by Luke Goldberg, Future Graphics

Feature Article

Copyright 2005 Imaging Spectrum and its licensors.All rights reserved.

Introduction to the SOHO Market, Part I

Editors Note: This is the first article in a six-part series that will provide an in-depth overview of the fastest growing channel in the imaging 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.
he SOHO market, comprised of home users/consumers
and small businesses operating from home or small
offices, has always held allure for cartridge remanufacturers 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 buying 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 lukeg@futuregraphicsllc.com.

www.i-itc.org March 2005 Imaging Spectrum Magazine 41

Feature Article

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 Target or Best Buy to fulfill its network laser cartridges or workgroup
color product needs, such as the HP 4650. In most cases, the retail-

Goldberg: Introduction to the SOHO Market, Part I

ers supporting this channel in the mass merchant and consumer

electronics sector will not even offer these products.
100 Million Prospects
One of the keys to truly understanding the massive opportunity in
the SOHO channel is to grasp the sheer size of SOHO business. For
example, every time a consumer purchases a computer bundled
with a printer, he or she is a potential consumables user. Every time
a digital camera is purchased from a computer retailer or consumer
electronics store, that camera buyer becomes a potential consumables customer. This market represents as many as 100 million new
prospective customers per year! Conversely, countless new corporate accounts are not sprouting up every minute.
The SOHO channel also is relatively untapped compared to the corporate channel. In the corporate channel, remanufacturers have
long battled the office channels/catalogue houses to wrest a 30 percent market share. In the SOHO channel in most product categories,
it is only between 10 to 15 percent market share, and the competition 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 market
are the rise of personal computer (PC) sales, the popularity of digital cameras and home photo printing, and the increase in e-filing of
taxes. Here is a closer look at each of these factors.
PC Sales
Beginning in the year 2001-2002, PC revenues started to plummet
even as PC sales were on the rise (see Figure 2). This phenomenon
was the result of more and more PCs becoming commoditized and

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

cent. In short, these products devour ink and propel the OEM consumables 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 printing 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.

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
Dells decision to partner with Lexmark and Samsung in order to
leverage its consumer brand power and challenge HPs hegemony in
the SOHO printer/consumables business. There will be a more indepth 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 publications, 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 multifunctional inkjet printers.

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 traditionally being done through staple corporate accounts, such as accountancy 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 Dells entrance as
a player. Finally, we will provide some insight into the business models that will allow access into this dynamic market.Also, as we examine 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, laserbased multi-functional machines.
Spanning all of these product lines, it will be possible to see a complete 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 Dells 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.

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 coverages of 80-plus perwww.i-itc.org March 2005 Imaging Spectrum Magazine 43