LOW-END INKJET COMPETITION HEATS UP
LOW-END INKJET COMPETITION HEATS UP
2005-05-30 at 10:25:00 am #9403
Photo MFPs Take the High Road as Low-End Competition Heats
May , 2005
Photo-enabled inkjet MFPs are one of the hottest revenue growth segments in
the printer market, with sales projected to grow upwards of 20% in 2005.
Manufacturers have used creative promotions featuring sub-$150 MFPs bundled with
digital cameras, notebooks, and PCs to offer consumers effective price points
that are as low as $0. Market share and volume are the key determinants as
printer manufacturers seek to lock in consumers with low price points so they
can reap the benefits that come with the highly profitable downstream revenues
associated with inkjet printing supplies. The problem is that the low-end inkjet
MFP space is getting crowded. MFP manufacturers looking to gain market share and
differentiate product lines are forced to look to the high end of the inkjet
market for future revenue growth opportunities in 2005 and beyond.
The low-end MFP space was once dominated by Lexmark, whose bland, sub-$150
models were big hits with budget-constrained families and students. The bad news
for Lexmark is that photo-enabled printers have increased in popularity and come
down in price to levels that are competitive with Lexmark’s standard inkjet
machines. Lexmark does not have a photo-friendly brand name and was slow to jump
on the photo bandwagon.
Photo-enabled MFPs are now available for under $150 in the retail channel and
only consumers with the most extreme budget constraints will opt for generic
inkjet MFPs because the price difference is only $20. Epson and HP have attacked
the market with their respective $99 CX4600 and sub-$100 PSC models, targeting
consumers with creative promotions that offer up photo MFPs for next to nothing.
Newcomers to the low end of the inkjet MFP space include Canon and Brother.
Canon has just released its first sub-$100 inkjet MFP model, the MP130. It has a
futuristic form factor that looks like something out of Star Trek. Brother, the
silent assassin in the shadows, appears ready to steal share at the low end of
the SOHO market. Brother is not strong in photo printing, but it offers office
models with fax functionality and networking at bargain prices.
With all this congestion at the low end, moving upmarket to focus on
higher-end models seems like an obvious choice. The potential of this segment is
highlighted by the success of HP’s PSC 2610 ($259), which has consistently been
a top-selling MFP in terms of revenues since the holidays. Recently,
manufacturers have taken two different routes to market MFPs with higher-end
functionality: they have developed models that converge office and photo
features, and designed high-end photo models that cater to hardcore photo
HP has focused on the former, producing products that combine office and
photo functionality. HP has accomplished this by adding photo features like
memory card slots, six-color printing and PictBridge connectivity to its
OfficeJet line of office MFPs and by supplementing its PSC line of photo MFPs
with fax and built-in networking capabilities.
The photo enthusiast strategy has been employed by inkjet MFP
manufacturers to appeal to the growing legions of high-end amateur digital
photographers. These machines are full of fancy features that include standard
five- and six-color ink systems, film adaptors for scanners, image correction
and photo enhancement software, CD printing, and compatibility with CD-R drives.
The two key players in this arena are Canon and Epson, which shouldn’t surprise
anyone given their strong reputations in digital photography.
The outlier at the high end is Lexmark, whose limited SKUs don’t give it a
clean-cut retail strategy. Lexmark seems best suited for the office-photo
conversion route as it does not have a strong brand name in digital imaging. How
does Lexmark foster growth of higher-end inkjet MFPs? By continuing to rely on
OEM partner Dell, which has advantages in consumer branding and low-cost, direct
The graph below shows high-end photo inkjet revenue share in retail from
November of 2004 to April of this year.
The big winner? HP–without a doubt. HP has leveraged its brand name,
promotional muscle and office-photo convergence strategy to dominate the market.
Epson’s revenue share has fallen off over the past few months, and it appears
that Epson’s fancy features may not be enough to sustain high-end market share
growth throughout the year. Lexmark suffers from the aforementioned SKU issues
and Canon needs to increase its MFP shelf presence in the consumer electronics
Looking forward, the impact Kodak’s 2006 entrance into the inkjet market will
have on the market, and specifically the retail space needs to be examined. Much
has already been made of Kodak’s potential inkjet OEM relationship with Dell,
but what will be interesting to see is where Kodak positions itself in retail.
Kodak does not currently produce an MFP, but it will certainly have to if it
wants to effectively compete in the inkjet arena. If Kodak comes to market with
inkjet MFPs, what will this mean to the high end of the inkjet MFP space? New
CEO Antonio Perez knows enough about HP to stay away from it in the SOHO space.
Kodak’s best shot is targeting the inkjet photo market, where it will need no
introduction to digital photo enthusiasts. Epson and Canon will need to prepare
themselves to duke it out with a photo giant that has every bit the “photo
quality” brand image that they do. As for HP, it will see increased price
competition and take some hits down low, but it will keep on rollin’ at the high
end with a convergence strategy that hasn’t been seriously challenged.