O

-Y

% U

p Y-

O-Y

7.5%

11.7%

7.5%

N/A

Exhibit 1.23: Dealer Revenue Increases Year to Date Actual 2015 Versus 2014 Results

Exhibit 1.24The average revenue for the 48% of all dealers who fell into the more than $5 million classification was $22.2 million. That is a very telling number, indicating these particular dealers are taking advan-tage of the contraction in this industry.

Exhibit 1.25Due to dealer contraction, we also started looking at those with revenues of $7 mil-lion and up.

Despite all the downward pressure on margins and a maturing print market, dealers have been able to maintain a sus-tainable business model. The evolution of the independent dealer continues, as they generate revenues from sources such as

The $5 Million and Up Club

60%

70%

80%

Percentage Up

20152015420132012

0.8

1.0

1.2

Exhibit 1.25: Percentage of $5 Million Club Dealers Reporting Revenues Greater than $7 Million

Exhibit 1.24: Dealers Trending $5 Million in Revenue and Up

Vendor % of Dealer Universe Average Median % of Dealers with $5M and Up Revenue ($M) Revenue ($M) in $5M Club Canon 8.2% 30.22 12.4 85Konica Minolta 11.0% 19.55 5.5 52KYOCERA 2.5% 11.01 3.3 22RFG 13.9% 28.24 10.4 68 Sharp 4.2% 17.58 2.7 26Toshiba 7.1% 10.00 3.1 38Other .003% 7.40 0.7 13

Exhibits 1.26 and 1.27With the advent of MPS, the relationship between printer manufacturers and inde-pendent dealers has become increasingly important. Managing fleets, particularly when competitive manufacturers are in-volved, requires delivering a more con-sultative approach to the client. In years past, printers were provided as a conve-

nience to customers who required them for their desktops. Today, the approach is to manage the fleet—MFPs and printers.

HP, KYOCERA and Lexmark have been at the top of this list for the last four years and at the same relative penetration level, with HP at 23% and KYOCERA at 18%. Lexmark has come down from a high of

18% to 14%. We are not sure of the driv-ers for that decrease. Please note that the absence of Toshiba in this chart is because the manufacturer has partnered with Lexmark and HP in this area. The few Toshiba dealers that in-dicated they sell its printers were placed into the “Other” category, along with

0 5 10 15 20 25

Pe2013

P2014

P2015

Other

Canon

OKI Data

Xerox

Sharp

Samsung

Konica Minolta

RFG

Lexmark

KYOCERA

Hewlett-Packard

Percentage of Total Printer Supply Line

2015

2014

2013

• 43 •

Printer Lines

managed services (MPS and MNS), ac-quisitions and diversification, in order to the meet the challenges of big data, cloud, security and BYOD, as well as mobile print, which is significant for dealers and particularly strong in the education seg-ment. (Dealers are reporting an increase

in click counts at many of the schools and universities they service. It makes sense that it is coming from mobile print.)

We’d like to provide one additional com-ment here. In 2014, there were three par-ticipating dealers who reported $100 mil-

lion in revenue and two with $200 million or more. That makes an appreciable dif-ference in the numbers. Yet it is inter-esting to note that this year’s survey ex-ceeded last year’s revenue total by $600 million. As we said, the most balanced survey we have ever conducted.

Exhibit 1.26: Printer Lines in Order of Importance for Dealers

• 44 •

$0 $5 $10 $15 $20 $25 $30

Y 2015

Y 2014

Y 2013

Toshiba

Sharp

RFG

KYOCERA

Konica Minolta

Canon

2013

2014

2015

Number of Lines

$18.6$20.8

$26.8

$8.7$10.6

$11.4

$5$3.9

$5.4

$13.6$16.4

$20.1

$6.1$10.5

$7

$5.5$4.4

$6.2

Exhibit 1.27: Average Number of Printer Lines per Dealer

dealers who selected Muratec and Broth-er printers.

HP’s Presence

Through the years, we have observed Hewlett-Packard’s position in the inde-pendent dealer channel declining. In our 1999 survey, 39% of our respondents in the independent dealer segment sold HP. But the following year in 2000, that num-ber fell to 23%. Over the next six years, HP’s presence continued to drop, falling an additional 7.4%, until the percentage stabilized and even has shown some signs of improvement.

Despite these results, we believe that HP continues to hold a dominant position in the printer category for a select group of dealers. For the independent dealer, the interest in HP and its MFP products has remained strong. In our opinion, the com-pany’s A4 MFPs have shed new light on carrying the line.

At the same time, HP’s strength among

dealers does not mean they are moving HP’s MFP products in great numbers. The stronger dealers, particularly those in major markets, have forged a strong rela-tionship with HP and service many of its Enterprise accounts.

From our vantage point, the growing in-terest of dealers in MPS has enabled the dealer/HP relationship to remain positive.

Last year, 22.5% of responding dealers reported they carried HP, and we were of the opinion that the number of deal-ers selling HP MFPs would remain fairly stable. Here, we cited the issue of sus-tainability and going green as one of the contributing reasons. No manufacturer has done as well as HP in this area. This year’s performance bears that out.

Two other companies we continue to mon-itor closely are KYOCERA and Lexmark. These two companies are dueling for the No. 2 slot and at the moment, the former has the edge. However, I would not sell Lexmark short. In looking at the quality

of the dealers the company has brought on board, I can see Lexmark increasing its penetration of the dealer channel with printers, as well as MFPs.

