When Independent Dealers Go Shopping Over the years we’ve heard plenty of dealers vent about the issues and challenges of working with their manufacturers. Despite the venting, many usually reach a détente of sorts with those manufacturers and maintain the status quo. After all, the grass isn’t always greener on the other side, unless you’re looking to add a second or third product line. What does it take to inspire a dealer to look for another vendor or an additional product line and what kind of due diligence should a dealer do before making a final decision? We interviewed five dealers who have gone shopping for another product line, to get their opinions on this issue. One preferred to give their statements off the record, the rest had no problem being quoted. Rich is a Panasonic dealer who last year found himself in the market for a new primary copier vendor. Anyone familiar with Panasonic and the change in direction they’re making on the office technology front can understand why Rich was looking. It turns out Rich didn’t have to go searching all that hard; manufacturers were seeking him out. “As soon as Panasonic announced they were no longer going to be making A3 copiers, everyone was calling,” reports Rich. He was approached by Kyocera, Copystar, Konica Minolta, Sharp, and Toshiba. “I had no interest in Sharp because I heard too many horror stories from dealers who were using them,” says Rich, “and I didn’t care for the Konica Minolta reps. It was like, ‘We’ll do you a favor and give you the line.’ I don’t need favors.” It didn’t help either that the Konica Minolta rep promised he’d do something for Rich within a week, and then never followed through. “So, it was, ‘I don’t care what you come up with now, you can’t bring the line in here.’” Ultimately it came down to two players, Kyocera and Toshiba. He decided to go with Kyocera Mita because he felt more confident in the line. Rich was a loyal Panasonic dealer for years and had no interest in shopping around even when other manufacturers came knocking. “The only mistake I made was years and years ago,” he recalls. “Canon offered us its C-version line, which they eventually got rid of, but anyone who had the line was able to get the rest of the Canon line after that. If I’d done that I probably would have stayed Canon and that’s only because of the name. The name buys a lot of things.” The transition to Kyocera happened last April and so far so good. “The products run, I’ll give them that much,” says Rich. “It’s a strange way they do their pricing; we’re used to a different system. They make you jump through hoops. But their support people are excellent and they seem to be coming out with new products left and right.” Spectrum Business Centers, a Ricoh dealer in Huntington Beach, California recently added Lexmark as a second line. Why? “We felt we had a lot of holes in our product line,” says Glenn Plank, systems engineer. “Our clientele seems to be more small and medium size businesses and Ricoh seems to be focusing on larger size companies, leaving us in the dust as they were developing more enterprise level applications.” Spectrum was looking for a vendor with products and applications for customers who didn’t have tens of thousands of dollars to sink into a solution and an IT staff to support it. While Plank thinks Ricoh products are tops, he felt that this smaller segment of the market is currently being ignored by Ricoh. Over the years Spectrum filled the holes with Panasonic and Muratec devices, but Plank isn’t as enthusiastic about the product lines as he once was. So, when Lexmark called, he and owner Leonard Mingoia were all ears. Due diligence is important before committing to a new vendor and Plank spoke with plenty of Ricoh dealers who have taken on the product line, including competitive Ricoh dealers in Spectrum’s own marketplace. “They shared a lot of their experience. What the product is, what it isn’t, what we should expect, and what we shouldn’t expect,” says Plank. “That helped us feel we were going down the right path.” Since taking on Lexmark in July, Mingoia says it’s been a good move for Spectrum. “Looking at the industry as a whole, copying seems to be diminishing and printing increasing, and one of the reasons we looked at Lexmark was because we could actually sell this to the low end to medium marketplace and not lose money and maybe even make some money,” says Mingoia. “They’re awfully good printers.” They also wanted a product line that wasn’t over distributed. “I can’t make money selling a HP machine because it’s distributed by everyone under the sun,” laments Plank. While Spectrum filled some gaps with Lexmark, Mingoia remains heavily invested in Ricoh. “Our whole customer base is primarily Ricoh and even though they haven’t treated us fairly, they haven’t treated us badly either,” he says. “Over the years they’ve been good to us. It really hurt me to go somewhere other than Ricoh, but I talked to them about it and they said do whatever you have to do to survive.” Plank offers kudos to Ricoh. “Out of all the companies we’ve worked with, nobody does a better job than Ricoh at delivering us parts, technical support, and quality manuals. That’s important to us. Abandoning them wouldn’t make any sense.” Chip Miceli, president of Des Plaines Office Equipment (DPOE) in the Chicago area has been a loyal Sharp dealer since the 1970’s. Over the years, he’s done a fair amount of shopping around for a second line when he needed products that Sharp didn’t have in their line at the time. He’s also been courted by his fair share of vendors with Canon hot on his tail right now. When it comes to due diligence, Miceli starts with the members of the Select Dealer Group (SDG), an organization of independent dealers focused on best practices. “I seek out dealers who have a product I’m interested in,” says Miceli. “I ask them about the pros and cons of the product and what issues they have with it and how successful they are with it. I get input from other dealers because the dealers I know through SDG will give me the straight scoop.” This may sound obvious, but due diligence means trying to get the straight scoop from any manufacturers