My friends, soon we will discuss the Imaging Channel's deliverables as Pre-Virus and Post-Virus. Over the next few weeks, we will all witness many unpleasantries. However, we must prepare, and as I have done for many years, I will continue sharing my thoughts and what I envision coming. Hopefully, helping everyone prepare. In this article, I will discuss Leasing Pre-Virus and Post-Virus.
Will this Pandemic cause the same problems as the 2008-09 Financial Crisis regarding Leasing in the Imaging Channel? Most would say yes, and then some. During the financial crisis, the industry's leasing organizations went through some tough times as end-users struggled to make payments. We can assume that this Pandemic will cause a similar condition.
The most significant difference between the Pandemic versus the 2008-09 financial crisis. The Pandemic is affecting the entire marketplace, and for the first time in the Imaging Channel's history, the customers are not using the equipment as they are working remotely. It is important to note that most of the leased equipment is sitting in empty offices not being used.
How many pages are included in my lease?
Printer Service based on output include in leases will now raise questions. End-users will want to understand how much of their monthly payment includes monthly service and for how many pages? End-users will question paying for output or services when they produced no output.
Over the last decade, the Imaging Channel has increased in the number of leasing contracts where service is included in the payment. This all included one payment approach was a way in which the industry could simplify payment processes to the industry's end-users.
I have been a critic of many of the outdated leasing practices as most are not customer-centric and have helped lead the industry to an over-spec'ing and overdelivering model. A model where leases are perpetually prematurely upgraded with excessive buyouts rolled into the upgraded deal.
In the Imaging Channel's past, when print output was growing, and customer's needs were changing based on growth in printed or copied pages, and the equipment's capabilities continually improved, premature lease upgrades made sense. Those days are gone, and today's end-users are learning that every day through this crisis.
Today the industry needs to focus on downgrading customers' print equipment and the expenses associated with its acquisition. Customers will not be inclined to continue paying 20% interest rates on equipment hardly used and will be very apprehensive to the including of CPC service contracts in in future lease payments.
Especially as today's new equipment which aligns more suitable to customer's needs is very inexpensive. Not to mention Leasing companies will be forced to evaluate many of their own practices as they will experience increased write-offs caused by the Pandemic. There will be a lot of end-user scrutinies regarding Leasing just as the other components of the industry's deliverable.
Here are some questions the end-users will be asking the imaging channel's leasing partners.
How will leasing companies separate service from Hardware in the lease defaults if the services were prepaid upfront?
Will leasing companies let end-users abandon leases if the dealer that serves them falls victim to the Pandemic's economic turmoil and can no longer service the equipment?
Will the tier three smaller Leasing companies find themselves with too little liquidity as delinquent payments mount or lessees go out of business?
The overbooking of Hardware to upwards of 125% of list price will prove to have an impact on defaults, and those asset values will be way out of sync with the new realities of the equipment's value.
Will leasing companies who have diversified into other dealer services be able to maintain those services if those services are not profitable on their own?
That last question will ring true to dealers or manufacturers themselves. With the evaporation of revenue and profits from a core deliverable, the diversified one must be sustainable on its own. Losing money as an investment on one side of the business or a separate wholly-owned business to bring value to the core business can be a strategy. However, when the core is threatened, and the diversity has never been profitable, maybe it's time to evacuate, cutting costs, and focus on the core.
The time is Now for industry manufactures and the dealer communities who sell and service their products. To re-think much of the outdated product-centric approaches of leasing and equipment placements, which for the most part, have been more beneficial to the industry's actors then the customers they serve.
It is time to start thinking of what the future of Leasing in the imaging channel will look like?
Does this recent Pandemic bring an end to some of the outdated leasing programs, programs that quite frankly require a massive innovation? I believe, yes.
Over the last decade, we have seen some innovation with global leasing companies. It seems nearly all now accept credit cards for payments, have digital platforms allowing for on-line approval signatures and digital documentation programs eliminating the need for unnecessary phone calls, which speed up approval and document preparation processes. Those things are not innovative; they are common practice. For the most part the leasing of copier/printers has not changed much at all in over two decades.
Leasing as we new it pre-virus will make way to rental platforms using a different means for needed financing, which will allow for dealers and manufacturers to offer more subscription-based annual contracts as the less expensive A4 equipment becomes mainstream replacing a majority of the oversold A3's. Also as e-commerce and subscription model alternatives become mainstream much of the outdated Leasing programs will perish to obsolescence.
The A4Revolution will advance by five years from this Pandemic along with many other components of the deliverable. End-users, for the first time, have realized that those big copier/printers are not near as essential to workflows or business processes as they thought pre virus. We will see end-users looking for the least expensive and easiest way to acquire A4 MFPs.
Some suggestions for dealers to address leasing concerns as this pandemic crisis ends.
Dealers must prepare to deal with non-payment of service, whether that service is included as part of the lease or billed outside of the lease. Customers will question paying for services they did not use or need. Think of creative ways to apply credits for unused service. Be proactive in calming end-users to a coming reality.
Dealers should stop the practice of excessive buyouts, and inform their marketplace not to allow their competitors to continue overselling and prematurely upgrading their printer/copier leases.
Dealers should look for alternatives in equipment financing and stop the dependency on a dysfunctional model. Preparing themselves as some manufactures will come to market with annual subscription programs which will buy-pass normal leasing as the industry sees today.
Dealers must accept that a vast majority of customers will migrate to A4, and that fact opens the door to outsiders who will be excited to offer print equipment and its services. Bringing to market a more customer-centric model, and it won't be five year leases loaded with buyouts and pages.
The Imaging Channel's dealers must be ready to challenge the status quo of the manufacturers they represent and all the supporting vendors to the channel. Many of the channel's actors will do everything they can to keep things as they were Pre-Virus.
Sadly as I Pay attention to some of the daily conversation it would appear many think nothing will change. It will be up to those who understand it's time to be customer-centric that will win in the Post-Virus World of Print.
Remember, Status Quo Is The Killer Of All That Will Be Invented."
Leasing will not be immune to the massive changes coming.
Stay Well My Friends
Ray Stasieczko CEO/Founder TEASRA, The Innovation Channel and Host of The End Of The Day With Ray! Subscribe to my YouTube Channel https://www.youtube.com/channel/UCULKZDBCR1ozWXmu4Tob66A?view_as=subscriber
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