Last year, we noted our surprise that Sam-sung did not make a better showing on the printer side and we’d be watching to see how the company fared in the coming year. As it turns out, Samsung fell 2%. If Samsung declines again next year, that would certainly indicate a trend.

Exhibit 1.28Here, we are comparing how different manufacturers’ dealers are approaching the printer market. Historically, Sharp dealers have reported the lowest number of lines carried, while Ricoh and Konica Minolta have been on the higher side. However, the difference is small. It is also interesting to examine Canon’s numbers. The number of lines carried by Canon’s dealers is up, and we believe that can be attributed to the number of those partic-ular dealers taking on the Samsung line, including both printers and MFPs.

• 45 •

1.0

1.5

2.0

2.5

3.0

2015201420132012111111....000000

111111111......555555555555

222222222......000000000

222222222....5555555

33333333.....00000000

22222000011115552222200001111444422220000001111113333332222222222000000111111112222221.0

1.5

2.0

2.5

3.0

2015201420132012

Toshiba

Canon

Sharp

KYOCERA

RFG

Konica Minolta

No.

of L

ines

Exhibit 1.28: Printer Lines per Dealer by Manufacturer

Refurbished Machines Exhibits 1.29–1.31From 2008 to 2011, there was obviously some added pressure on dealers to utilize reconditioned machines, when dealers were facing some challenges with their leasing vendors. We don’t believe this is the case any longer.

With the introduction of managed print services, we are finding that dealers are more open to using rebuilt products—along with remanufactured cartridges—for their clients. This usage facilitates a reasonable return on investment for the independent dealer.

At the same time, there is a cost burden associated with rebuilt machines, and many dealers do not take this factor into consideration. It takes time and effort to rebuild machines that will be returned to the field, along with additional parts out-lays, which is something our dealer par-ticipants ought to consider.

80%

100%

Percentage Up

201520142013

0.8

1.0

1.2

Exhibit 1.29: Historical Percentage of Dealers Using Rebuilt Machines

Perc

enta

ge o

f Reb

uilt

Plac

emen

ts

0%

5%

10%

15%

20%

Other*ToshibaSharpRFGKYOCERAKonica Minolta

Canon

8.1% 7.5%

13.9%15.7%

9.9%13.4%7.6%

0.0

0.20.4

0.6

0.8

1.0

Exhibit 1.30: Rebuilt Machine Sales Trends

*Other includes: OKI Data, Muratec and Xerox.

• 46 •

10%

15%

20%

Percentage Up

2015201420132012

0.8

1.0

1.2

Exhibit 1.31: Historical Average Percentage of Rebuilt Placements for Universe

Managed Print ServicesExhibit 1.32 This year, an average of 72% of dealers reported they were engaging in MPS, which is markedly lower than last year’s 79%. Prior to this year, we had witnessed a steady rise of dealers involved in MPS.

Ricoh dealers’ MPS engagement has ris-en steadily to 98% this year versus 92% for 2014. The remaining manufactur-ers’ dealers dropped from their previous year’s results.

KYOCERA and Sharp reported the most significant losses, dropping 15% and 12%, respectively. It’s clear that a num-ber of the dealers indicated they were en-gaged in MPS that in previous years, and one for reason or another, they have cho-sen not to continue.

Last year, we opined that not every dealer is going to engage in any type of managed services. We believe the top end of MPS engagement for dealers is about 80%.

One limitation of our survey is have not been able to dig deeply into how involved dealers are with MPS.

Exhibit 1.33As you can see, dealers use a wide gamut of software. The most-popular MPS soft-ware vendors are Print Fleet, Print Au-dit, FM Audit and LMI. Since we began tracking software usage in MPS, Print Fleet, Print Audit and FM Audit have been at or near the top.

Percentage Engaged in MPS0% 20% 40% 60% 80% 100%

y2013

y2014

y2015

Sharp

KYOCERA

Toshiba

Konica Minolta

RFG

Canon 2015

2014

2013

85%

69%76%

70%

90%74%

57%

93%98%

83%76%

75%

80%78%

92%

89%89%

70%

Exhibit 1.32: MPS Trends by Manufacturer and Dealer

• 47 •

0% 5% 10% 15% 20% 25% 30% 35% 40%

Other*

Supplies Network

Fleetview

Compass

Print Tracker

Print Audit

LMI

Print Fleet

FM Audit

Percentage Engaged in MPS

Exhibit 1.33: Software Vendors Used by Dealers Employing MPS

0% 3% 6% 9% 12% 15%

2015

2014

2013

Toshiba

RFG

Sharp

KYOCERA

Konica Minolta

Canon

Average Percentage of Revenue

9.35%8.29%

9.35%

6.04%6.78%

6.04%7.87%

9.61%7.87%

9.84%7.7%

9.84%

8.67%10%

10%12.2%

13.32%12.2%

Exhibit 1.34: Percentage of 2014 Revenue Attributed to MPS

Exhibit 1.34 MPS is not the end goal for independent dealers. This year, the average percent-age of dealer revenue driven by MPS was 5.49%, which we do believe most accu-rately reflects what dealers are actually generating from MPS.

