PRINTER INK SUPPLY REVENUE TO TOP $100B.

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PRINTER INK SUPPLY REVENUE TO TOP $100B.

 user 2006-07-02 at 9:01:00 pm Views: 62
  • #15928

    Printer Supply Revenue To Top $100B
    New York -Global digital imaging supplies revenue is expected to pass the $100 billion mark in 2006, but traditional printer companies could miss out on the windfall, according to imaging analysis firm, Lyra Research.Digital imaging supplies, also called “consumables,” include ink, toner and cut paper for copiers, printers and digital presses. In 2004, global supplies revenue was $89 billion. In 2005, it jumped to $96 billion. By the end of 2006, Lyra predicts, it should be about $101 billion.But printer makers (also known as original equipment manufacturers or OEMs) like market leader Hewlett-Packard , Lexmark, Seiko Epson and Canon , which charge premium prices for their brand name ink and toner cartridges, could lose out on revenue as other companies provide supplies cheaper.”The biggest threat to OEMs is this third party issue,” says Rodger Reis, research analyst at Lyra. “It goes right to their [revenue] base.”Three privately-held concerns, Emeryville, Calif.-based Cartridge World, Caboodle Cartridge of Palo Alto, Calif. and Springfield, Oregon’s Rapid Refill sell remanufactured and refill cartridges at 30% to 60% less than the printer hardware companies.For example, a brand name HP 45 black inkjet printer cartridge, which works in over 200 HP printers, retails for about $20. Rapid Refill sells a similar third party cartridge for $16.50. Similarly, a self-branded Canon E40 cartridge can cost more than $140. Rapid Refill charges $70.”People are furious about paying $40 to $50 for an ink cartridge,” says Kelly Cahill, marketing manager for Rapid Refill. “That’s just too much money.”In the past, consumers have been somewhat reluctant to buy third-party ink because of quality concerns. But that perception is changing. And as reputable retailers like Staples , Office Depot  and Office Max  have begun offering their own self-branded cartridges for about $5 less than brand name supplies, the stigma is fading instead of the ink.”These stores have strong established brands, with a reputation for quality,” Reis says. “And they stand behind their products.”But the real money is in the business-to-business market. “People are still trying to figure out the refill business,” Reis says. “The model is to go out to these businesses and provide printer services, providing a working contract to manage an entire printer fleet.”Dell Computer has its eye on this market and offers its own printers, consumables and service contracts to businesses at 20% to 25% less then other OEM printer companies. But since printer hardware is a very mature market, the strategy hasn’t been entirely successful. And the company has no plans to enter into the third-party consumables market, according to Tony Mara, senior product marketing manager in Dell’s Imaging and Printing Group. Staying focused on the hardware market could be a misstep for Dell. Lyra’s research indicates that worldwide revenue for printers has essentially flat-lined at about $60 billion. There are still growth opportunities in emerging markets in the Pacific Rim, the Middle East and South America, but printers, which are already being sold at a 30% discount, can’t go much lower.That leaves the printer companies in a bind. They have to compete for printer sales while relying on the “razor and razor blades”–or in this case, printers and ink–business model for profit. “No one is willing to lower the price on supplies because that’s where the revenue is,” Reis says.However, HP is adamant that the company has been working hard to bring overall printing costs down and insists that its products are simply better. “It is up to customers to decide which solution is best for them,” says Tuan Tran, vice president of marketing, HP Imaging and Printing Supplies. “There will always be some segment of the population that is willing to accept trade-offs in quality and reliability to save a little money.”HP, Lexmark and Epson, all of whom realize a majority of their imaging revenue from supplies, aren’t taking the challenge sitting down. Over the years, the three companies have sued many third-party supplies companies for patent infringement–not always successfully. Epson is currently pursuing legal action against another 24 companies.In some cases, the legal pressure has paid off.”We have seen aftermarket competitors come and go, all while we maintained a healthy business and market share,” says Tran.