Scanners, which once were an afterthought purchase for PC buyers, are now slowly but surely gaining a more prominent position in the IT peripheral market. In fact, RAJNEESH DE finds that scanner manufacturers are now targeting the home user directly, as that segment has the most potential

Analysts believe that the scanner market in India has matured over time and is now ready to adopt the latest technology trends

HP’s V Krishnan says the product category of scanners needs to be more mature as there are not many imaging occasions being created

Though the negative growth witnessed by the PC industry this year might have further depressed the sentiment of the Indian hardware industry there was a faint hint of a silver lining in the peripheral market. For, unlike the past, where it was PC sales that drove the market, this year the main contribution came from add-ons like scanners, printers and even digital cameras. With the graphics and multimedia industry poised for high growth, it was not surprising that the imaging hardware sector, comprising scanners and to some extent digital cameras, finally seems to be taking its place on the front shelves.

Cropping a clearer picture
According to IDC, the scanner market in India has been witnessing a steady growth over the years with 121,000 units being sold in 2000-01 which increased to 139,000 in 2001-02. With the home users starting to look beyond PCs, there is a huge potential for further growth (See Box: Market share of scanner vendors). On the vendor front, it was HP that led the show with a 47.4 percent market share, followed by Umax with 15.9 percent, BenQ with 15.1 percent, Canon with 12.4 percent and Microtek with 4.9 percent. Other players like Epson, Modi Xerox and Agfa made up the rest. Translating this into revenues, the scanner market in India was approximately pegged at Rs 120 crore, with leaders HP, Umax and Canon enjoying 52.6, 12.8 and 7.9 percent market share respectively. Though overall, the year witnessed a positive growth, Q4 of 2001-02 witnessed a decline of 4.2 percent over the corresponding quarter in the previous fiscal. The quarter sold approximately 31,872 units against the previous year’s 33,275 units.

Umax’s George Tsai predicts that flatbed scanners will grow in the days to come, as there is already a decline in the demand for sheetfed scanners

So what was the main reason for a decline in one particular quarter in a year where overall the sales figure saw a climb upwards?
Each of the leading vendors explain this sales dip, citing specific reasons. The worst hit were a couple of Taiwanese companies like Umax and Microtek, whose sales figures were down by 35.2 percent (from 10,986 units to 5,071 units for Umax) and 53.8 percent (2,417 units to 1,567 units for Microtek). While trying to pinpoint the reason behind this decline, one interesting facet came to light. Neither Umax nor Microtek have a direct presence in India, but operate through their distributors Neoteric Informatique for Umax and Rashi Peripherals for Microtek. On the other hand, another Taiwanese brand, BenQ, which has a direct presence in the country, has seen a 10 percent growth over the same period. BenQ sold 4,844 units in Q4 of fiscal 2002 against 4,405 units in fiscal 2001. This is perhaps a lesson for all Taiwanese brands to come to India directly. And Tashi Gelek, managing director, BenQ India, wholeheartedly vouches for it. According to him, a direct presence helps in gaining a better understanding of the intricacies of the Indian market, which operates on a completely different scale as compared to more mature markets overseas. Not surprisingly, even George Tsai, assistant vice president, Sales, Umax, reveals his company’s plans of setting up its Indian operations by next fiscal. The company is planning a joint venture on the lines of the Taiwanese networking giant D-Link. However, Tsai hastens to clarify Umax’s reasons for the decline in sales. He says that as the units were manufactured in Taiwan, Umax did not take into account the environmental conditions in India. Subsequently, there was a severe leakage problem with the ink from the scanners, and the company had to withdraw almost its entire inventory.

Tashi Gelek says scanners are becoming a more consumer-friendly product with vendors wooing end users on features and price

Though a direct presence of the vendor helps in capturing local mind share, it would be grossly unfair to conclude that distributors like Neoteric and Rashi have been unable to create a brand awareness for their vendor’s products. In fact, it’s a strong channel presence with a robust distribution strategy that can help scanner vendors consolidate their position in the market. And the recall value that these vendors have in the channel, proves that these distributors have done their bit to promote the brands.

Having said that, one must admit that when it comes to establishing a market presence, there is no better player than HP, the uncrowned king of peripherals in India. HP’s excellent channel network has ensured that even in a year when competitors are aggressively bracing themselves up it has maintained a steady growth rate of 10 percent. HP sold 15,106 units in Q4 of 2002 against the 13,438 units sold in the corresponding quarter in the previous fiscal. This enabled HP to gain a considerable lead in the scanner market and leave the second-place- contender Umax comfortably behind.

Alok Bharadwaj attributes Canon’s significant growth to a major refurbishing of its channel strategy

With the market share of Umax and Microtek dropping, it was not just HP, but also Canon that gained quite a large foothold in this market. Canon witnessed a spectacular growth of 1,500 percent when its sales increased from just 250 units in Q4 2001 to 3,972 units in Q4 2002. This assumes even more significance considering that Canon is one of the newer entrants in this segment. It made an appearance in the scanner segment as late as 2000, although the segment was roughly four-years-old by then. Alok Bharadwaj, general manager, Canon India, attributes Can-on’s significant growth to a major refurbishing of its channel strategy. It now has a presence in the top 25 cities with four regional distributors and 1,100 dealers or channel partners. This entailed appointing 53 Canon premium partners, 33 Canon corporate partners and the creation of 47 Canon retail outlets.