** The “Other” category includes: West Point, Page Pack, AXess, Supplies Network, ECI, OMD, Konica Minolta, E-Automate, Paper Cut, MPS ToolBox and N-Able.

Exhibit 1.35On average, dealers reported that 1.44% of their revenue is driven from MNS. Last year, we stated that MPS and MNS

combined most likely represented ap-proximately 9% (5% from MPS and 4% from MNS) of all average dealer revenue. This year’s results indicate that dealers are at nearly 7% (5.49% for MNS and

1.44% for MNS) for combined MPS and MNS revenue.

Transitioning into MPS did not require a major change in IT knowledge. It is far different coming up with answers for di-saster recovery and solving security is-sues than doing an MPS assessment. In addition, the bundling of supplies and service for an MPS contract is fully sup-ported by the leasing companies. It is also the best tool that we know of to pick up clicks via mobile print.

Of our survey respondent, 40.3% report-ed engagement in MNS, an encouraging and positive statistic. In their case, these dealers’ average revenue in MNS was 13.6%, a quantum leap from 1.4%. Given that 60% of dealers not engaged, we be-lieve 13.6% is realistic number and sends a clear message to those dealers not yet engaged in this area that MNS remains a significant opportunity.

• 48 •

Exhibit 1.35: Average Percentage of Revenue Attributed to MNS

Vendor Average Percentage of Revenue

Canon 2.44%Konica Minolta 1.22% KYOCERA 0.84%RFG 2.49%Sharp 1.00%Toshiba 0.74%Other* 1.50%

Total Average: 1.44**Others include: OKI Data, Muratec and Xerox

Managed Network Services

In probing for data on service technicians and sales, we altered the question format from previous years. In earlier surveys, we noted the tech count was on a slightly downward trend.

In our 2009 survey, we recorded an av-erage of 14.04 techs per dealer. We aver-aged 14.04 techs per dealer. With an av-erage revenue difference of only $27,888 between the 2010 versus the 2009 survey findings, respondents reported one few tech per dealerships.

In this year’s 2015 survey, respondents indicated two more tech per dealership, with 7.5% less in average revenue per dealer. We believe this result could be attributed to “technicians” hired for MPS and possibly MNS.

We determined that in order to gain fur-

ther clarity, we determined it was neces-sary to ask two separate questions. First, we asked how many break-and-fix techs dealers employed.

Second, we specifically asked for dealers to indicate the number of techs they employed to service MPS and MNS clients.

Service Technicians And Sales

Exhibit 1.36: Technicians per Dealer by Manufacturer (2013–2014)

Vendor 2014 2013 2014 2013 Number Number Average Average of Techs of Techs per Dealer per Dealer

Canon 972 901 34.7 33.4 Konica Minolta 1,989 1049 26.9 17.5KYOCERA 456 270 9.1 9.0 RFG 1,328 1,336 28.9 25.2 Sharp 395 438 15.8 12.2 Toshiba 367 413 11.2 8.0

Totals: 5,507 4,407 20.5 17.3

By breaking out our tech inquiry into two questions, our ability to trend that does not present the value it once did. Hence, we’ve included the 2013 and 2014 survey data for your reference.

When we began our dealer surveys back in 1985, a dealer employed techs with a ratio of 40 to 1. Those early machines were not reliable and required a great deal of attention.

Today, we have the specter of managed services (both print & IT) that require a totally different set of skills.

We will continue to collect data in this fashion moving forward. For this year, by adding break-and-fix techs with MPS/MNS techs, dealers reported an average of 16.1 techs per dealership.

In our two prior surveys that report 2012 and 2013 performance levels, the sales level was fairly well established. I con-tinue to believe the trends prove a point. Is the average dealer generating $10 mil-lion per year? We think that is an accurate number. The difference is in the separa-tion of dealers from top to bottom. We addressed that to some extent in our $5 million and up club. Fewer dealers are selling more product and growing at a very fast rate.

Similar to how we approached dealers about the type of techs employed, we al-tered the question about salespeople to determine the number specifically tack-ling MPS and MNS.

Of our responding dealers, 35% reporting employing additional sales support for MPS and MNS. If you look specifically at those that provide additional sales sup-port for MPS and MNS that represents 2.6% per dealer. Given that 72% of our responding deal-ers are engaged with MPS, we believe the average number of personnel supporting this effort makes sense. This data tells us that many of those dealers are satisfied with cross-training existing sales person-nel to sell MPS contracts.

• 49 •

Exhibit 1.37: Break-and-Fix Technicians per Dealerby Manufacturer (2015)

Vendor Number of “Other” Techs Average per Dealer

Canon 949 35Konica Minolta 802 13.4KYOCERA 219 6.8RFG 993 17.4 Sharp 421 9.2Toshiba 360 7.2Other* 38 4.8

Total/Avg: 3,744 13.4*Other includes: OKI Data, Muratec and Xerox.

Exhibit 1.38: Technicians Employed to Support MPSand MNS (2015)

Vendor Number of techs Average per Dealer

Canon 62 2.3Konica Minolta 157 2.6 KYOCERA 71 2.2 RFG 290 4.9 Sharp 55 1.2 Toshiba 107 2.1Other* 7 .88

Total/Avg: 749 2.7

*Other includes: OKI Data, Muratec and Xerox.

