Ricoh to buy IKON

Ricoh, the Japanese copier company (on of the top three in the world) announced it would buy US office-machine dealer IKON Office Solutions. The deal is for $1.6 billion. IKON is the largest U.S. independent dealer (400 locations) and is currently a major reseller of Ricoh’s copiers and printers (it sells over 20% of them). IKON is also a major reseller for Ricoh rivals Canon, Hewlett-Packard, and Océ.

The buyout is the third in a series of purchases, where major copier companies have bought out independent US dealer chains. In April 2007 , Xerox announced the purchase of Global Imaging ($1.5 billion). In April 2008, Konica Minolta announced it would buy Danka Office Imaging ($240 million). If the IKON deal goes through, there will be no more major dealer chains, though there are still plenty of smaller dealers.

The structure of the copier/office equipment industry has been much like that of the auto industry, where only the largest customers bought directly from the manufacturers, That has changed in the copier industry over the years, as corporate sales divisions compete more and more with local dealers, especially at national accounts, the cream of the business. The IKON move is an emphatic acceleration of that process.

The interesting question is what Canon will do? IKON sells around 40% of Canon copiers currently. Canon seems to have lost a game of musical chairs, and it will be forced to build even more its own internal national sales efforts in the US. The squeeze is on for small and mid-size dealers.

Konica Minolta buys Danka

Konica Minolta announced it would buy copier dealer chain Danka Office Imaging by one of its suppliers,. The US company is a division of UK-based Danka Business Systems PLC, which is planning to dissolve. The deal was for $240 million.

Danka (which is 31 years old) was once a major power in the copier industry, with a wide network in North America and Europe. In 2006, it sold off its European operations to Ricoh for $210 million. Last year, the remainder of the business lost almost $30 million.

For Konica Minolta, the deal is part of a campaign for it to move up into the first tier of U/S? copier companies, to join rivals Canon, Ricoh, and Xerox. The move was also a reaction to Xerox's buyout of copier retail chain Global Imaging last year, as more and more the copier manufacturers swallow up the most profitable part of dealer layer that stands between them and the customer.

A few industry trends

Talking with Toshiba dealers at their conference last week, I heard the following:
▪ Color units represent between 50-70 percent of units installed. That is even more remarkable when you consider that Toshiba does not sell lo=end color single-function printers and that, as we have noted before, has not had, up until now, a full range of Toshiba-manufactured color copiers (The ones above 55ppm were relabeled Ricoh models.)
▪ Most buyers of color systems are upgrading from current black-and-white systems. Moreover, color devices are being placed through the whole range of customer types.
▪ While buyers are very insistent on demanding access controls and accounting software to regulate color use and cut down on unnecessary color printing, the truth is that, once the systems are installed, most customers don’t use these tools.
▪ Customers are getting more and more used to using copier-multifunctionals as fax machines.
▪ Dealers are well aware of the need to become “solutions providers,” that is, to accompany the sales of hardware with extensive software supports in such areas as document management, accounting, and workflow. Most have allocated technical staff and sales support to that end. But all report that it’s a tough sell, with long lead time and sometimes disappointing results. It’s one thing to get a single exec to sign off on a copier; it’s quite another to get a group of managers to agree on how and when documents will be stored digitally, how they will be protected and accessed. The sales cycle stretches out as the customers starts to redesign the way business is conducted. Yes, if carried out right, it can make you ever more indispensable to our customers, but it does involve a big investment in staffing and training with a long-term payback.