by Michael Nadeau, Business and Technology Analyst
The emerging channel for 3D printing hardware, consumables, and service is showing significant similarities to the long-established 2D hardcopy channel. That suggests there may be opportunities for 2D companies in the 3D channel.
While we believe this is true, we recommend any player in the hardcopy channel consider the following challenges.
1. Low Margins
The big 3D printer manufacturers currently do not offer terms to channel players that match those that traditional 2D printer OEMs offer. Channel players in both markets report small profit margins on 3D sales. Some expect margins to increase and say that the low profits are the price to pay to establish themselves in the market.
Others are being more creative. For example, NovaCopy, a Tennessee-based full-service provider of 3D printer technology, copiers, and document solutions, offers 3D prototyping services for its existing hardcopy client base and potential 3D customers. This has two advantages: First, it represents another revenue stream in addition to what such a firm sees from sales and services contracts. Second, it offers proof of concept—or “try before your buy” —for clients that are debating whether to bring 3D printing capability in house.
2. Growing Pains
The 3D printing market is still new and growing in fits and starts. Most observers expect to see significant shakeout and consolidation in the industry over the next few years. Sales of commercial-grade 3D systems have recently stalled (see “3D Printing Leaders Report Less-than-Positive First Quarters: Is the End in Sight?”), reportedly due to the fact that companies with the most need for in-house 3D printing capability have already made the investment and have not yet reached the next upgrade/replacement cycle.
The small to medium-sized business (SMB) market is even more unsettled with many new and established vendors entering the space. The main problem is that few professional-grade systems are available at price points that work for the SMB market. Most of the options are in the home/hobbyist category and not really suitable for professional purposes. And even the best of the lot do not offer the quality and performance available at the midrange and high end of the market. Consequently, many SMBs in need of 3D printing, such as local architectural or engineering firms, for example, are opting for service bureaus.
This will sort itself out over time, but in the interim anyone considering becoming part of the 3D channel will need a strategy that helps them cope with the ups and downs of the market.
3. Same Customer, New Relationships
While you can probably expect a portion of your existing hardcopy customer base to also purchase 3D contracts with you, you might need to build relationships with different people and groups within those organizations. “With hardcopy, we typically go through IT or procurement,” says Dino Pagliarello, director of product marketing at Konica Minolta. “For 3D, we might be speaking with an engineer or architect—people we don’t normally go after.”
Still, Mr. Pagliarello sees pre-established relationships as an advantage even if they are not directly involved with 3D purchases. Word gets around within organizations quickly about who offers 3D equipment and services, he says, and from there it’s easy to make the connection.
4. Rapidly Evolving Technology
Traditional 2D hardcopy technology hasn’t changed much in the last 10 years or so in terms of systems and materials. This makes it easier for a channel player to stay up to date and able to provide expert advice to clients. On the 3D side, the market is more like the embryonic digital printer market of the 1980s and 1990s. Hardware, software, and consumables vendors in the 3D space are all playing a game of technological leapfrog with their competitors. The next generation of one class of products might render the previous ones obsolete. And that next generation might be based on new concepts that would require a channel player to retrain its staff.
Mr. Pagliarello says to expect “tech no one has seen before” in the next five years. While it is hard to predict what form that new technology will take, he expects that it will drive a lot of changes in the industry with new players emerging, consolidation, and changing price point/performance levels.
On the plus side, a channel player that can stay ahead on current 3D technology will have a significant advantage. We have heard companies that depend on 3D technology complain that they know more about the products and technology than their VAR or distributor. The ability to provide good technical advice would be worth a premium to clients.
5. Legal Stuff
Anyone who has been around the traditional hardcopy business for any length of time knows the important role that lawsuits have played in the industry. The major 3D vendors are all aggressively trying to protect their intellectual property, especially around consumables. There are a number of active lawsuits filed against providers of third-party consumables for 3D devices that seek to block or limit their ability to sell their products for use on the plaintiffs’ 3D printer brands.
This situation has set the stage for contention between channel providers and their customers, who often balk at the high cost of 3D materials from the hardware manufacturer. While they are aware of quality issues with some third-party supplies, customers want the option to find acceptable third-party sources for consumables. Meanwhile, channel partners insist on selling only OEM 3D consumables due to quality and legal concerns.
6. Big Hardcopy Vendors’ Plans for 3D
What happens when HP, Epson, Konica Minolta, Ricoh, and other hardcopy vendors actually start selling 3D systems under their own brands? All have said they will in the next few years, but, with few exceptions, nobody knows what those machines will be or to whom they will be sold. Even murkier: Will those vendors match the terms they currently offer their hardcopy channel partners, or will they go along with the terms that the established 3D vendors offer the channel?
These issues are typical of an emerging market and can seem daunting. Those willing to sort through the issues now, however, will be in a great position as the market matures.
Michael Nadeau has made a career of explaining emerging technology to business and IT professionals. He is the founding publisher of Data Informed and a veteran editor and publisher of IT publications. Michael has held senior-level positions at BYTE magazine and IDG. He currently helps IT companies and publishers master content- and data-driven marketing and social media practices. You may contact Michael at menadeau99@gmail.com.