Exhibit 1.39: Salespeople per Dealer By Manufacturer

2015 2014Vendor No. of Avg. per No. of Avg. per Sales Reps Dealer Sales Reps Dealer

Canon 587 21.7 506 18.7Konica Minolta 618 10.3 707 11.8KYOCERA 92 2.9 201 6.7 RFG 971 17.0 842 15.9Sharp 280 6.1 286 7.9Toshiba 263 5.3 269 7.3Other* 22 2.8

Total/Avg: 2833 10.1 2,811 11.02

*Other includes: OKI Data, Muratec and Xerox.

Exhibit 1.42 With continued contraction among inde-pendent dealers, we believe the percent-age of dealers with greater than $20 mil-lion in revenue will increase over time.

Exhibit 1.43We caution you to read the following ex-planation as shown in Exhibit 1.40 care-fully. We analyze this data differently than most surveys conducted by and for dealers. We are presenting a simple way to measure sales productivity and the cor-relation between the size of a dealer and dealer revenue.

This analysis has always stood us in good stead when asked to speak to companies and vendors that have an interest in mar-keting their products through dealers.

Here, we simply take the total reve-nue and divide it by the total number of

• 50 •

Exhibit 1.40: Salespeople per Dealer over Time

2004 2005 2006 2007 2008 2009 2010 2011 2012

Salespeople 7.75 8.05 8.87 7.4 6.8 10.1 8.9 10.5 11.3

Exhibit 1.41: Staff Employed to Provide Sales Support for MPS and MNSNumber of “other” Sales

Manufacturer Number of Personnel Average per dealer Number of Dealers Employing Other

Canon 39 1.4 5 Konica Minolta 69 1.2 25 KYOCERA 23 0.72 10RFG 91 1.6 27Sharp 21 0.46 9Toshiba 15 0.30 11Other 1 0.13 1

Totals: 259 0.93 98

To provide some prospective, we like to present our commentary from previous surveys, as we continue to profile the independent dealer—meaning revenue, manpower, and overall evaluations and concerns. The following is what we re-ported in our 2009 survey issue:

It is fairly safe to say that the average revenue for independent dealers is

roughly $6.5 million. They employ six salespeople and have an owner heavily engaged in sales. There are eight techs with one service manager.

Last year [2008], we stated that the average revenue was $6,808,741. As we noted in the response to the same question in this year’s survey [2009], the average revenue is now $9,890,003.

Revenue and Productivity

Exhibit 1.42: Dealers Reporting Greater Than $20 Million in Revenue

2012 13.6% 2013 11.4% 2014 11.9% 2015 17.1%

• 51 •

Exhibit 1.43: Revenue per Salesperson by Average No. of Salespeople over Time

Year Average Number Revenue Per of Salespeople Salesperson

2000 8.2 $707,9782001 8.8 $694,1182002 9.9 $686,5322003 8.9 $671,4492004 9.6 $647,2192005 7.8 $803,3962006 7.4 $905,0632007 6.9 $1,001,1292008 10.1 $890,0622009 8.9 $1,009,0702010 10.5 $941,9052011 11.3 $872,1242012 11.0 $826,3772013 1.0 $827,8802014 15.2* $706,3502015 11.2 $931,034

*Please note that this year’s average number of salespeople include specialists,support people and managers, whereas previous years only include salespeople.

Machines in Field Exhibit 1.44 We have to start somewhere, and it might as well be here. In completing Exhibit 1.44, we believe the data provides a cohe-sive profile of an independent dealer with an A3 focus.

Last year, we believed revenue was over-stated. We do not believe that is the case this year, mainly due to the fact that we received survey returns from many deal-ers with revenue was greater than $20 million. In virtually all cases, we recog-nized each of these dealers, and it was particularly true of those in the $40 to $100 million range.

There is a direct correlation between MIF and revenue that has been borne out over the years. Roughly speaking, a MIF of 500 MFPs, plus a number of printers—less than 200—indicates the profile of a $1 million

dealer. Hence, a $5 million dealer will have a MIF of 2,500 MFPs with under 800 printers.

This year, the average dealer revenue was $10 million, with an average total MIF of 5,248, which includes printers.

As such, when we see a dealer reporting $20 million in annual revenue along with a MIF of 1,600, we discard such a result.

However, if we find other information useful or realistic, we have to take what-ever is suspect and subscribe a zero to it.

Exhibit 1.44: Total Number of Machines in Field (2014 vs. 2015)

2015 2014 Avg. MIF Per Dealer Avg. MIF Per Dealer Vendor Canon 11,649 10,565 Konica Minolta 5,023 4,282KYOCERA 2,391 3,580 RFG 8,057 5,978Sharp 3,330 4,478 Toshiba 2,939 3,167Other* 2,215 --

*Other includes: OKI Data, Muratec and Xerox.

salespeople. We do not distinguish reve-nues coming from other sources such as supplies and service. The encompassing CPC tends to make this a more realistic way to measure the performance of the independent dealer. The decrease in deal-er productivity is fairly small but realistic in light of the fact that pricing has eroded.

Here yet again, we believe this is some-thing that is reflective of what actually was the cause and the effect.

AcquisitionsIn the area of acquisitions, we asked deal-ers two questions. First, we asked if they acquired any dealers in 2014. Second, we queried whether they were actively en-gaged in acquiring dealers in 2015. 33% of dealers indicated they are very much in the mode of acquiring smaller dealers.

