Fighting for a smaller pie

Following on from the Brexit vote and subsequent ‘currency valuation changes’, many vendors upped their prices to compensate for the money they were losing. These range from HTC notoriously sticking an extra £70 on its Vive VR headset to Apple pretty much making its pound prices equal to the dollar (the iPhone X is £999 in the UK and $999 plus tax in the US, for example), but the print market somewhat surprisingly largely didn’t follow suit, not at least in the same fashion.

“Currency changes have had quite a dramatic effect on the market,” says Epson head of retail sales and distribution Annika Fagerstrom. “Hardware didn’t go up in price with the different exchange rate situations that we had last year but the ink had to. I think it’s a really difficult one because the average household whose wages were squeezed and whose disposable income was less then having to pay £24 for an ink cartridge”

Fagerstrom, who has been at Epson since March 2015 and who previously had spells at HP and Samsung, is well aware of the tough climate facing tech retail, despite the company’s success.

“It’s been a good year for us so far. March is the end of our financial year and we are having a good year where hardware’s concerned but we did see a really challenging last year for ink within the retail sector.

There’s a number of different issues there with the exchange rate going against us and some price increases we had to put in. It’s across the board for the print vendors. We saw a decline in genuine ink and that’s really concerning for us. And the other trends that we’re continuing to see is consolidation in bricks and mortar retail with big players going out of business like Maplin earlier this year and Staples the year before that splitting up into Staples and Office Outlet. There’s real pressure on the high street.”

But with that difficulty and change comes opportunity as the market evolves. “Online is growing and it is for us as well. 2017 was the year that Amazon actually took over and became our largest retail account,” she notes.

Even over the three years that she has been with the company, Fagerstrom has seen a drastic shift to online – particularly towards Amazon. “I think that the biggest increase we’re seeing is online and the massive power of Amazon. That’s been huge in this last three years.

“When I started, Amazon was probably our third largest customer; today it’s number one. They are so powerful that it’s useless fighting them, you might as well work with them and they are very good at what they do. Now that it wants to break into the B2B sector, it will be very interesting to see how Amazon’s going to get on with that.”

As consumers move in their droves from the high street to the laptop, they are also increasingly focused on value and getting the best deal. The print market has been so affected by that price focus that Fagerstrom notes: “according to Gfk, 63 per cent of the market now is below £50 within print. And that’s incredible.”

She continues, “the print vendors actually sell their hardware at that end of the market at a loss and they make their profit on ink. So in a year where ink is going down but actually that low end is becoming bigger and bigger part of the market it’s really really difficult.”

That concern is something one which has caused the print market a considerable amount of reflection and strategies have shifted, perhaps more drastically than they ever have done in the space. HP, for example, has its HP Instant Ink scheme for consumers that the company brands as its ‘revolutionary ink replacement service’. In reality, users pay a subscription fee, their printer will then tell HP when they need new cartridges and then send them in the post. Epson is aware of these kinds of programmes and has come up with its own methods to ‘cover all the bases’.

“We’re seeing the market going down the managed print subscription printing for the consumers with some of our competitors and when we’re going down that way as well,” Fagerstrom states.

“We’ve got easy pay which is really for the resellers in to corporates at the low end. This is a small, cut down version of the Print & Save managed print service that we offer to larger businesses. We also have Ready Ink which is not subscription as such like HP Instant Ink, but it’s more what you pay as you need the product. You sign up to the Ready Ink programme and then as you run out of ink the retailer or the reseller will send you more, though it’s more a print as you go. And then we have an unlimited printing program which we will introduce later on this year and that will be a subscription for both the printer and for the ink.”

The crown jewel for Epson right now however is its EcoTank range. Standing in stark contrast to the cheap to buy but expensive to run printers that Fagerstrom refers to from Gfk’s stats, EcoTank are ‘‘Cartridge-free’ printers. What this means in real-world terms is that users can fill up the tank of ink with bottles bought in bulk at a cheaper rate than their cartridge counterparts. EcoTank printers come with up to three years of ink, and Epson claims that they will save users ‘74 per cent on average on printing costs’.

The shift in ethos is meant to eliminate ‘printer panic’ moments where users run out of ink when they most need it. A survey carried out by OnePoll, on behalf of Epson, says that 56 per cent of European parents have experienced this, and that 87 per cent of people have been unable to print because of a lack of ink.

