The office equipment industry is an industry that lives by the numbers. With so many different market research and consulting companies working the industry, there’s always a lot of numbers floating around. Market share numbers, sales figures, connectivity rates— you name it, someone is tracking it. But just how accurate are those numbers regarding shipments, especially when in most cases it’s nothing more than a guessing game?

Before we get started, let’s not forget that the office equipment industry is an industry where market share is everything and everyone likes to boast how large a share they have. It’s kind of like hanging out in the men’s locker room at the YMCA. That oft-used and annoying phrase, “size matters” really does for office equipment manufacturers unless they’re that tiny crumb on the market share pie chart.

As many of us who cover the industry have seen, it’s not unusual for multiple manufacturers to boast how they’re number one in a particular product category. It’s gotten to the point where many industry observers like myself take all these numbers with an unhealthy heaping helping of salt. Why shouldn’t we? We attend all the various dealer meetings and oddly enough, it always seems as if everybody’s business is growing every year. But can that really be happening? Somebody has to be losing, right? This whole numbers game is really kind of wacky when you step back and look at it subjectively and objectively.

We’re Number One

Is there too big of an emphasis on market share in the industry? An analyst with one of the leading market research companies who spoke off the record doesn’t think so. “It’s a nice convenient way to look at who is successful and who is less successful,” he says. “Vendors like to see it and end-users like to see it.”

Frank Cannata, president of Market Research Consultants, has a different view, at least with the way market share is being currently reported. “It’s a joke. It’s akin to when I go to a football game and these morons are standing up there with these big plastic hands with the fingers that say, we’re number one. What does that do for you?”

I don’t want to knock the market research companies. I give them credit for what they do because it takes strong analytical minds and keen insights into the market to try and make sense of all these numbers that may or may not be accurate. And then take those numbers that they know can’t be completely accurate and massage them in such a way so that it reflects a bit more realistically on what kind of business the reporting company is actually doing. The rub though is sometimes they’re dead on and sometimes they’re off, but because not all numbers are certified, nobody really knows for sure.

It’s no surprise that the market research companies prefer to speak off the record about the certification issue. They depend on the industry whose numbers they are reporting for a significant amount of income, and the last thing they want to do is alienate long-time customers. “We encourage all vendors to certify their data,” says the anonymous analyst. “It’s not a complex process. We’re asking an executive to go on record, ‘Here’s our numbers and we stand by them.’”

But that’s not what usually happens.

Those That Do

Only three companies—Kyocera Mita, Sharp, Toshiba—certify their numbers. For the record, Kyocera Mita was the first manufacturer to certify its numbers and has been doing so for four years now.

“We tried to work closely with Gartner and IDC to get them to provide requirements and a sense of awareness to receive certified numbers from manufacturers because at that time and even now we’re one of the only industries that’s not regulated by the numbers that are reported,” says Mike Pietrunti, Kyocera Mita’s president and CEO. “We led the charge and laid out the process of how we were going to do it and report our unit numbers on a quarterly basis with the same scrutiny we sign our financial reports from our auditors.”

Adds Pietrunti, “Since our efforts began, Toshiba and Sharp have followed and one day my hope is we see companies like Canon, Ricoh, and Konica Minolta reporting their accurate results. At the end of the day when we’re sitting in product planning meetings in Japan and trying to assess our needs for the future based on market data, it will be great to see what the real trends are.”

“The reason we never certified in the past was no one really required us to certify,” notes Steve Rhorer, vice president of marketing for Toshiba America Business Solutions (TABS). “They just said send in your numbers and we’ll go from there. What would typically happen is that some of the market research companies would take our numbers and massage them. Once you certify them, they take them as gospel. There was really no reason for us not to certify because we were submitting the correct numbers for years.”

“We started certifying data at the end of 2005 and then went back and sent analysts all certified data from 2001 forward,” adds Mike Marusic, vice president marketing for Sharp. “At some point or another, all manufacturers need to make that honest clean break and Sharp had been misleading for quite a few years back into the 1990s, and one lie begat a larger lie and so on,” explains Marusic. “Our reported data was about 50 percent higher than what we were actually shipping, so when it became my turn to report the data after I joined, I said I wasn’t providing data that was false.”

Certifying data after not having done so can bring about repercussions, opening the door to competitors who might point out that Sharp’s market share was declining. “But we felt it was the right thing to do, and frankly it’s easier to provide the accurate data.”

Why Not?

Long-time industry analyst Frank Cannata, president of Marketing Research Consultants (MRC), has been especially vocal on this topic and rattles off three reasons why manufacturers who don’t certify their numbers are doing a disservice to the industry. “I think it hurts dealers because when you promulgate false numbers, the dealers are allocated quotas predicated on those false numbers,” he opines. “Number two, it distorts the picture of what the industry is really doing, which does a disservice to everybody in it. If you’re trying to make your plans as to which direction you want to move in and you’re looking at bad numbers, it can misdirect you.”

Finally, he says, it doesn’t speak well for the industry. “When a CEO gets up there and knowingly puts slides up there saying [feel free to insert name of any market research that tracks shipments company here] or whomever says we’re number one, and they know damn well that the numbers they’ve published are wrong, it’s the old story, ‘Are you lying now? Were you lying then?’ It just destroys your integrity.”