who he’s speaking with too. “You have to ask them about their plans for the future,” says Miceli. “Right now everything is print management and if the organization you’re talking to isn’t looking in that direction, or they feel it will hinder their down-the-street business, that’s probably not an organization whose products you’d be wanting to take on.” Shopping for another vendor is not something to be taken lightly. “To change vendors or take on another line is a costly endeavor,” says Miceli. “Some people think they can do it for ten bucks. I’ve investigated this and it costs you a lot of money to get yourself rolling with another product line if you plan on doing them justice.” He cautions dealers about taking on another product line just to have a ‘me too’ product or a couple of machines from the product line. “If you do that, you’re not going to be successful with it. You have to spend some money. A lot of people don’t have the money or want to spend the money and they don’t do well with it.” Ray Belanger, president of Bay Copy in Massachusetts, is one content Konica Minolta dealer, but that doesn’t mean he’s always been content. Even though he continues to be successful selling the Konica Minolta line, he’s a prime target for other manufacturers. “We have everybody knocking on our doors now and have talked to a number over the past couple of years,” says Belanger. In addition to Konica Minolta, Bay Copy sells Muratec and Lexmark devices. Belanger admits he’s looked around periodically when he was unhappy or just to see what was available. The reasons are reasons any dealer can identify with. “If you’re not getting a good deal from your manufacturer or if your relationship isn’t that great,” says Belanger. He offers his take on what’s going on with dealers who carry multiple lines. “Most dealers have multiple lines now,” he says. “The reason you used to have multiple lines in the old days was product driven because some manufacturers had better products than others and you could pick and choose. Now it’s more about trying to leverage the suppliers to make sure you have good pricing and programs. Some of the lines might be better than others, but all the major players have decent lines.” Belanger concedes it’s difficult to bring in another line, although things typically are rosy from the get go. “At least initially you can be a star because the business you’re bringing to them is all new and incremental.” That’s also a good time to receive enticing programs and pricing, but he says you’ll also be under a lot of pressure to transition more of business to your new vendor. Belanger believes in due diligence even though he’s been with Konica Minolta for 20+ years. That involves talking to other dealers, particularly through the Select Dealer Group. “I know dealers who carry all the other lines so I can talk to them about who has good programs,” says Belanger. Naturally a conversation with the vendor is part of his due diligence with the focus being how they handle weaknesses, perceived and otherwise, new opportunities, distribution plans, and what other dealers in his area are carrying the line, as well as plans for direct distribution vs. independent dealers. “A lot of this is driven by programs,” he says. “What are you going to do for me if we take on your line? How will you help us get started? What type of pricing are we going to get? Are there any special marketing funds or programs available to us?” Asked if the grass is always greener on the other side, Belanger replies, “Sometimes it looks greener, but I’m not convinced it is. I don’t think any of them are perfect. It’s more, ‘What have you done for me lately?’ If you’ve done good for them lately, you’re probably getting treated real well, if not, probably not so much.” Mike Arnold, president of CPO Limited in Santa Clara, California is a multi-line dealer, carrying Konica Minolta, Sharp, and Muratec. Arnold added Sharp in 2004 because of uncertainty around the Konica and Minolta merger. He also felt that the Sharp line allowed CPO to approach a different breed of prospects—those interested in lower end devices. Another factor was Sharp didn’t have any branch operations at the time, something that Konica did. “It was kind of a hedge of what might happen with KM and we also bought a local Sharp dealer,” says Arnold. “That was a consideration at the beginning of having to compete with a branch and quite honestly having our butts kicked most of the time.” Sharp made the decision easy by providing CPO at the outset with inventory, parts, and preferred pricing for a period of time. It’s not easy making a transition to another vendor. CPO found that out in the 1990s when they switched from Mita Copystar to Konica because Mita was behind the curve on the move to digital. Notifying customers of a switch can be a little dicey. “You have to consider the customer base and what kind of brand loyalty there is to your current products,” he says. “You’ve been telling them all about the positives and nothing about the negatives of the line, and then when taking on another line, you have to switch gears and talk about the negatives and why they should switch to another brand.” Arnold admits that Konica Minolta wasn’t thrilled about the addition of Sharp, but he explained CPO wasn’t going to take business away from Konica Minolta with the line, but place it in situations where they couldn’t sell Konica Minolta. “If we’re in a bid situation with a Konica branch, we know we don’t have a chance of getting that so we go in with Sharp and get better pricing and have a better chance of getting the deal,” notes Arnold. That strategy has worked out well. “Most of our Sharp biz has been net new business,” says Arnold. Asked if he has any advice for dealers thinking of taking on an additional line, Arnold ponders the question for a moment, then replies, “It’s a big commitment. It changes all your reporting, and you’re going to be carrying twice as much inventory on parts and supplies and equipment in terms of your showroom. I wouldn’t add another line unless there was a specific need to.” Scott Cullen has been writing about the office technology industry since 1986.