“Printing is a bit like loading your car with petrol. You hate doing it but you have to do it, and it’s the same with the printer. You might have bought for £29.99, but a multi cartridge could be £25 or £30. The thing is that people today hate printing, and that’s why we want to change that with our EcoTanks where you don’t need to worry about how much ink is in the printer because for two years or so it’s hassle- free.

“If you think that 63 per cent of the market are buying printers that at £50 and below, with a large portion at £29.99, and we managed to grow that eco tank segment we are really pleased. We think there’s more more value to that coming and we’ve got really big, aggressive plans for EcoTank for 2018.

But obviously that value comes at a cost. The cheapest in the range – the ET-2600 – retails at £179.99 with the most expensive being closer to £1,000. Those might be eye watering numbers for consumer printing devices, but Fagerstrom argues that these are considered to be alternatives and the company has plenty of strings to its printing bow.

“We’re really pleased that we’ve got the EcoTank as an alternative, but certainly for the consumer we see print in three different ways.

You’ve got the low price printer which make the end user happy but then he hates the high price of the cartridges. You see the eco tank which is obviously highly priced to begin with, but then it makes the end user happy because the price of printing is much less. And then we’re looking now at different programmes such as finance programmes and so on to make eco tanks more accessible.

“We’re not going to get out of the low priced printing market. We need to be in there as well because 63 per cent of the market after all it is in that area. So we’re going to cover all the needs, hopefully with the different ranges of printers that we have.”

The big question with such an expensive product range is whether consumers want to outlay so much money in cost conscious Brexit Britain, and Brexit has had an effect on the business as a whole.

“I think from the point of view that consumers have less money in their pocket and that inflation has gone up some of that must be attributable to Brexit. Yes certainly on the ink side of things as I said previously we’ve seen a big effect. On hardware it’s not so much, but then I think that’s because the hardware prices haven’t gone up. Saying that, the overall print market is declining; year on year we’re all we’re all fighting for a smaller pie.”

So safe to say it’s not exactly an easy time in print, but Fagerstrom is optimistic that it will reach a sustainable size. “I think it will it will come to a point will have to stop shrinking because print is still needed.

“But what I think will change is the way people purchase print in the future. We’re already seeing that with the subscription models becoming stronger and people in the UK becoming more accustomed to it with phones and TV on subscription, that type of thing. I think more and more people will buy into subscription type of printing programmes rather than just buying the hardware.”

The next step towards ensuring that Epson’s slice of the pie remains bountiful is by exploring different avenues of engagement, without the obvious dependence on ‘showrooming’ at retailers.

“We’ve done pieces in the past on how parents can entertain their children by printing out colouring in sheets. All of that kind of thing. Another one is the health and fitness market. The number of these different programmes out there like Joe Wicks where you sign up for a 12 week programme and have to print out all the menus and training regimes. A lot of people go down and have that printed at their local print shop. That’s costing them fortunes especially if they keep on it and every 12 weeks they need to print more. That’s at least 30 to 100 pages. That must be a market that print probably hasn’t thought of before as well.”

Fagerstrom also poses the elusive question that a lot of established vendors are asking themselves: “how do we get the younger generation, that awful word the Millennials? How do we attract them into printing?

“They don’t go shopping anymore, they buy everything online. So how do we attract them with them with products that probably they don’t see that much use for anymore? That’s all about social media, getting influencers to promote your product and showing different ways to print and then there’s other ways that you can use printers. We’re currently doing some research into how much students spend on print at university, because not that many go to university with a printer. Well for the average page, a university charges between 10 and 15 pence. So you can imagine how much students have to fork out for printing their thesis and their reports that type of thing. I don’t think they even think about that when they go to university the parents might do. But certainly the students don’t.”

For Epson between its different business models and aims to target different audiences, the main focus is navigating a market that is shrinking in size at an increasing rate at a difficult moment. One thing that’s for certain is that the company is unwavering in its commitment to the Channel.

“We’re seeing a lot of changes in the B2B market with print manufacturers buying dealers and so on, but we at Epson are 100 per cent Channel focused,” Fagerstrom concludes. “We have no intention of going down that route of going direct. It’s the Channel that we will be working through for the foreseeable future and nothing is going to change about that.”