Office Equipment

SIC 5044

Companies in this industry

Industry report:

This entry includes establishments primarily engaged in the wholesale distribution of office machines and related equipment, including photocopy and microfilm equipment; safes and vaults; accounting and adding machines; calculating machines; cash registers; duplicating machines; mailing machines; mimeograph equipment; typewriters; and addressing machines. These establishments also frequently sell office supplies, but establishments primarily engaged in wholesale distribution of office supplies are classified in SIC 5111: Printing and Writing Paper, SIC 5112: Stationary and Office Supplies, or SIC 5113: Industrial and Personal Service Paper. Establishments primarily engaged in wholesale distribution of office furniture are classified in SIC 5021: Furniture, and those involved primarily in wholesale distribution of computers and peripheral equipment are classified in SIC 5045: Computers and Computer Peripheral Equipment and Software.

Industry Snapshot

The office equipment industry is made up of establishments that distribute supplies and equipment from photocopying machines to safes to calculators. According to 2010 data from D&B Sales & Marketing Solutions, 7,672 establishments employed 99,958 people in this industry and generated total annual revenues of $7.1 billion. Firms specializing in photocopy machines represented one of the largest categories, accounting for 17 percent of all employees and $512.2 million in sales. Other important categories were copying equipment and cash registers. Vaults and safes accounted for about 3 percent of sales, as did automatic teller machines and check writing, signing, and endorsing machines. Smaller segments included accounting, adding, and calculating machines.

Background and Development

Xerox Corporation, the inventor of the copier in 1949, led the office equipment industry until the 1970s when Japanese rivals entered the market. Xerox sales representatives found themselves competing against local distributors of Minolta Camera Co. Ltd., Toshiba Corporation, and other companies. At the premium-priced end, Eastman Kodak Co. became a powerful competitor as well. Xerox's quality-improvement strategy, however, helped the company regain much of its market share (about 38 percent in 1991). Xerox sold and rented machines and provided special financing to its largest accounts. Because Xerox machines were usually high-end products and small or new businesses did not qualify for Xerox's low-interest financing, entrepreneurs often turned to the distributors of the lower-priced Japanese machines to buy or rent.

Wholesale distributors of office equipment have traditionally been part of a two-tier distribution system in which they buy merchandise from the manufacturers and sell it for profit to other retailers or industrial and commercial clients. These companies maintained deep inventories, often by taking loans against those inventories. To remain competitive, they continually added services, expanded geographically, and diversified their product markets.

The number of office equipment wholesalers decreased in the 1990s due to consolidation, forcing dealers to accept tighter profit margins. Like distributors in other industries, office equipment dealers found that the way to maintain or increase their market share was to emphasize the service they provided that customers would not find in the superstores and other discount outlets. To broaden their appeal, many distributors also developed online catalogs for easy customer use.

The office machinery wholesale industry became intensely competitive in the late twentieth century as profit margins tightened. Many buyers of office equipment ordered through wholesale distributors rather than through retail outlets or direct from the manufacturer. Dealers selling low-end copiers and other equipment encountered tough competition from superstores and discounters, whose prices appealed to small and medium-sized businesses that did not qualify for the volume discounts given to large companies.

Distributors of office equipment, although not as vulnerable to the spending habits of individual consumers, had to contend with downsizing and layoffs at businesses across the country. Superstores vied for the small to mid-sized business market and were very successful in part because they offered smaller businesses discounts for which they had not qualified before. Smaller distributors, who could not profitably compete with the superstores for their customer base, were thus endangered.

Dealers, however, stressed the value-added service that they could provide to business customers of the retail outlets they supplied. Value-added service was one advantage that wholesalers stressed in their competition with superstores. Value-added services included on-call technical expertise; special financing arrangements; assistance in customer materials management costs; product lines tailored to specific customers; specially designed, labeled, or customized products or catalogs; next-day delivery; aftermarket products and service; just-in-time inventory controls; online reporting; and usage reports. Intense competition, though, often prevented dealers from charging fees for these services, which adversely affected their already tight profit margins.

Long-standing dealers of office equipment were angered by the generous discounting some manufacturers extended to office supply superstores. According to the National Office Machine Dealers Association (NOMDA), manufacturers were selling to the discounters at a better price than they sold to dealers. They noted that the superstores did not have to bear the expense of supporting repair, training, and technical service networks that the dealers maintained.