Scanning a broader future
Industry analysts believe that the scanner market in the country has matured over time and is now ready to adopt the latest technology trends. Overall, the segment has evolved from 300 dpi to 600 dpi today. Most vendors now provide USB port scanners, rather than just parallel port ones. Says Gelek, “Scanners are fast becoming a more consumer-friendly product with vendors wooing end-users on features and price points.” He also claims that BenQ was one of the first to introduce the USB port scanners in the country and move the market. “We were also able to successfully launch 600 dpi scanners and this was followed by other companies. In short, we have been the trend setters in the scanner segment,” he claims.

V Krishnan, general manager, marketing, imaging & printing group), HP India, also feels that a key trend observed in the scanner market is a shift from parallel to USB connectivity. The Internet is also fuelling the demand for scanners. Along with higher resolution, 48-bit colour depth features like scan-to-e-mail and scan-to-web are driving demand. “Interestingly, an increasing number of home and SOHO buyers are now going in for scanners,” he adds. And this new market getting created at the consumer level, seems to be the main driver for fuelling growth in the scanner market. Because anyway, scanners have never been hot favourites or priority purchase items for the corporate sector.

This increasing acceptance of scanners in the SOHO and home segment has made vendors relook at their marketing strategy. For example, Canon has launched a promotional campaign targeted directly at the end-user. Leaders like Umax and HP who used to rely on their channel partners to push the products, have also now started advertising campaigns that targets the customer directly. Though the importance of a strong distribution network is still evident, the vendors’ spends on advertising in the print and electronic media are on the rise.Bharadwaj says that Canon’s innovative and fun television commercials definitely helped it to take on market leaders like HP and Umax and carve out a niche for itself in the market.

Not only commercials, Canon is also targeting the home users through its nine retail showrooms across the country, with the first one having come up in Thane near Mumbai. The positive fallout of the campaigns targeted at home users, feels Bharadwaj, was that while most consumers did not associate scanners with Canon, the brand per se was recognised and respected as a good quality Japanese brand, mainly because of its strong presence in the still camera market. So the task really was to establish the brand association of Canon with scanners and going by the results it got, it seems that the goal has been achieved.

Corporate sector blurred picture
Though a majority of the scanners are sold through the retail segment, it does not indicate the end of the road for corporate sales.

In the last fiscal, about 38 percent of the scanners were sold to home users, 17 percent to the SOHO and SME segments, 23 percent to large corporates and the rest to the government sector. Traditional leaders like HP and Umax are strong with the corporates especially amongst the newly emerging multimedia studios and DTP outfits in addition to their traditional clients. Although sales in this segment may not be significant in terms of numbers, it certainly merits being called a new trend. This might speed up the adoption of PC-based imaging solutions in the country, which in turn, could increase the rate of scanner penetration.

Umax is gradually upstaging HP as the preferred choice in the government sector, where sheetfed scanners still seem to be the norm. While currently the more popular version of the scanner is surely the flatbed one, Gelek feels that the sheetfed scanners are not all that popular and would be present only in the niche sectors like government and would be sold through tenders. Umax’s Tsai predicts that flatbed scanners will grow in the days to come, as there is already a decline in the demand for sheetfed scanners.

Though the scanner market is on a growth path, it still falls short of its projected growth figures. The reason is simple: during the current period of industry slowdown, the scanner assumes a lower priority in the purchase hierarchy. HP’s Krishnan puts forth another reason, “The scanner product category needs to be more mature as there are not many imaging occasions being created currently. Applications, lifestyles as well as the corporate culture needs to change significantly for the market to really grow.” BenQ’s Gelek is more blunt. “Overall the PC market has not grown according to expectation and the fortunes of the scanner market are attached to it. Scanner is not high on the priority list of the end-consumer. First is a PC, then a printer and then a multimedia kit with speakers, modem and then a scanner. However, we are kick- starting initiatives to attract the consumers by bundling some offers on our scanners.”

Naturally, different vendors are adopting different strategies to increase sales. Some like HP are banking on multifunctional devices to cushion the impact if scanner sales hit a plateau. Reveals Krishnan, “A multifunctional device is a new and growing segment and we will promote it along with our printers and scanners. There are clear markets for such products and they also offer our channel an upward path from scanners to multifunction products. We are conscious of the SMB market that may prefer multifunction products and we will encourage such shifts in the buying pattern.”

In the ultimate analysis, the competition between major players Umax and HP in the scanner market continues, with each trying to dominate the other. Though HP’s domination in the government sector was challenged by Umax, the former made successful forays into the home segment by bundling its scanners with its Pavilion brand of home PCs. Even players like Canon, BenQ and Microtek are now actively looking at this PC- bundling strategy. It seems to be exciting times ahead for all the scanner vendors.