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Printer OEMs are killing off their own supplies business – losing out to third party supplies industry

Issue #0918/1 – Printer users are faced with massive increases in supplies prices that are pushing their Total Cost of Printing through the roof. Those suffering most are small and medium businesses with a high print volume as printer manufacturers steadily push up supplies prices. But, printer manufactures are themselves suffering with huge loss of revenue from supplies. Why? Are they guilty of cutting off their noses to spite their faces? This article presents masses of data to show why printer manufacturers are alienating their customer base and pushing customers into the hands of the third party supplies industry.

Specific supplies data is only available for the US manufacturers shown below but in each case, loss to revenue is significant. Other manufacturers note losses but do not provide breakdown information.

Lexmark returns the worst results, at -16%, having been steadily losing revenue on both hardware and supplies for several years but Hewlett-Packard is not far behind in this past quarter, with a loss of 14%. Any loss to supplies revenue is of grave concern for the printer manufacturer because this is the portion of their revenue that is supposed to be of a secure, annuity nature. The really big question this poses is, “if supplies revenue has fallen by as much as 16% at a time when prices are being pushed up, what it the impact on volume sales?”

Revenue Growth – Printer Supplies

Quarter ending Spring 2009

Manufacturers do not publish information on supplies unit sales but one source has posed the hypothesis that a 16% revenue loss could very easily equate to a 30% loss in unit sales! This is really, really bad news for manufacturers.

However, it seems to be matched by excellent news from the third party supplies industry. While, again, specific financial information has not been forthcoming, one key remanufacturer in the UK told me that remanufacturing of laser toner cartridges has increased by at least 300% over the last year! Furthermore, a major supplier to the remanufacturing industry indicates that, “there has been a huge increase in interest in the past six months”.

Why should we see this situation?

“businesses are angry, showing massive resentment
at price increases of 30% over the year”

Quite simply, as the remanufacturer put it, “businesses are angry, showing massive resentment at 30% price increases over the year”! In fact, as we shall prove, those increases have been considerably higher even than 30%. The increase in business for the remanufacturer has been primarily in the burgeoning colour toner market. This makes sense as businesses have been persuaded (even duped) by the manufacturers over the past couple of years to buy colour printers despite concerns over costs – only to be hit with these massive price increases.

At a time such as we are facing in this current economic climate, the last thing any business needs is for the cost of printing quotations, invoices, customer statements and financial reports to increase, perhaps by as much as 50%! While businesses are under pressure not to raise prices to customers in order to retain the business, their costs are being constantly pushed upwards by their suppliers increasing prices.

What we are seeing is a backlash by small and medium businesses, in particular, against the printer manufacturers. These are the customers that suffer most – squeezed between their multinational suppliers (printer manufacturers) and their customers. There is no surprise that there is a angry backlash when they are faced with rapidly increasing prices, falling revenues of their own and see signs that the printer manufacturers are protecting their own business by offering concessions to their biggest customers only.

Remanufacturing of toner cartridges seems to be concentrated particularly on Epson, Lexmark, Oki and Samsung products. Hewlett-Packard, on the other hand, has put in place a loyalty scheme that would appear to be working well – there has been relatively little increase in remanufacturing of Hewlett-Packard cartridges.

However, Hewlett-Packard has also offered protection from the impact of currency related price increases – but only to its biggest customers – so it is the vulnerable small and medium businesses that are paying the price for the favours shown to big corporations.

Furthermore, small and medium businesses are now beginning to realise the mistake of buying cheap hardware! The penalty of expensive supplies is too much to bear at this time and these recent price increases just rub salt into the wound.

We have to accept that the economic downturn has hit exchange rates badly, the UK in particular for a variety of reasons, but the Euro zone as well. In fact, taking a variety of product baskets used for Total Cost of Printing comparisons in TCPglobal over the last 16 months or so, we see that supplies prices, on the street, have risen by an average of about 25%, with a maximum increase noted as being a phenomenal 52%.

As indicated, from the historical data available from TCPglobal comparisons, the UK has been hardest hit, with average street price increases of 35% to 37%, while Germany in the Euro zone has suffered average increases of 8% to 10%. It should be noted that data points are dependent on the comparisons made in TCPglobal and are therefore not complete, with variable numbers of data points for different manufacturers.

Average Price Increase – UK & Germany

2008 to June 2009

There is little variation in price increases between toner cartridges of different types and the variations that do exist are not consistent between the UK and Germany – whereas prices of colour toners in the UK have been increased by more than the black cartridges, in Germany the opposite is true.

