When the Canadian dollar reached an unexpected US$1.10 Nov. 7, the highest level it has been in years, both consumers and vendors were left wondering just how far a buck could take them.
In response to the soaring loonie and to give customers and dealers more options, some vendors may soon follow the lead of Konica Minolta Business Solutions (Canada) Ltd., which recently announced a 10 per cent price cut on its bizhub line of products and accessories.
Joe Cadeau, vice-president of dealer sales for Konica Minolta Business Solutions Canada, says with today’s industry and markets being so competitive the Canadian branch wanted to revise the price points on its bizhub printers, including its MFPs and accessories, to better reflect the strengthening dollar and provide customers with more bang for their buck.
“Our price drop allows dealers and customers to purchase our equipment at a much more aggressive price so they can better compete in the marketplace,” Cadeau said. “Our decision to do this shows we’re in tune with our channel and we’re hoping to show others we’re a leader in this industry.”
Michelle Warren, a senior research analyst for London, Ont.-based Info-Tech Research Group, says Konica’s decision to lower its prices is a smart move as it demonstrates just how quick and responsive it is to the changing Canadian economy.
“The soaring loonie raises challenges for anyone selling a product either here or in the U.S. because companies need to compete on price and features,” Warren said. “Companies need to have a quick response rate. My guess is Konica’s Canadian competitors will closely monitor sales to see if they can also pick up market share with this product strategy. It wouldn’t surprise me if we soon see other companies [cutting prices].”
While Warren says some organizations may have agreements in place that prevent cross-border shopping and transactions, she says it all depends on the company and situation at hand.
“Some organizations may have standard agreements in place with their providers or even end users,” Warren said. “For instance, if a reseller works with an organization, they may sign on for a long-term service agreement where they agree to purchase X amount of products over a certain period of time.”
For those companies that don’t have these agreements in place, Warren says both customers and partners are free to look elsewhere for their desired products. However, she says with the current rise of the Canadian dollar potential U.S. buyers may be a bit more hesitant shopping here now.
And don’t expect Canadian consumers to be shopping South of the border anytime soon either.
According to Warren, prices in the IT industry have pretty much been on par and competitive with one another since the U.S. and Canada are in such close proximity.
Warren also says if the surging loonie continues, vendors here may want to take a second look at their price points.
“If this [dollar] continues for a long period of time, then I think vendors will face some challenges with competition and they need to be more responsive to this,” Warren says. “We just need to wait and see how long the dollar will last.”
Given the current state of the Canadian dollar and the fact that more revenue may also be gained by vendors and partners who choose to further expand business in Canada, one North American-based provider does not think this is the case.
Kate Ashley, executive director of marketing and retail channel at Velocity Micro Inc., a Richmond, Va.-based North American computer provider, says as a company that deals with both the U.S. and Canada she’s not worried about the increasing Canadian dollar and the weakening American dollar.
“We don’t feel a strong impact from the rising Canadian dollar in terms of pricing pressure,” Ashley said. “We don’t compete with others on price because our customers are not particularly price sensitive. Our products are high-end computers, so we typically play in the high-end of the mainstream,” she adds.
Although prices may have been revised, Konica’s Cadeau says partner margins remain the same. During an earlier interview, he quoted partner margins to be between 10 to 30 per cent. It is Konica Minolta’s hope, he says, that customers will keep coming back to the company for future purchases after they learn of the lowered pricing.
“This will be a way for our partners to recoup some of the money that they’ve taken a hit with,” Cadeau said. “We expect our sales to increase now that we’ve taken price cuts on our line.”