Of that group in acquisition mode, 7.5% said they were closing in on more than one other dealer. This data only takes into consideration dealer feedback through June 2015, when we completed conduct-ing this survey.

Exhibits 1.45–1.46These charts reflect aquisition trends across the two survey years prior to this one and you will note the comment we made in 2014’s survey.

Survey Says

We have been asking dealers for their ac-quisition activity for four years now. In tallying up their numbers, dealers have acquired a total of 214 dealers, represent-ing a revenue of $459.2 million. There is no question that an acquisition strategy is very much on the minds of certain inde-pendent dealers.

However, there is a proverbial fly in the ointment here. Dealers looking to exit the business realize there is an interest in their businesses, and the time is right for them to sell. Unfortunately, it appears these dealers are consistently valuing their businesses considerably higher, in some cases by over 100%, than their true market value.

In 2014, I received a call from a dealer and discussed what he should expect to receive from the sale of his business. As a courtesy, he asked me to put a value on his business, and I took a look at the over-all business, including size of MIF, ser-vice and supply revenue, and the average segment of MFP found in the MIF.

In this particular case, the dealer had

predominantly a Segment 2 MIF, with a small number of Segment 3 and even smaller number of Segment 4 place-ments. After looking at everything, I told this dealer that the optimum sales figure was $600,000. This dealer was ultimately looking for twice that amount in terms of a final sale price.

In listening to what dealers who are looking to acquire other dealers, my experience is consistent with the rest of our industry.

I would hope BTA, with the help of Gen-eral Council Bob Goldberg, who is far better equipped than I am to take a realis-tic approach to evaluating their business, can provide some assistance in helping dealers more realistically value and posi-tion them for sale.

• 52 •

Exhibit 1.45: Acquisition Trends (2014)

Vendor Number of Number Total Revenue Dealers Into Acquired 2014 ($ Million) of Acquisitions Those Acquired

Canon 6% 4 $2.9 Konica Minolta 10% 11 $26.6KYOCERA 2% 3 $2.6RFG 10% 8 $9.3Sharp 2% 1 $1.0Toshiba 3% 1 $1.0

Totals 33 28 $43.4

Exhibit 1.46: Acquisition Trends (2013)

Vendor Number of Number Total Revenue Dealers Into Acquired 2013 ($ Million) of Acquisitions Those Acquired

Canon 3% 9 $6.8 Konica Minolta 6% 15 $36.3KYOCERA 3% 2 $1.4RFG 6% 9 $21.4Sharp 3% 3 $2.6Toshiba 3% 3 $5.2

Totals 24% 41 $73.2

Dealer Opportuni-ties and Concerns Exhibits 1.47–1.53 MPS was the clear winner among dealers’ growth opportunities, with 40% of re-spondents, particularly those from Sharp and Toshiba. In MNS, Konica Minolta and Ricoh were responsible for 62% of those selecting MNS as the leader. Toshi-ba led in document management, and Ricoh took first place in production print.

There were no surprises here, except for Canon dealers and MNS. We thought we would see a much higher percentage than 22% from those dealers.

Production Print

Exhibit 1.54One of the respondents in last year’s sur-vey noted he was surprised that we did not have a question regarding production print. We agreed that was a very good suggestion and committed to including production print in the 2015 survey.

Here, we asked two questions. First, we asked dealers about their engagement in this area. Second, we asked what per-centage of revenue production print rep-resents for them.

With this data, we are not looking to de-termine what individual dealers are do-ing but rather the distribution as a whole. According to our survey results, 53% of dealers are engaged in production print. However, only about half of those respon-dents provided an answer to the percent-age of revenue production print generates. In these types of situations, we interpret a blank answer as a zero.

For those survey participants that did pro-vide an answer, many reported percent-ages in the 10% to 18% range. At best, a realistic expectation for dealers who are looking for some sort of benchmark once they become engaged in production print, we would suggest they use 12% as an at-tainable goal.

• 53 •

Perc

enta

ge o

f Gro

wth

0%

10%

20%

30%

40%

50%

Other*ToshibaSharpRFGKYOCERA Konica Minolta

Canon

42%

12%17%

39%

24%22%

0.0

0.2

0.4

0.6

0.81.0

0%

Exhibit 1.47: MPS as Growth Opportunity

Perc

enta

ge o

f Gro

wth

0%

10%

20%

30%

40%

50%

Other*ToshibaSharpRFGKYOCERA Konica Minolta

Canon

42%

12%17%

39%

24%22%

0.0

0.2

0.4

0.6

0.81.0

0%

Exhibit 1.48: MNS as Growth Opportunity

Perc

enta

ge o

f Gro

wth

0%

5%

10%

15%

20%

25%

30%

35%

40%

Other*ToshibaSharpRFGKYOCERA Konica Minolta

Canon

15%

21%

13%

7%12%

19%

0.0

0.2

0.4

0.6

0.81.0

38%Exhibit 1.49: Document Management as Growth Opportunity

*Acquisitions was the most named among “Other Selections.” **Oki Data, Muratec and Xerox

*Other includes: OKI Data, Muratec and Xerox.

*Other includes: OKI Data, Muratec and Xerox.

As an added bonus here, dealers provid-ed us with the model numbers they are selling, which predominantly correspond to light production devices. The primary model numbers dealers reported were the Ricoh 5100, 7100 and 8100 series, along with the Konica Minolta 1070 and 1100.