By manufacturer, this data reveals that Canon, Lexmark and Xerox have typically increased prices by the highest percentages, while Dell is noted for minimal increases. Epson also appears to stand out as having increased prices by a lower than average amount.

Average Price Increase – UK & Germany

2008 to June 2009

Interestingly, there is little significant difference between price increases by US manufacturers in comparison to those from the Far East. Increases from the US averaged 22%, while increases from the Far East averaged 24%.

So, let’s drill down and look at the actual prices charged a year or so ago and those being charged now. The following tables and charts show the price increases for the actual products used in the comparisons by cartridge type in the UK and in Germany.

First of all, in the UK, black cartridges for a group of 28ppm workgroup mono laser printers () shows an increase of 52% from March of last year for the toner for Kyocera’s FS-1100, while Dell has increased the price of toner for its workgroup 1700 printer by only 19% in the same period. Note that the price for Dell toner was acquired from Dell, while toner prices for all other printers were acquired from a single source in the channel.

It is these two that stand out from the crown, Kyocera for its high increase and Dell for its low increase. Although this is clearly a deliberate policy on the part of Dell, the price rise on this particular Kyocera toner is considerably higher than the average for Kyocera seen above.

Black Toner (Mono Printer)
UK – Single outlet
March 2008 June 2009 Price Increase
Brother TN-3170 £50.00 £69.87 40%
Dell 593-10239 £69.00 £82.00 19%
Hewlett-Packard Q7553X £81.50 £108.74 33%
Kyocera TK-140 £41.00 £62.37 52%
Lexmark 0E250A11E £51.50 £71.16 38%
Samsung ML-D2850B £67.50 £85.50 27%

Retail Price Increase – Black Toner (Mono Printer)

UK – September 2008 to June 2009

In Germany, the picture looks slightly different, quite apart from the much lower percentage price increases, and here we do see rather more of an east/west split than we saw in the overall view above. From prices obtained during October 2008, we see Epson with the lowest increase, just 5%, followed closely by Brother, Kyocera, Oki and Samsung. At the other end of the scale, it is the US manufacturers, Lexmark and Hewlett-Packard that have been much more aggressive, pushing prices up by 17% and 15% respectively. Xerox is the odd-one-out here, a US manufacturer with a price increase of only 8%.

Black Toner (Mono Printer)
Germany – Median Street Price
October 2008 June 2009 Price Increase
Brother TN-3170 €80.00 €85.77 7%
Epson C13S051111 €198.90 €209.05 5%
Hewlett-Packard Q7551X €168.95 €194.00 15%
Kyocera TK-130 €80.79 €87.45 8%
Lexmark 0064036HE €294.25 €343.79 17%
Oki 09004078 €145.50 €158.53 9%
Samsung ML-D3470B €124.99 €137.35 10%
Xerox 106R01371 €169.00 €183.08 8%

Retail Price Increase – Black Toner (Mono Printer)

Germany – October 2008 to June 2009

Moving to supplies for colour laser printers compared in , we see more high percentage increases in the UK, with Lexmark again topping the bill with a 46% increase on the black toner for the C530, while Xerox and Oki toners fall only a percentage point or two behind Lexmark.

At the other end of the scale, Dell again stands out as having raised prices by a small amount but the general range of increases is in the same sort of range as the toners for mono laser printers. It is perhaps noteworthy that toners from Brother, Epson and Kyocera (all far eastern manufacturers) have suffered the lighter increases. For Kyocera, showing a 31% increase on this cartridge, the contrast is marked compared to the toner for the mono laser printer above where the increase was 52%.

Interestingly, the average increase in this group is the same 35% as for the mono printers despite the lower high point and preponderance of manufacturers (five) showing increases of around or above 40% (compared to two).

Black Toner (Colour Printer)
UK – Single outlet
June 2008 June 2009 Price Increase
Brother TN-135BK £39 £51 31%
Canon 711BK £67 £93 39%
Dell 593-10170 £65 £72 11%
Epson C13S051161 £118 £151 28%
Hewlett-Packard Q6470A £71 £97 37%
Konica Minolta 1710582-002 £72 £98 36%
Kyocera TK-510K £59 £77 31%
Lexmark 00C5222KS £56 £82 46%
Oki 43459332 £34 £49 44%
Samsung CLP-K660B £57 £79 39%
Xerox 113R00726 £101 £145 45%

Retail Price Increase – Black Toner (Colour Printer)

UK – June 2008 to June 2009

Colour toners for those same colour laser printers in the UK show a much more consistent picture, with an average increase only two percentage points higher then the black cartridges but held within a much tighter band. Only Dell shows an increase of less than 35% and all the others fall between 35% and 42%.

