DocuCrunch talked with industry expert Bob Sostilio about the effect of the recession on the office equipment industry.

For the office, how is the recession making a difference in terms of buying, leasing, and maintaining office equipment?

The current lack of available financing can be traced back to a number of issues: fewer institutions offering leases, tighter criteria in the approval process and higher rates are forcing the restriction of buying and upgrading existing accounts. Resellers and dealers are limiting their prospects to type A clients who can qualify for a lease and avoiding those potential clients with poor credit ratings or history of late paying, etc.

There is almost a virtual blackout of available financing in certain SIC vertical markets, such as: construction – of any kind and associated manufacturing coupled with housing construction; automobile dealerships; automobile parts companies and used car resellers; real estate and supporting agencies; finance (banks, saving and loans, mortgage agencies, etc); and restaurants and franchises. Users of office equipment in these aforementioned markets are not turning over leases due to tighter requirements, higher rates and fewer sources. Therefore dealers and resellers are limited in how to upgrade these accounts.

Eventually the accounts can be carried by the dealer who will carry the paper or they will have their service agreements renegotiated to a cost/per/page all inclusive agreement.

We know the vendors and dealers are hurting — do you see any parallels to the bargains you can now get at car dealerships, for example?

The only deals I see are smaller dealers becoming acquisition candidates for not only manufacturers but larger dealers who see a value of growing their revenue by means of acquisition dollars. Since historically the hardware has been heavily discounted, there is little wiggle room for better hardware deals. Where the bargains can be found perhaps are in finding a dealership that will offer a managed print service program to reduce existing enterprise imaging costs.

What might a buyer best negotiate on — where is the give? List price, per page costs, consumables, service, extras (do I really have to pay extra for PostScript or a fax add on?)

The buyer (existing user or potential user of MFPs, printers, etc) has a fair chance of negotiating per page costs and service. Consumables are the life blood of the annuity stream for dealers and resellers and they have some room to maneuver. The best realm to negotiate perhaps is in service where a user can get single source invoicing, quicker response times, free help desk minutes, monthly usage reports, free software upgrades, etc. Some dealers have to walk away from aggressive CPC [cost per copy] pricing because in the long run they may loose too much revenue but the dealer can be profitable while meeting user expectations when they negotiate intangibles and do not have to add a service burden to their existing business model.

Consultant Bob Sostilio is a 36-year veteran of the office equipment industry with expertise in strategic planning, product development, manufacturing, product marketing, product launch, brand management and technology. He can be reached at: sostilio@flash.net or bob@sostilio.com

Tags: Bob Sostilio, recession, Sostilio & Associates International