Both Ricoh and Konica Minolta have a broad distribution among their multi-ple-line dealers. We found both compa-ny’s models being noted by KYOCERA, Sharp and Toshiba dealers, as well as with each other’s distribution. It was not un-common to find both Ricoh and Konica Minolta production print devices together with individual lines across the board. Areas of Greatest Concern

Exhibits 1.55–1.61This year we changed this question, as we were attempting to find the single most troublesome area for dealers. Rather than having dealers indicate concerns on their own, we provided four selections:

• Competing against partner manufactur-ers’ branches.

• Declining click counts.

• An inability to recruit talented personnel to be employed in the services area.

• Succeeding in production print.

It is easy to see what dealers have the greatest concerns about. When 40% of all respondents claim competition against manufacturer branches is most trouble-some for them, we are not surprised. For perspective, we are also including results from our 2014 and 2013 surveys. As you will note, dealer concerns have remained more or less consistent. To determine the three most important ar-eas that gave dealers the greatest causes for concern, we asked dealers to provide their top three concerns, listing them in order of importance. To aggregate re-sponses, we designated 3 points for 1st place, 2 points for 2nd place, and 1 point for 3rd place.

• 54 •

Perc

enta

ge o

f Gro

wth

0%

5%

10%

15%

20%

25%

30%

Other*ToshibaSharpRFGKYOCERA Konica Minolta

Canon

15%

7%

0%

26%

3%7%

0.0

0.2

0.4

0.6

0.81.0

13%

Exhibit 1.50: Production Print as Growth Opportunity

Perc

enta

ge o

f Gro

wth

0%

2%

4%

6%

8%

10%

12%

Other*ToshibaSharpRFGKYOCERA Konica Minolta

Canon

0% 0%

2%

0%

3%4%

0.0

0.2

0.4

0.6

0.81.0

12%Exhibit 1.51: Wide Format as Growth Opportunity

Perc

enta

ge o

f Gro

wth

0%

2%

4%

6%

8%

10%

12%

Other*ToshibaSharpRFGKYOCERA Konica Minolta

Canon

8%9%

7%

5%

8%

4%0.0

0.2

0.4

0.6

0.81.0

12%Exhibit 1.52: Other Selections as Growth Opportunity

*Acquisitions were the most named among “Other Selections.” **Other includes: OKI Data, Muratec and Xerox

*Other includes: OKI Data, Muratec and Xerox.

*Other includes: OKI Data, Muratec and Xerox.

Perc

enta

ge o

f

0%

5%

10%

15%

20%

25%

30%

35%

40%

OtherSelections*

Wide Format

Production Print

Doc/MgmtMNSMPS

26%

7%

1%

11%15%

40%

0.0

0.20.4

0.6

0.8

1.0

Exhibit 1.53: Total of Greatest Growth Opportunities among Dealers

*Acquisitions was the most named among “Other Selections.”

Exhibit 1.54: Dealer Engagement in Production Printwith Average Percentage of Revenue

Manufacturer Number of dealers engaged Avg. Percentage production print in of Revenue Canon 8% 6.2%Konica Minolta 15% 6.3%KYOCERA 5% 1.0%RFG 14% 3.9%Sharp 4% 0.8% Toshiba 6% 1.3%Other* 2% 2.5%Industry: 54% 3.3

*Other includes: OKI Data, Muratec and Xerox.

• 55 •

In looking at dealer concerns from 2013 through 2015, we can see that manufac-turers continue to elicit concerns from dealers. At the same time, the angst and anger between dealers and direct chan-nels that has permeated the industry at-mosphere over the past several years, ap-pears to be abating somewhat.

As we mentioned last year, 98% of deal-ers considered sustaining market share to be one of their major concerns in our 2011 survey. Of that group, 40% indicat-ed it as the No. 1 concern. In that same survey, 40% of all dealers listed compe-tition from manufacturers’ branches as their No. 1 concern.

In 2012, 41% of dealers placed their con-cern about manufacturers’ branches in first place.

