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1/3www.i-itc.org ✴ March 2005 ✴ Imaging Spectrum Magazine 41

by Luke Goldberg, Future Graphics Feature Article

Editor’s Note: This is the first article in a six-part series that will pro-

vide an in-depth overview of the fastest growing channel in the imag-

ing industry, the SOHO channel. This first segment defines the market

and dissects the common trends and drivers of the exponential growth

that propels this business.

The SOHO market, comprised of home users/consumers

and small businesses operating from home or small

offices, has always held allure for cartridge remanufac-

turers because of the vast numbers of potential customers. The

challenge, of course, has been how to reach and deliver product

to a market largely composed of individual customers. If the

aftermarket can find solutions for these problems, the rewards

promise to be enormous.

Delineating the SOHO Channel

To understand the SOHO market, it is important to understand how

the OEMs divide their printer/consumables business into clearly

defined sales channels and levels of distribution. There are distinct

channels of distribution and product offerings that mirror the buy-

ing habits of users in each of these segments as well as products that

meet the needs of these users (see Figure 1 on next page).

Luke Goldberg is responsible for developing overall market/industry analysis and sales trends,expanding

dealer channels,managing the Future Graphics sales team of professionals as part of the new product

development and marketing/promotions team.Luke has more than 14 years of experience in the imaging

supplies industry.He may be reached at [email protected].

Introduction to the SOHO Market, Part I


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Feature Article

42 Imaging Spectrum Magazine ✴ March 2005 ✴ www.i-itc.org

Goldberg: Introduction to the SOHO Market,Part I

In general,although there is some overlap,to understand what products

move in given channels,one must look at what is being offered in these

channels of distribution. For example,clearly a mass merchant such as

Target or Wal-Mart is attracting the home consumer. Therefore, their

offerings are going to be tailored to the needs of the SOHO channel

and will consist primarily of inkjet and low-end laser cartridges.

On the other hand, a large corporate account will not shop at a Tar-

get or Best Buy to fulfill its network laser cartridges or workgroup

color product needs, such as the HP 4650. In most cases, the retail-

ers supporting this channel in the mass merchant and consum

electronics sector will not even offer these products.

100 Million Prospects

One of the keys to truly understanding the massive opportunity

the SOHO channel is to grasp the sheer size of SOHO business. F

example, every time a consumer purchases a computer bundle

with a printer,he or she is a potential consumables user. Every tim

a digital camera is purchased from a computer retailer or consume

electronics store, that camera buyer becomes a potential consum

ables customer. This market represents as many as 100 million ne

prospective customers per year! Conversely, countless new corpo

rate accounts are not sprouting up every minute.

The SOHO channel also is relatively untapped compared to the co

porate channel. In the corporate channel, remanufacturers havlong battled the office channels/catalogue houses to wrest a 30 pe

cent market share.In the SOHO channel in most product categorie

it is only between 10 to 15 percent market share, and the compet

tion is not nearly as stiff due to the unwieldy size of the market.

Factors Driving Growth

Some of the key factors that are driving the growth of this mark

are the rise of personal computer (PC) sales, the popularity of dig

tal cameras and home photo printing, and the increase in e-filing

taxes. Here is a closer look at each of these factors.

PC Sales

Beginning in the year 2001-2002, PC revenues started to plumm

even as PC sales were on the rise (see Figure 2). This phenomeno

was the result of more and more PCs becoming commoditized an


3/3www.i-itc.org ✴ March 2005 ✴ Imaging Spectrum Magazine 43

being viewed by Hewlett-Packard (HP) and its arch competitor, Dell,

as nothing more than an inducement to buy high-profit consumables.

Clearly, this PC battle between HP and Dell was a critical catalyst in

Dell’s decision to partner with Lexmark and Samsung in order to

leverage its consumer brand power and challenge HP’s hegemony in

the SOHO printer/consumables business. There will be a more in-

depth discussion about Dell in a later article, but, for now, it is

important to understand how both Dell and HP leverage PC sales as

a vehicle to propel ink/toner consumables sales.

Most of the 13 million PCs sold by these two powerhouses in 2004

had a printer attached to them.The relationship between computers

and printers cannot be overstated. In fact, it reached its pinnacle

during the 2004 holiday shopping season as Dell, in its retail mall

kiosks, as well as in print and TV ads, began offering free printers

with the purchase of its entry-level laptop computer.

The Digital World

In addition to the relationship between PCs and printers, a similar

symbiotic relationship exists between digital cameras and photo

inkjet printers. Clearly, the home printing/photo revolution is upon

us. According to numerous national consumer and news publica-

tions, the number-one gift in the United States this year is the digital

camera. Many of these cameras will be bundled with photo-specific

printers made by Epson, Canon,HP and others.

I often visit consumer electronics stores and computer retailers in

order to keep a finger on the pulse of what is going on in the SOHO

channel.The other day, I asked a sales clerk at a local Best Buy store

what were the hottest-selling products. Predictably, he mentioned

digital cameras and photo-specific inkjet printers. He said that for

the first time in his tenure (he was a seasoned veteran of more than

10 months in the industry), photo printers were out-selling multi-

functional inkjet printers.

According to Lyra Research, Inc., the 80 million digital cameras sold

this year will capture billions of images. And out of these images,

millions will be printed, many with page coverage’s of 80-plus per-

cent. In short, these products devour ink and propel the OEM con-

sumables business in concert with PC attach rates, which is the

amount of printer/computer bundling that takes place in retail sales.

These two trends alone will create mind-boggling amounts of print-

ing at home. Also, according to Lyra, by the end of 2005, in many

industrialized areas such as the United States, Japan and Western

Europe, it is projected that the average consumer will have as many

as two printers at home: one for general use and one for photos.

Tax E-Filing

Another factor driving growth in home printing is e-filing of

income tax returns. In the past, we saw a huge spike in corporate

business during February, March and April.As a matter of fact, from

the time I first started in this business in 1991 all the way through

1997, our company did half of our business in those months.

Now e-filing has taken a bite out of the business that was tradition-

ally being done through staple corporate accounts,such as account-

ancy and law firms.

Conversely, the over 70 million U.S.households who will e-file this tax

season will want copies for their records,and they will print these from

a home printer. Clearly, there is a huge opportunity in this channel.

Coming Up Next

In subsequent articles, we will look specifically at each product line

in the SOHO channel, and we will further analyze Dell’s entrance as

a player. Finally, we will provide some insight into the business mod-

els that will allow access into this dynamic market.Also, as we exam-

ine the various product lines in the next five articles, we will present

the overriding trends that apply across all SOHO product lines,including photo inkjet, entry-level color laser and black-only, laser-

based multi-functional machines.

Spanning all of these product lines, it will be possible to see a com-

plete leveraging of hardware sales in order to create consumables

revenue (hence, the razors/blades selling strategy of the OEMs,all in

an effort to capture consumables revenue).As illustrated previously

in the example of Dell’s printer giveaway,hardware is literally being

given away to gain this sought-after revenue stream.

Next month, we will look at the trends in the SOHO inkjet sector

and discuss the opportunities and challenges in this explosive

product line.

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