Thursday, December 9, 2010

A Letter From Transtech - Fargo Printers

Nov. 24, 2010
I sit here this morning thinking back to the beginnings of this digital desktop PVC card printing business all the way back in 1993-94 when Fargo Electronics introduced what was a low-cost alternative to what were then megalithic, expensive units affordable by only large players.
For those of you that were around in those pioneering days, you may also fondly remember the hey-day and high margin sales we all enjoyed as we happily converted the thousands of instant-film badging systems that then proliferated.
I am also sitting here in shock as I read the latest eNewsletter I received only last week from Fargo Electronics-becoming-HID Global.
In a section entitled "HID IN THE NEWS" there is a link to an article with the name "Crucial factors to consider when buying an ID card printer." Click on the article name here to go to the article itself. 
Given where the industry was only 16-17 years ago in terms of profitability (ungodly high, as I recall), reading this article has given me a new-found appreciation, and some significant cause for concern, that our little business segment has, indeed, "grown up" and become seriously commoditized in the process.
In my opinion, margin deterioration began back when Privilege-became-Eltron-became-Zebra aggressively entered the market in the late 90's to compete with Fargo-becoming-HID Global.  Their stated goal was to drive prices down, over-distribute the products to make them available virtually everywhere and run their competition's market share and profitability down significantly while growing their own.
The result can be summarized in a quote taken directly from the article I mentioned above: 
"It would help if you would purchase online because the online market is able to give out prices that are more affordable than those offered in the traditional market."
Remember, this article has a prominent position on the front page of a newsletter from a company many of us began with, when they and we both needed each other to build market share and make sales so crucial to each of our success.  We relied and counted on each other to make that happen, and back then we had a true "relationship" in which we distributors and dealers were truly valued for our ability to tell the Fargo-becoming-HID Global story and proselytize for and educate customers about the benefits of that particular brand.
However, as the market grew and more competition entered the fray, Fargo-becoming-HID Global, Privilege-became-Eltron-became-Zebra and others, then public companies for the most part, developed a completely different motivation, mostly driven towards share price. 
We heard endlessly about the race to win the "units shipped" war, or the "dollars sold" war (not to mention the "dollars per unit", "profit per unit" and "number of dealers" wars.)
Well, the result is that we who (still) have the end-user customers and make recommendations to them have been completely marginalized and Fargo-becoming-HID Global is apparently now publicly advising their potential end-users to bypass us completely and go to the internet and buy on price alone.
"If you choose to buy from the online market, you will benefit from conveniences and affordable rates. A Fargo printer for example, will be less expensive if you buy it online because the online market generally offers lower prices than the traditional market."
This is yet another quote from the same article that reinforces what I just said, and makes it clear that "traditional market", i.e. dealers, are just too expensive, and don't offer "conveniences" as found on the internet.
So it is now apparent that all our work schlepping around printers to customer sites for demos, showing the products at national, regional and local trade shows, on-site, email and telephonic pre-sales support, installation capabilities (many times for free to secure the deal) and post-installation support is not needed anymore, at least by some manufacturers.
What's worse, in clicking the author's name at the top of the article, Kenzie Williams, one is taken to a page with numerous other articles submitted by the same author to Yahoo! Contributor Network, all regarding ID cards and printers.  There is virtually no contact information or credentials for this individual listed anywhere, so as far as we know, this might be someone with no credibility, expertise or experience in the industry on which they comment so controversially.  And I wonder if the manufacturers mentioned in these articles challenge their findings and conclusions as I do here or simply cite as a matter if course simply because they consider it free publicity.
To be fair, I have not spoken to anyone at Fargo-becoming-HID Global about this yet, as I felt it important enough to bring to your attention, first.  Hopefully, this will give them a wake-up call and we may even see a retraction or apology, as I firmly believe the market is STILL driven by us, their proverbial "feet-on-the-street."  None of these companies can afford to lose us and our mindshare as they continue to battle for sales and market, because this "traditional" channel drives customer demand, not the other way around.
True, the internet will continue to be a struggle for all of us as we go about our business and try to provide the services we know our customers need to learn about, integrate and operate the products, as many will indeed turn to it to find the cheapest price after they are confident we have provided them all the knowledge and expertise they need to buy "price-only."  This is a bitter pill to swallow, surely, but the reality of the nature of sales today, and makes it more critical than ever for you to concentrate your efforts on customers who will not so callously turn their backs on you, either.
My advice, as it has been since early on, is to choose your manufacturers with care.  If you are one of the internet retailers and are all about moving boxes in volume, pushing support back to the manufacturers and trying to own the market, then you will have to choose a company whose business model reflects that same philosophy.
If you consider yourself a value-added dealer, as most of us in the industry are, then make sure the manufacturers you represent actually care that you are and value your loyalty while understanding that you are the one that ultimately steers business in their direction.
Who those companies are is for you to decide.
Please accept my sincere holiday wishes for you and your family, and thanks for listening yet again.
Jim GIngo

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