Perc

enta

ge o

f Gro

wth

0%

5%

10%

15%

20%

25%

30%

35%

40%

Other*ToshibaSharpRFGKYOCERA Konica Minolta

Canon

15%

21%

13%

7%12%

19%

0.0

0.2

0.4

0.6

0.81.0

38%Exhibit 1.55: Branches as Greatest Dealer

Concern by Manufacturer

• 56 •

Perc

enta

ge o

f Gre

ates

t Con

cern

0%

5%

10%

15%

20%

25%

30%

35%

Other*ToshibaSharpRFGKYOCERA Konica Minolta

Canon

19% 18%

28%31%

23%

28%

0.0

0.2

0.4

0.6

0.81.0

12%

Exhibit 1.56: Clicks as Greatest Dealer Concern by Manufacturer

Perc

enta

ge o

f Gre

ates

t Con

cern

0%

5%

10%

15%

20%

25%

30%

35%

40%

Other*ToshibaSharpRFGKYOCERA Konica Minolta

Canon

26%

40%

26%

20%19%

32%

0.0

0.2

0.4

0.6

0.81.012%

Exhibit 1.57: Recruiting as Greatest Dealer Concern by Manufacturer

Perc

enta

ge o

f Gre

ates

t Con

cern

0%

2%

4%

6%

8%

10%

12%

Other*ToshibaSharpRFGKYOCERA Konica Minolta

Canon

2% 2%2%2%

6%

0%

0.0

0.2

0.4

0.6

0.81.0

12%Exhibit 1.58: Production Print as Greatest

Concern by Manufacturer

0%

10%

20%

30%

40%

50%

2015

2014

Succeeding inProduction Print

Sale of A4 MFPs lowering AUSP

Growing market share in a declining print environment

12%

22%

50%

32%34%

0.0

0.20.4

0.6

0.8

1.0

Manufacturers’ branches selling

below dealer cost

17%12%

21%

Perc

enta

ge o

f Gre

ates

t Con

cern

s

Exhibit 1.61: Dealer Concerns (2013 and 2014)

• 57 •

Perc

enta

ge o

f Gre

ates

t Con

cern

s

0%

5%

10%

15%

20%

25%

30%

35%

40%

Other*Production Print

Recruiting ClicksBranches

24%

6%3%

27%

40%

0.0

0.20.4

0.6

0.8

1.0

Exhibit 1.60: Total Greatest Concerns for Dealers

Perc

enta

ge o

f Gre

ates

t Con

cern

0%

2%

4%

6%

8%

10%

12%

Other*ToshibaSharpRFGKYOCERA Konica Minolta

Canon

10% 10%

4%4%3%

12%

0.0

0.2

0.4

0.6

0.81.0

0%

Exhibit 1.59: Other as Greatest Concernby Manufacturer

* Other comments included: • Over distribution • Margins • Overall economy • Resources needed to grow • Maintaining profitability • Vendor relationship • Dealing with a changing

business environment

End of Part IPublication of our “2015 Survey Re-sults: Part II” issue is slated for early to mid November.

TECHNOLOGIES

• 58 •

In January 2015, I wrote that copier/printer [business technology] dealers should consider selling 3D-printers into their manufacturing client base.

I still hold that belief. Nonetheless, after the second quarter earnings reporting period, it now appears that the income growth and surge in unit sales of low-cost 3D printers that occurred in 2014 and early 2015 have sputtered to a fizzle. Several 3D printer companies, such as The ARC Group, The ExOne Company,

Stratasys Ltd, and 3D Systems Corp to name a few, made significant acquisitions during the last 12 months and benefitted from media attention that drove their sales numbers up. But now, these same vendors are reporting disappointing unit and supply sales, resulting in “negative income growth.” Two of the leading manufacturers, 3D Systems and Stratasys, went so far as to announce they would be withholding their earnings guidance, in other words, there would be no more

estimates of future earnings conveyed to shareholders, market watchers and researchers, and journalists.

As I previously stated, the 3D printer is a disruptive technology only to selective industries, such as the recreational, automotive and aerospace. I still contend that using design software and 3D printers allows engineering departments to circumvent time-consuming traditional methodology in producing engineering

My 2 CentsBy Bob Sostilio

Output Disruption in 3DMarket Potential Estimates Fall By 75%

EMERGING

• 59 •

• 60 •

samples and parts. Most notably, the use of low-cost 3D printers has shortened the duration from concept development to working prototypes in the hobbyist’s market, as well as in the medical field where single body and tissue parts are created on an as-needed basis.

At the start of 2015, I estimated the market potential was $10 billion, based on perception of historical trends and review of market factors from financial information and SEC filings of the top four of 10 3D printer companies. At the time, I stated that 3D printing was a form of development adeptness, which is highly sought after by many engineering departments. Unfortunately, not all market segment growth had sustainability, nor did my assumptions prevail. Now, the market potential looks more like $2 to$ 3 billion for the near future.

The revenue surge that occurred in 2014 and early 2015 was not a result of mass-market visionaries buying into a new technology. It was driven primarily by lower cost alternative compact models with acceptable output speeds along with newer materials that new users found attractive. Along with the first time hobbyist who saw the 3D printer as a means to produce quality parts versus those they made with hand tools and for the many engineering departments that already were working with CAD (computer aided design) software, the 3D printer provided an alternative in manufacturing complex prototypes. But, no one was getting rich selling sub-$1,000 3D printers that carry thin margins to technology enthusiasts and early visionaries who are predominately making custom parts one at a time. Some estimates claim consumer market penetration is less than 1%.

The profit in 3D printing still remains with pragmatists using the high-end, fully featured, faster, more expensive models in production/manufacturing environments, where consuming tremendous amounts of material provides an annuity stream to the selling entity.

3D printing will evolve much like other digital technology. Enthusiasm of early visionaries will be sustained by realists who implement scalability and expand capacity as more reliability is assured. More users will employ the 3D printer as friendlier user interfaces are installed on the units and accessed from computers/remote devices. And faster 3D printing devices that are buttressed by well-trained service and supply personnel will expand the base of users and eventually be integral components of a corporation’s parts and prototype development and delivery cycle.

Dealers who are serious about 3D printing will do so with a commitment of dollars for marketing, training sales and service staff, investing in CAD software and showroom demos, and targeting those markets that offer the highest

closure ratios — designers using plastic, manufacturers of medical and auto parts, aerodynamic companies building scalable models, hobbyist organizations marketing scalable models, etc. The list can be endless with the proper market research and feet on the street. The 3D printer manufacturers will have to realize that they cannot market to all possible markets using current methodology. In order to grow, they must use alternative channels. Here, once again, the copier/printer dealer has the outbound sales and service personnel capable of making a difference when it comes to building a channel for both the sale and support of 3D printers.