“I’m not sure why it hasn’t been done,” says Pietrunti when asked why the industry doesn’t do this as a general practice. “I’ve been in this industry 27 years. Going back to the 1980’s when copiers really started to move through the dealer channel, manufacturers at that point were kind of using reported market share numbers to create their own pie charts to show their dealers that they were number one. You’d go to dealer meetings and everybody had a pie chart that showed they were number one in the marketplace. I even remember a few years ago when two of the top manufacturers in our industry were claiming number one in the same category. At some point in time, there’s a responsibility of good business ethics to the consumer, to the analyst companies, and to the people who buy what you folks print when they make their decisions. It’s important when you go to buy a product for yourself, whether it’s an automobile or a computer, and you want to do some research and you try to evaluate what’s the best choice for you, everybody takes for granted that the data being provided is accurate. I think we owe that to end-users.”

“There really isn’t a penalty for not certifying your numbers,” adds Rhorer. “You either certify them or not and there’s no governing body that’s going to penalize you one way or the other if you don’t.”

“It’s typically no specific reason, just a simple, ‘We’re not going to do that,’ says the anonymous analyst when asked what the companies who don’t certify are telling him. “Others say, ‘Once you get our three major competitors on board, then we’ll do it.’”

“They’re not going to stop doing it unless Xerox stops doing it,” another analyst tells me. “And Xerox is the inventor of that game.” Those manufacturers also respond, ‘Why should we put ourselves in the position while Xerox reaps the rewards by continuing to do it?’

Cannata remains determined to see more vendors hop on board the certification train. “I keep asking manufacturers to certify their numbers,” he says. “Within a couple of the companies, there are people at the senior staff level who have urged their superiors to certify their numbers and those superiors have said, ‘No.’ The answer they get, is ‘Do they think I’m lying?’ If the numbers are false, the answer is ‘Yes.’”

If this all sounds like a classic Catch 22, it is. With manufacturers’ attitudes about certifying numbers rooted firmly in place, you can pretty much bet the house that industry-wide certification probably won’t happen anytime soon.

The Bright Side

On the positive side, it says a lot about Sharp, Toshiba and Kyocera Mita whose numbers, to paraphrase Stephen Colbert, have a strong element of ‘truthiness’ to them. This provides them with a bit of an advantage in the market against the leaders who don’t certify. This way, whenever a customer tells them or their dealers that they’re fourth or fifth in market share, they can point out how they certify their numbers, noting that these numbers are signed, sealed, and delivered by a senior executive and completely honest and accurate.

Certified numbers can also be beneficial to dealers. In some instances, it provides them with an added talking point when in front of customers. “From the standpoint of the charts that we show our dealers that indicate we are the fastest growing copier manufacturer over the last four years, that absolutely is a key point,” maintains Rhorer. “That adds validity to the fact we are growing.”

“Dealers benefit because they can gauge themselves against Sharp in the marketplace,” says Marusic. “If you’re a Sharp dealer and your business is up five percent, for example, and we’re up 10 percent, then you know you’re falling behind your counterparts. Conversely, if you report you’re growing 15 percent and Sharp is growing 10 percent, you’re outpacing your counterpoints. If you can’t trust that data and it’s not certified, you really don’t know where you stand versus your counterparts. Certified data also provides dealers and everybody in product planning roles information on what markets are moving, what segments are changing, and where growth is coming from.”

Cannata applauds those companies who have taken the high road by certifying numbers and believes this truly benefits the dealer channel. “I think the companies send a very strong message to their distribution partners that they are acting with a high degree of integrity; we believe in honest communication and as partners, we believe that’s what you would want to hear.”

Will the numbers game ever stop being a game? “My last hope was The Wall Street Journal,” says Cannata. “I spoke with them and said, “Don’t you think this is a practice you would want to see changed seeing as there are public companies doing this? They weren’t overly interested. They said, ‘When we’re meeting [with manufacturers] and ask about market share numbers, they refer us to [the market research companies].’ I said, ‘And you just buy it?’ They said, ‘Yes.’

“All you have to do is research Department of Commerce statistics that shows every MFP that comes into the country,” adds Cannata. “Then add those numbers up and compare them with the numbers they say were sold and you’ll see there’s a disparity—and the balance is not sitting in inventory.”

Despite his pessimism, Cannata deep down hopes things will change. “As management changes at the various companies, somebody will come over and think more of their integrity and reputation than they currently do and change it.”

Sharp’s Marusic is more optimistic, citing Sarbanes-Oxley compliance in Japan, known as JSOX, which may eventually lead to more honest reporting. “I think it’s becoming an issue for JSOX where that same type of honesty will be forced down and the companies in Japan will say, ‘We can’t provide misleading information in the different markets.’”

Like Cannata, he sees this misleading information all of the time. “If you look at the financial reports of the Japanese companies and compare what they said they did in overseas market to what the local operation said they did, it’s a complete disconnect. At some point, somebody is going to crack down on this whether it’s the investment community or the analyst community within our industry.”

Should the analyst community be more vocal in encouraging manufacturers to tell the truth? “I realize the analyst community also has those company’s that don’t certify numbers as customers,” says Marusic, “and it does put them in a precarious position, but one simple thing they can do that would negate any need to lie about your data is not allow their company to be quoted in any press releases about market share if the company doesn’t certify. I think that will immediately push people to provide certified data because there’s no purpose at that point to lie.”

So, how radically will the office equipment universe change if there were widespread certification? “I don’t think certification will dramatically upset the apple cart in the rankings,” opines Marusic. “I don’t have any belief that [it will show that] Sharp is a bigger vendor than Canon, but it will close a lot of the gaps. I think it will really clear out the lines of who’s selling what and doing what among the middle tier players. I think it’s important for the dealer community to know that.”

Scott Cullen is a contributing editor to ENX and has been writing about the office equipment industry for 22 years—and that number is certified.