This indicates a very clear policy by manufacturers that colour printing will be strongly penalised to help balance their books, completely undoing the message that they have been trying [incorrectly in my view] to convey over the last few years that colour printing is “affordable”. Printer manufacturers are now rapidly conveying the message that colour printing is not affordable, a message that could take them some years to unravel once the economic climate improves! Users are likely to think twice about buying colour laser and may be guided more easily into making a wise choice of printer if they do buy colour, avoiding the cheapest models.

Colour Toner (Colour Printer)
UK – Single outlet
June 2008 June 2009 Price Increase
Brother TN-135C/M/Y £70 £98 40%
Canon 711C/M/Y £84 £119 42%
Dell 593-10171/72/73 £112 £125 12%
Hewlett-Packard Q7581/82/83A £90 £126 40%
Konica Minolta 1710594-001 (CMY) £301 £424 41%
Kyocera TK-510C/M/Y £86 £117 36%
Lexmark 00C5222C/M/YS £64 £91 42%
Oki 43459329/30/31 £49 £66 35%
Samsung CLP-C/M/Y660B £79 £109 38%
Xerox 113R00723/24/25 £109 £152 39%

Retail Price Increase – Colour Toner (Colour Printer)

UK – June 2008 to June 2009

In Germany, there is an equally varied range of price increases on toners for colour MFPs, as seen in the comparison in . The black toners show the only incidence of a toner with no price increase! Dell’s black cartridge for the 3115cn colour MFP is still the same price as it was in September of last year!

No so with the Lexmark black for the X560n, however. Here we see the highest price increase in Germany, of 17%, matching its increase on its toner for the mono laser printer above.

Black Toner (Colour MFP)
Germany – Lowest Street Price
September 2008 June 2009 Price Increase
Dell 593-10162 €111.86 €111.86 0%
Hewlett-Packard CC530A €80.80 €91.50 13%
Lexmark 0X560H2KG €155.15 €181.02 17%
Oki 43324424 €58.86 €61.99 5%
Xerox 113R00726 €131.19 €147.67 13%

Retail Price Increase – Black Toner (Colour MFP)

Germany – September 2008 to June 2009

However, while both Hewlett-Packard and Xerox show increases of 13% on the black toner, and Hewlett-Packard’s increase on the toner for the mono printer was also high, Hewlett-Packard’s colour toners show a remarkably low price increase in Germany, of only 7% compared to 13% from Xerox and 17% from Lexmark.

Closely emulating its zero increase on the black toner, Dell has increased its colour toners by only 2%. However, Oki is in close contention with an increase of only 3% on its colour toners, beating its already low increase of just 5% on the black toner.

Colour Toner (Colour MFP)
Germany – Lowest Street Price
September 2008 June 2009 Price Increase
Dell 593-10163/64/65 €191.59 €196.35 2%
Hewlett-Packard CC531/32/33A €80.90 €86.33 7%
Lexmark 0X560H2C/M/YG €226.80 €264.99 17%
Oki 43324421/22/23 €108.73 €111.98 3%
Xerox 113R00723/24/25 €135.91 €153.65 13%

Retail Price Increase – Colour Toner (Colour MFP)

Germany – September 2008 to June 2009

So, where does this leave us? Well, there are ways in which printer users can reduce print costs and set themselves up for a future of lower-cost printing in the future.

Businesses in Germany can perhaps accept the increases just as inevitable and rather annoying but, faced with increases of up to 17%, they are sure to be facing some grief.

However, for those in the UK where the economic crisis is particularly deep, the situation is much more serious for printer users. It is certainly not surprising that users are reacting with frustration and turning their backs on the OEMs.

Briefly then, what can business users do to combat this trend?

  • Use third party remanufactured toners
  • Rotate their printer and MFP fleet for more cost-effective models
  • Modify their printing habits and buy duplex units
  • Stop printing!

TCPglobal is full of advice and information on how to minimise the Total Cost of Printing; how to choose a cost-effective printer or MFP; cost comparisons showing which models may be more cost-effective; and why not paying full attention to these bullet points before purchasing can cost users dearly – to the tune of more than double the necessary print cost!

Perhaps this is ultimately an opportunity for users to send a message to the printer industry that they will not be manipulated into paying an unreasonably high price for supplies and that the user base is becoming more astute in their management of hard copy.

Or, perhaps it is just an opportunity for users to experiment with third party supplies where they may have been reluctant to do so before. After all, with third party supplies prices remaining relatively stable, the potential savings against OEM supplies are increasing!

At the end of the day, the long-term question will be, “how many will return to OEM supplies as the economic crisis passes”?

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