Although manufacturers, through the large retailers, realized the benefits of reaching out to the small business and home-office market they might not have reached through traditional distributor channels, superstores were a mixed blessing to them. The superstores offered minimal service, and the manufacturers assumed increased responsibility for handling repair and warranty problems. Dealers, on the other hand, carried a large inventory of parts, provided training with the equipment they sold, and provided same-day, on-site repair of the equipment.

The remaining larger distributors competed for the corporate dollars of national companies. To be competitive, however, they had to offer a wide range of products and services, because customers often prefer to deal with one supplier rather than many.

Fueled by the strong U.S. economy and the advent of digital copiers, the office equipment industry experienced bounding growth throughout the 1990s. According to Industry Analysts Inc., of Rochester, New York, many office equipment dealerships experienced increased sales of 8 to 10 percent in 1999. Another market research firm, Dataquest, of San Jose, California, projected U.S. placements of 180,000 digital copiers in 1998; actual placements more than doubled this projection, with 377,710 digital copier installed that year. Combined 1998 placements of analog and digital copiers numbered 1.9 units, an increase of 9.9 percent compared to 1997.

In 2001 the industry consisted of approximately 6,780 establishments. By 2003, that number had increased to 9,233, with more than $25 million in annual sales. The average number of employees per establishment was 15, and the average sales per establishment was almost $4 million. The majority of office equipment establishments were concentrated in California and Florida.

Some industry analysts attributed the positive digital copier market to organizations replacing analog copiers with digital technology, which suggested finite growth once full digitalization was achieved. However, the trend toward digital networking encouraged the purchase of multiple copiers that could be interlinked, which could buoy sales once analog copiers were phased-out. Industry analysts also projected a shift in income for companies from hardware sales to technical support, as office equipment such as copiers were integrated into more complex systems requiring more sophisticated and knowledgeable users, and hence more support.

As technology grew at an accelerated pace, corporate leaders began to rent or lease some of their office equipment. This proved to be cost effective for businesses whose office equipment became obsolete as new technology was introduced. According to the Equipment Leasing Association of America (ELA), leasing would continue to be popular throughout the early twenty-first century. Key Equipment Finance of Superior, Colorado, noted that approximately 90 percent of its sales were derived from office equipment dealers and manufacturers. Xerox Corp. noted that about 85 percent of its customers leased their office equipment, such as multifunction copiers and fax machines.

Current Conditions

Photocopy machines and related equipment accounted for almost half of the industry's total revenues in 2010. Color copiers in particular were becoming more affordable and increasingly popular. The rise in number of home offices helped fuel the industry, as did the rising demand for machines that could perform multiple functions. According to IBISWorld, "the future for this industry lies in supplying 'one-stop shop' packages. In response, companies were designing and selling computer printers that also filled the role of fax machine, photocopier, scanner, and other machines.

Industry Leaders

In 2009, industry giant Xerox Corp. of Norwalk, Connecticut, registered sales of $15.1 billion with 53,600 employees. Other companies in that league included Canon, Sharp, Hewlett-Packard, Dell, Toshiba, and others. More specialized companies included IKON Office Solutions. In the late 1990s, Alco Standard Corp. completed a long-contemplated consolidation by adopting IKON Office Solutions as its name for its office products division. Based in Malvern, Pennsylvania, by the late 2000s IKON was selling copiers and other office equipment throughout the United States, Canada, and Europe. In 2008 IKON was purchased by Ricoh of Japan for $1.6 billion. Ricoh also owned Lanier Worldwide Inc., a leading wholesaler of photocopiers, computers, and other office machines.

Workforce

The wholesale distribution of office machines and related equipment employed about 99,958 people in 2009. This represented a decline from previous years, such as 2003 when the U.S. Census Bureau reported 128,589 workers were employed in the industry.

Most establishments that specialized in the wholesale distribution of office machines and related equipment were small, with more than 70 percent employing fewer than 10 people, according to Dun & Bradstreet. On the other hand, almost half of the nation's employees worked for firms that had more than 50 employees. California accounted for the largest number of employees in the industry by far, with 10,837, or about 11 percent of the total workforce. Texas was second with 7,265, followed by New York (7,172), Florida (6,678), and New Jersey (6,337).

Research and Technology

Wholesale distributors applied computer technology to improve profit margins. This improved the productivity of many functions, including purchasing, delivery, storage, and shipping. It also improved inventory, credit, and information management.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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