SCANNERS: On An Upswing

Scanner shipments during JFM 2003 witnessed a growth of about 30% over the
previous quarter, according to IDC. In terms of value, the market was up by
about 24% in the same comparative periods.

Among vendors, HP’s growth reflected in its marketshare as well, as it grew
by about three percentage points to touch 55.6% during JFM 2003. Umax also did
well during this quarter, helped largely by channel and end-user schemes.

Canon
aggressively pushed Lide 20, a model it launched in OND 2002. Canon’s
market-share touched 14% during JFM 2003. 

Siddhartha Barthakur, National Manager - Consumer Goods, Canon India, says,
"Canon enjoys a share of 15% in the scanner market. HP is the leader with
about 55% marketshare, Umax has 19% and Benq has about 5% share in the scanner
market."

Among smaller players in the scanner market, Microtek has shown a sequential
growth of about 16%, while Epson’s shipments fell by about 40% as compared to
shipments in OND 2002. 

With the exception of Benq, all top vendors performed very well in the JFM 02
quarter, when compared with their shipments in OND 02 quarter.

WHO SHOULD YOU SELL TO IDC reports that the medium business segment was the largest contributor in JFM 2003, with a share of 36.7%, followed by small business at 28.4%. Government buying also went up considerably during JFM 2003. Position the product taking in to account its features and customers’ requirement. A low-end scanner in the price range of Rs 2000 to Rs 4000 should be targeted at the home segment. Corporates are likely to go for mid-level scanners beginning at Rs 12000. For higher margins, sell to the design and print segment, like DTP operators, pre-press and photographers. Here high-end scanners are more in demand starting from Rs 25,000 upwards.

According to Ishwar Sadhwani, Proprietor of Akola’s Atlas Computers, Benq’s
sluggish sales could be traced to the renaming of the brand. "Earlier, Acer
scanners were selling well. But after the brand-name was changed to Benq, sales
have gone down a bit," he says.

Anil Sachdeva, CEO Kadam Marketing, feels "HP has a share of 60%
followed by Canon, Umax and Benq."

While most partners says that there is no doubt HP’s leadership in scanner
market, Rajesh Narang, MD, Ample Technologies finds Umax in the top as far as
entry-level scanners are concerned. According to him, HP, Umax and Epson account
for 75% of the total scanner market.

Saurabh Nagpal, CEO of Multilink Computers agrees with him that this
triumvirate are the most preferred brands in entry and mid-range scanners. But
there are others who like Ashish Bhugra of Bhugra Inc who votes Benq and Umax as
the top rankers, while Sujit Adhikari of CD Infotech Inc, places his bets on HP.

RECENT LAUNCHES

Various channel and end-user promotions helped HP push its numbers up during
JFM 2003. Shipment of the vendor’s entry-level model SJ2300C increased
substantially to once again emerge as the best-selling model in the overall
scanner market.

Umax
also launched two new scanner models in JFM 2003. While Powerlook 1100 was
phased out, it was replaced by Powerlook 1120 in March 2003. Astra 6700 was also
launched around the same time. Both are high-end scanners. Astra 2500, a CCD
technology, 600 dpi model was the best-selling model for Umax in JFM 2003. Canon
was able to capitalize on the year-end period with focused channel partnership
programs and end-user promotions.

Microtek launched a new model in the month of March 2003, an addition to its
ScanMaker family of flatbed scanners.

ScanMaker 9800XL is an A3 size scanner, offering 1600x3200 dpi scan
resolution with a triple interface structure.

SCANNING THE MARKET

Market feedbacks show a wide variation in estimating the size of scanner
market. It could be anywhere between 1 to 4 lakh units.

But,
market sources feel that it is growing at a healthy pace and vendors are upbeat
about this business. Says Sidharth, "Presently 3.5 to 4 lakh units are sold
in the country annually."

Neoteric Infomatique, the national distributor for Umax scanners, puts the
scanner market at 1.2 to 1.4 lakh in unit terms and Rs 62 to 70 crore in value
terms.

Even partners are happy with the current sales of scanner. Both Ashish and
Sujit estimate that scanners contribute 10 to 20% of the IT sales in the
country. Adds Sujit, "Atleast 1.20 lakh scanners are sold in Delhi per
annum." Saurabh agrees with him. Anil and Ashok Grover of Groovy
Communications say that Delhi’s monthly sale rests between 4,000 to 5,000
units.

Scanner sales have been gaining momentum even in Mumbai. Says Vinod
Mulchandani, MD, Aarvee Computers, "Our annual sales of scanners will be
around 18,000 units in the city." In the western region, even a B-class
city like Akola sees scanner sales of 12,000 units annually. "For every
four people who buy a PC, one person will go for a scanner," says Ishwar
Sadhwani.

Rajesh Narang pegs the annual Bangalore market sales at 12,000 per year in
the entry level and 2,000 units in the mid and high-end segments. "Of
these, entry level models enjoy the biggest share in the scanner market,"
he adds.

THE REVENUE GAME

The going was good for most players in the market. Canon, for instance,
clocked a revenue of Rs 202 crore in 2002-03 and expects this to increase by 35%
this year.

