Possible Xerox Tactics to Overcome the Separation from FUJIFILM

Be sure to check out our piece on the office side of this story! 

We assumed (like everyone) that FUJIFILM Business Innovation would like to continue having Xerox as their largest sales channel in the US and Europe—but does Xerox share the same interest? Like any other breakup, there are common interests and uncertainties about how it will be after the separation. In this case, each party retains assets that the other covets. Xerox has the market presence and brand awareness in the US and Europe, while FUJIFILM has the actual hardware.

What Happens Next for Xerox?

Xerox should assess which FUJIFILM products they expect to grow. Here’s our take:

• The Versant products are expected to be affected by print volume consolidation towards the largest production segments (mainly inkjet).
• The Primelink product is expected to decline as these are mostly purchased by copy centers and quick printers that expect a shift to the Internet, where print volumes are captured by large online printers with larger production equipment and lower operating costs.

The question is: Will Xerox decide to eventually pull out of the low production categories that are expected to decline? And, if so, when? If they do, they’ll have to make up for that lost revenue somewhere else:

• Some could be replaced by capturing print volumes expected to shift to centralized large production centers with Xerox Baltoro in the case of some quick printers and/or copy centers, as they are trying to reduce their production costs. This is not an easy task, since running cost revenues are much higher on the lower production categories than inkjet Baltoro.
• Focusing more on inkjet largest production taking additional print volumes from larger online printers as well as capturing the market offset to digital natural transition opportunity.
• Making up the revenue with other services outside print.

When it comes to Iridesse (which, again, is expected to grow), one option for Xerox—if they do not want to sell the FUJIFILM products—is to lower the iGen equipment price to come close to the Iridesse so they can compete not only with FUJIFILM, but also with the Ricoh C9200, Canon C10010, and Konica Minolta C12000/14000.

In order to keep digital printing revenues growing, OEMs are expected to play in the following areas:

• High-electrophotography production (Xerox Iridesse, Ricoh C9200, Canon C10010 and Konica Minolta C12000/14000), as there will be many PSPs that do not have the large print volumes to justify an equipment larger capital investment.
• Larger production cut-sheet inkjet B3/B2-size formats (or both), which are expected to capture the top end of the printing consolidation as well as the largest shifts opportunity from offset to digital.
• Color r-fed large production inkjet should not be for everyone but also expected to grow if PSPs manage to capture the magazines and catalogs digital print volume opportunity. Xerox, however, has already exited this larger production roll-fed inkjet category and it seems unlikely that they will come back.

Outside of pure printing equipment strategies and as large production inkjet cut-sheet is expected to grow worldwide, Xerox could also find a partner to sell the Xerox Baltoro in the Asia-Pacific market. Time will tell if this becomes one of their next moves.

What Happens Next for FUJIFILM?

FUJIFILM should try to keep Xerox as their largest sales channel for as long as they can, but also prepare for the scenario where Xerox loses interest in selling FUJIFILM printers. In other words, the company needs a contingency plan that enables them to do it alone, if needed.

FUJIFILM announced that they will start selling their products in Spain, Portugal, Italy, Austria, and Germany. These are the markets where the company doesn’t seem to have a support agreement with Xerox.  In contrast, it appears as if there might be some remaining agreements in the US and other European countries through 2024. For example, the FUJIFILM website in the US still promotes the Xerox products manufactured by FUJIFILM (such as Iridesse). We expect FUJIFILM to enter these five EU countries quietly with limited resources to avoid upsetting their largest sales channel. 

We also expect FUJIFILM will use their existing graphic arts channels to sell their new branded toner-base products, specially to customers where Xerox does not have a strong relationship with.

Once FUJIFILM directly starts being present in the toner digital printing market, it is expected that they will compete with Xerox at some accounts. Unfortunately, FUJIFILM can’t forget that Xerox (their competitor) is also their biggest customer.

This is a developing story, so we’ll keep you posted as the situation evolves.

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