Company Overview
Eikon Device was founded in 1994, by three young and dynamic partners: Dean Byrnes, his wife Monika Stengele and their friend Bill Baker, a tattoo artist. The company entered the market at a time when the industry was just coming out of the shadow. The equipment was rudimentary, tattoo artists were building their own machines from DIY kits, relied on needles designed for other applications and had a hard time trusting any company entering the market. However, Eikon Device managed to gain credibility as co-founder Bill Baker belonged to the community.
Entering a market where everything remained to be done, Eikon invested heavily in R&D and published its findings to keep its customers on top of new trends. These early days remain inked in the company’s DNA: Eikon exists to provide the tattoo industry with solutions tailored to its needs and outstanding customer service.
In 2012, the company had revenues of CAD10M of which 65% were made online. The company’s international sales are mainly made in the US (27% of 2012 revenues). Medical grade consumables accounted for 70% of sales but generated very low margins, while power supplies and tattoo machines, which accounted for less than 20% of sales, generate margins of c.300%.

Current situation

Eikon Device has managed to secure a leading position in the tattoo equipment market. For almost two decades, the company has been following the market without defining a clear strategic framework but it is now at a turning point where it needs to define strategic guidelines to tackle current changes in the market. US and European competition is increasing on machinery whereas emerging countries competitors are challenging Eikon on consumables (e.g.: needles).
Eikon Device is led by passionate and dedicated people, who succeeded in infusing an entrepreneurial spirit into the company. Eikon Device has been developing strong technical competencies in machinery and power supplies. It has recently reinforced its R&D capabilities and has maintained a high level of innovation compared to industry standards. Eikon only manufactures high-quality products, in Canada, for which it holds patents in major markets. Unlike most competitors, Eikon has developed a unique service model in this industry, building strong relationships with its customers. The drive of Eikon’s employees and its engineering capabilities contributed to creating a well-respected brand, known by tattoo professionals internationally.
Eikon has also been able to source a number of products from medical device manufacturers (bandages, tape) and low-costs manufacturers (needles). Eikon focuses its manufacturing capabilities on high value-added products.
Overall, Eikon is able to provide a complete offering to its client, including innovative machinery and power supplies, inks, needles and medical supplies. So far, the company has always managed to adapt to new demands arising from the market.
Despite its leading market position, the company has to reflect on its strategic orientation to not only follow new trends – as it has done in the last few years - but to identify the tattoo industry’s needs before customers can name them. Manufacturing in Canada ensures quality but comes at a price. Manufacturing expenses are high and Eikon’s products have to maintain a high price point to generate reasonable margins and justify an intense R&D policy.
Regarding distribution channels, Eikon lacks international experience and has no formal relationships with current foreign distributors. The marketing effort has also been moderate.
Looking at its top-line, the company has managed to find a balance between high margin products with low turnover (machinery) and low margin products with high turnover (consumables). Although we were not provided with the full details of the financial position, the CEO assured they had enough cash to pursue diverse strategic alternatives. We also see the shareholder structure as stable even if the current CEO and owner will have to think of an exit strategy in the near future.

Competitive environment
Eikon competes in a very dynamic market, where demand grows quickly as tattoos become mainstream. According to a 2006 PEW Research study, 40% of Americans between age 26 and 40 are tattooed. The willingness to pay higher prices for complex and larger tattoos is also increasing.
The tattoo shop market is by nature very fragmented and unlikely to consolidate. Regulation in this industry has remained fairly low up until recently. This is however rapidly changing with the introduction of new hygiene and health standards.
On the machinery and power supply market, Eikon competes against a dozen of small companies located in Europe and the US. However, on needles and other consumables, Eikon has been facing growing competition from low-cost competitors. Although the quality of Chinese needles cannot match Eikon’s, their lower price drove Eikon out of the market.
There are a few key success factors tattoo equipment companies need to understand to secure larger market shares:
- Innovative and high-quality equipment is highly valued by costumers, although tattoo artists remain reluctant to make large investments,
- Communication and relationships with the tattoo industry is key as tattoo artists need to trust their suppliers,
- The strengthening of hygiene standards and health regulations on tattooing are difficult to face for most tattoo artists who need help to better understand new requirements
- While customers remain the tattoo artists, it is vital that equipment manufacturer engage with end-customers to gain market shares and recognition.

Recommendations
A recent trend towards the consolidation of the tattoo equipment sector started in Europe with the acquisition of Barbers of Sheffield by a capital development fund and the subsequent build-up strategy the fund adopted for its investment. We understand it is crucial for the current shareholders to prepare for a potential sell-out in the years to come by securing strong growth, avoiding mishaps and preserving the company’s unique DNA.
Learning from Eikon’s past decisions and strategic orientations, we feel that the company should focus on its roots and what has made it a success in the first place: the strong relationship it had been able to build with its customers. We would thus advise Eikon’s management to look into two main strategic orientations: a strengthening of its product line and a new approach to customer relationship that would include the end-customers.
We would recommend a constant focus on the product line, which needs to meet all the needs of tattoo artists. The company has decided to stop producing needles as the competition on this segment was too strong: this decision should be extended to any product which does not require a specific expertise. The organization, made up of qualified workers who know the ins and outs of the trade, is not built to produce low-value added products anyone else can make, as it cannot compete on costs.
With a deep understanding of the artists’ and end-clients’ needs, Eikon is well positioned to lead an aggressive R&D program that would enable it to offer top products, which no one else could compete with. Potential joint ventures such as the one conducted recently with HM Machines should be considered by all means if they can enable Eikon to stay on top of technological innovation.
New offerings, such as new ranges of pigments, must be innovative as well: offering ink that no one else can make is brilliant. We feel that if any new needs appear, the company must be able to anticipate them: being a one-stop-shop is the only way it can thrive and keep its customers captive.
This remaining constantly on the edge should be leveraged to build stronger customer relationships. The development of a selective partnership network, which could for example take the form of a yearly maintenance and quality visit for a reasonable price, would enable them to be part of an officially recognized and audited tattoo artists network. Inference should be avoided at all cost, the aim of the partnership would only be to reward Eikon’s customers with the highest quality standards and give the end-customers a feeling of safety.
We also identified a need to tie new bounds within the community: revive the original sense of belonging. New media could be considered to stream the company’s ideas (mailing, blog, applications, etc.) featuring intervention from key artists. Partnerships with artists would thus inspire potential customers. It would also give Eikon a chance to reach out to end clients, who would be interested in the artistic view provided in these media, and earn more credibility.
A new focus on marketing key products directly related to end clients “wants” such as on-demand ink would also enable Eikon to be the first tattoo equipment company to successfully reach them and would certainly help strengthen its partnership network.
To a lesser extent, Eikon should also consider international development. Consolidation having already started in Europe, we would advise Eikon to focus on protecting and growing its market share in the United-States so that it could be perceived as a technological leader and a market leader for North America and constitute a perfect target for a European build-up, which would then consider paying a price premium to acquire a technological advantage and a strong foothold in North-America at the same time.