Even
HP had a good inning with 60% growth in 2002-03. Says Barkha, "In JFM, we
clocked revenues of Rs 15 crore. Though the AMJ revenue details are not out, the
growth has been around 60%."

Rajesh Goenka, Divisional Head of Rashi Peripherals, which is the national
distributor for Microtek is a bit more cautious, as scanners contribute 3% to
the company’s overall revenues. "Our scanner business has been increasing
by 30% year-on-year, and we hope to sustain this growth," says he.

Partners are equally gung-ho about the sales in fiscal 2002-03 and hope the
trend will continue. Scanners contributed 10% to Bhugra Inc’s total revenue
last fiscal, which was an increase of 5% from the previous year.

20% of Groovy Computer’s overall revenue of Rs 8.06 crore came from
scanners in 2002-03. Atlas Computers too saw 22% of its business come from
scanner, 40% up from the year before.

While Aarvee had a modest contribution of 8% from scanners to its revenues in
the last fiscal, there were other companies who found a bulk of their sales
coming from this product. Says Sujit, "We recorded Rs 6 lakh from the
scanner market in 2002-03, a growth of 200% from the previous fiscal. Similarly,
Ample Technologies, which sells only high end solutions and during 2002-03 sold
around 45-50 units, which accounted for Rs 25 lakh in value terms.

OPTIMISM ABOUNDS FOR FUTURE

Given the good headstart that scanners got in the fiscal 2002-03, vendors
are optimistic that this year will be just as good, if not better. Despite being
the leader, HP does not have any plans to rest on its laurels and is seeking to
increase its marketshare by another 5%. Sidharth expects Canon’s marketshare
to go up by 5%, capturing 20% share this fiscal.

Some of this enthusiasm has rubbed off on partners as well. Bangalore’s
Computer Planet expects a growth of 20% in value terms, while Sujit hopes to
sell 5,000 units in JAS and 10,000 units by the end of December 2003. Rajesh
Narang too expects business to grow by 30% in terms of demand and 25% in value.
Ishwar saw sales in the AMJ quarter decrease by 10% and hopes to rectify this in
the JAS quarter. Anish Kurup Product Manager for Umax at Neoteric Infomatique,
expects the company’s scanner business to grow by 10% in JAS, and keep steady
at this pace for the entire fiscal.

But at the same time, some other partners are softly stepping on this ground.
One reason for this is the growing popularity of multi-functional devices (MFDs)
which is affecting the scanner business. Says Ashish, "With MFDs gaining
strength, scanner business is suffering. We don´t expect any phenomenal growth
but hope that it keeps up to what we have been achieving every fiscal, which is
5 to 6%."

Vinod of Aarvee too sounds the warning bell for this business, "With the
increase in MFD sales, we expect the sales of scanners to come down a little
this quarter." Anil expects that the increase in MFD sales will call for a
decrease in prices by 30% which means that sales will, in turn, go up again.

PROMOTIONS IN THE OFFING

Now that vendors have got a well networked service system in place, they can
now train their eyes on increasing sales through innovative schemes.

Canon will focus on marketing its newly launched, Lide 20, in a big way.
"We are also planning to launch new scanners of 1,200, 2,400, 3,600 and
7,200 dpi and will cater the studio market," informs Sidharth.

HP will target the document management market, where it will be the part of
e-governance by providing good offsite service. "Moreover, we will be
promoting our HP 2300 and HP 3570 brand of scanners," says Barkha.

Rajesh Goenka of Rashi is also working on running technical awareness
seminars for resellers who will be interested in selling Microtek scanners.
"This way we can double our dedicated scanner partner base from its current
40. We are also participating in exhibitions and events to increase the
acceptance of Microtek scanners," he adds.

SERVICE ISSUES

HP has the largest service network of 270 outlets across 80 cities, while
Canon has 119 service networks spread across 90 locations. This will soon be
ramped up to 150. Since Microtek does not have a local office in India, Rashi
Peripherals provides service through its own network of 25 branches.

But partners are not impressed by these numbers and complain about it as the
only dark cloud to this otherwise bright sky. "The after-sales support
system is not up to the mark," Says Ashish.

Rashi Peripherals, the distributor for Microtek scanners in India, is faced
with an unique problem. The presence of another Indian company by the name
Microtek makes it difficult for them to sell their scanners. We have to explain
that we are selling scanners from the Singapore-based company and not the Indian
one all the time," says Rajesh Goenka.

NEAT MARGINS

Margins in the scanner business are not very high. But increasing volumes
help in keeping it a lucrative business. Says Ashish, "Normally we make
around 1 to 1.5% profit, which can go up to 2.5%." Anil pegs dealer margins
at 3%, while Sujit and Ishwar earn around 5%.

Ample Technologies make a higher profit at 10% because they sell the entire
printing solution, and not individual units. Adds Vinod, "A distributor’s
margin is just 1 to 2%, while a dealer sell to an end-user for 4 to 5%
profit." But at the same time, a distributor sells in bulk, while the
dealer has to push singular units.

But everyone is unanimous that these margins are not all that bad, given the
increasing volumes. Buyers these days are well informed of the product, and
scanners have ceased to be a push product. Using a scanner has become so simple
that even kids can do it. It surely can’t become simpler than this.

VINITA BHATIA in Mumbai with inputs
from SUNILA PAUL in Bangalore