TTR Profits Are Still Out There

What next? That's probably the question on the mind of every AIDC (automatic identification and data collection) VAR who has been watching the drama unfold in the thermal transfer ribbon (TTR) market. With price wars in full swing and acquisitions and mergers looming, the channel is anxiously waiting for the dust to settle on this industry.

"The TTR industry has seen flat organic growth for the past few years, and the same number of suppliers still exists," explains Harrison Chien, marketing manager for Sony Chemicals Corp. of America (Mt. Pleasant, PA). "In a mature industry like this, the playbook says to drive out competition by being the low cost supplier. Under that premise, something has to give. The winners in this market will need to have very competitive prices and the best services in order to compete. Pricing will continue to be aggressive, and acquisition activities are uncertain. This will be a very interesting year, as the forecast for an economic recovery seems bleak."

Representatives from other TTR companies agree that the price wars and consolidation will continue. Shigeru Tamura, president of Dynic USA Corp. (Hillsboro, OR), says this type of turmoil will likely continue for a year. Brett Cameron, VP of sales and marketing at DNP (Dai Nippon Printing Group) (Concord, NC), states that this year marks new lows for pricing and profits for TTR manufacturers. And, Chris Walker, VP and general manager at ARMOR USA, Inc. (Hebron, KY), predicts prices may fall by nearly 10% on standard wax ribbons, but less for non-wax ribbons. Just as they all agree on the volatility of the current market, each one also recommends VARs focus on niche markets to find those ever-elusive high margins.

Opportunities Reside In Non-Traditional Markets
"VARs need to identify technical applications which cannot be easily accommodated by catalog resellers of hardware and software," Walker states. These are typically applications outside of the traditional AIDC warehouse-related markets. Chien and Tamura list the healthcare, pharmaceutical, automotive, aeronautical, and semiconductor markets as examples. "VARs need to watch for applications that are not currently thermal transfer but have the potential to be modified to thermal transfer," explains Cameron. "For example, last year we had a small VAR replace a customer's hot stamp technology with thermal transfer technology. That VAR became a dramatically larger VAR in a few months. The switch from hot stamp to thermal transfer saved the customer money and provided the VAR with substantial margins."

What Are Your TTR Value-Added Services?
For years, TTR manufacturers have encouraged VARs to treat ribbons as another specialized component of a solution rather than just an add-on sale. While this advice may have been viewed as just standard vendor marketing by some VARs, today's slim margins should be changing the channel's view of this sales tactic. Remember, there still is a value-added service you can provide to customers requiring TTRs.

"Ribbons have to be compatible with the labels, the printer, and the expectations of the end user," Tamura says. "A TTR must be able to work in a customer's specific environment and have the resistance characteristics they are looking for. This is not just a grab-one-off-the-shelf-and-it-will-work type of business. But the upside is that thermal transfer ribbons are a great way of maintaining a long-term relationship with your current customers."

With TTR prices so low, VARs need to offer true value-added services or risk losing customers to competitors. Of course, the knowledge the channel needs to provide these types of services resides at the TTR vendors. Yet ironically, all of the vendors interviewed stated VARs seldom use TTR manufacturers' testing labs and training services. "As I traveled last year, too often I witnessed a poorly specified ribbon [over/under qualified] that allowed the incumbent VAR to lose the opportunity to a competitor," comments Cameron. "I cannot state strongly enough that working with a TTR manufacturer to create a specific product for a unique application is a win/win/win for the TTR manufacturer, VAR, and end user."

Chien agrees that many VARs are not properly educated on label and ribbon materials. He says there are many different substrates and topcoats that require more than just a standard wax ribbon. Proper training would give salespeople more confidence in selling labels and ribbon products. Tamura adds that selling the ribbons and the labels as a kit specifically designed for an application is another way VARs can increase profits from this technology. But, you first need to have the know-how to make sure those ribbon/label combinations keep your customers coming back for more.

Despite the current changes the TTR industry is experiencing, one thing is for sure - these companies need the channel. With that in mind, VARs should take advantage of this slow time in the market to become educated on TTR technology. That way, when the market improves and sales pick up - which they will - the only thing you'll be watching is your increasing profits.