Given the economy is still experiencing relatively low growth rates and showing no signs of breaking out of this abysmal recovery, 3D printer manufacturers, 3D printer software companies, 3D printing material suppliers and servicing companies must return to the proven path of product support and development. They will have to allow the new hobbyists, medical and dental supply engineers, recreational company product managers, and the like integrate 3D technology into their workflow and assess its utilization and expandability.

What new materials can be marketed and by whom? Perhaps the 3D printer manufacturers have to assess their channel and OEM partners and consider market coverage. The 3D printer manufacturers should look inside their own organizations, particularly at their cost of sales, SAG, ranging from 12% to 75%, as gleaned from their own financial statements.

Now that the media hype has subsided and the novelty wearing off, I suspect mergers

will continue throughout 2015, as small organizations will not reach critical mass and end up selling their small user base and channel to larger, more organized and financially stable companies.

The growth of 3D printing is predicated on the assumption that the industry can reduce its go-to-market costs and accelerate the timing of new model introductions. They have to reduce the risks associated with market expansion by maintaining quality control of the products, simplifying their supply chain support, improving upon user software interface and delivering value with each new model introduction. The growth will come from higher speed models, with scalable features that are capable of making larger objects, something bigger than a breadbox, in a shorter period of time. They must introduce new materials applicable to more markets in healthcare, aeronautics and automotive. Not to be ignored is the low-cost market for designers in arts and crafts that becomes the test market for new ideas.

THE BEST POSSIBLE ENTITY TO MARKET 3D PRINTERS

KEEP YOUR EYES ON THE TARGET MARKETS

CR

Questions About This Story?Contact Bob Sostilio via email:

bsostilio@embarqmail.com.

• 61 •

• 62 •

It was with great sadness that we learned that Cheryl “Kel” Gau, wife of Jeff Gau, had passed away in Au-

gust of this year.

Jeff let us know of Cheryl’s passing about two weeks prior to our most recent annual Cannata Dinner, which took place on Oc-tober 1. To say I was stunned would put it mildly. We pride ourselves on having an ear on what is going on. Most people as-sume we know about events, happenings, successes and tragedies before anyone else. That was not the case here.

There is one thing that is important to me, and that is family. Jeff Gau is one of those entrepreneurs who are people-sensitive. To me, that is a great sign that he is a good and decent person.

The circumstances of Cheryl’s death were as any unexpected death could be. There was no lingering illness, signs of a serious condition or any anxiety about her condi-tion. Jeff simply came home on Monday August 10, 2015, and she had passed at only 56 years old.

I did not know Cheryl personally, but I bet the ranch she was a source of incredi-ble strength for Jeff and his family.

Aside from Jeff, her survivors include a son Ryan (Maisie) Gau of Sauk Rapids, MN; daughter, Sara (Justin) Then of St. Cloud, MN; parents, Keeven and Al-yce Kalahar of Little Falls, MN; sisters, Carol Rae Kalahar of Little Falls, MN;

Cindy Kalahar of Minneapolis, MN; fa-ther-in-law, Conrad Gau of Little Falls, MN; and three grandchildren, Westyn, Addilyn and Deagan.

This year, Carol and I will be celebrating our 45th wedding anniversary. I’m not sure how I would cope if this situation happened to me.

When tragedy strikes my family—and no one is exempt from that kind of experi-ence—I search for solace in the words not of philosophers or religious leaders, but what I consider “regular people.” My favorite is a piece in Tim Russert’s book, “Big Russ and Me.” Most remember Rus-sert as the host of Meet the Press who suddenly died on June 13, 2008. He was 58 years old.

In his book, Russert recanted a story about paying his respects to a friend who had lost a 16-year old son. A priest said to the grieving parents, if God came to you and said I am going to give you an incredible son and you will have him for 16 years, would you take him?

From reading Cheryl’s obituary, you can tell she loved traveling with Jeff and en-joying spending time at their family cabin in Phelman, Minn. She raised two chil-dren and lived to have and enjoy three grandchildren. She was also a daughter and sister who at the age of 31 went to work for the Fingerhut Corporation and remained there until 1999. In other words, she was a working mom. For 30 years,

Jeff and Cheryl built a life together that was more than enduring, and I share my own sense of sorrow for Jeff’s loss.

Most people do not know that I love po-etry, and I search for means of expressing how I feel with words written by far more gifted people than myself. In this case, I think the most fitting words of loss were written by John Donne. The above poem is one of my favorites.

If you have not reached out to Jeff, I re-spectfully suggest you honor the request of the family with a memorial to Anna Marie’s Shelter (www.annamaries.org).

CR

“No man is an island,Entire of itself,Every man is a piece of the continent,A part of the main.If a clod be washed away by the sea,Europe is the less.As well as if a promontory were.As well as if a manor of thy friend’sOr of thine own were:Any man’s death diminishes me,Because I am involved in mankind,And therefore never send to know for whom the bell tolls; It tolls for thee.”

- By John Donne

IN MEMORIUM:Cheryl “Kel” Gau

September 6, 1958–August 10, 2015

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