*NEWS*EPSON IGNITES INK PRICE WAR (READ)

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Epson ignites printer price war
70 per cent ink price cut shakes industry
 Jan 2007Drastic regional price cuts from printer giant Epson could rock the printer industry, market observers have predicted. The Japanese printer maker has begun selling ink in China at nearly one third the price it charges in Europe and the US.The move has raised fears of a printer price war that could spread worldwide, potentially saving millions for consumers but hurting manufacturers’ profits.Vnunet.com’s analysis of data from Epson shows that buyers of the company’s cheapest entry-level printer in China can now expect to spend as little as $0.016 on ink for each page they print.US and European buyers of similar products are still paying up to three times as much.

“The industry could be facing something it has quietly dreaded for years: a consumables pricing war that melts the ‘razor-and-blades’ model and incinerates the industry’s rich profit margins,” said Jiqiang Rong, director of primary research at US-based Lyra Research. The Japanese headquarters of Seiko Epson Corp has not responded to vnunet.com’s request for comment on plans to introduce similarly low prices outside China.”If this strategy sells printers, competitors will have no choice but to respond in kind, and not just in China,” said Rong.In common with other printer makers, such as HP and Canon, Epson makes most of its profit from sales of consumables like ink and toner.Under this so-called ‘razors and blades’ business model, the printers may be sold at a loss which is recouped through high consumables pricing.Lyra Research predicts that a fall in consumables profits would ultimately force manufacturers to raise printer prices.These high profit margins have encouraged other companies to make copycat cartridges which are compatible with Epson’s printers, but which are cheaper than the official consumables.Epson has pursued legal action against numerous imitators, with some success.Epson China has explained its new ultra-low pricing as a way to fight cheap third-party ink cartridges and counterfeit cartridges. The company claims that these cheaper consumables produce poor results, fade over time and can damage printers.Lyra Research sees the move as an attempt to make inroads into China’s highly price-conscious consumers as fast as possible.
A new threat looms in the shape of local PC maker Lenovo which is hoping to get into the printer manufacturing industry, possibly with government backing.

Even in China, Epson has not applied price cuts across the board. The most cut-throat pricing applies to the Epson ME range of printers, some of which appear to be available only in China.For example, the $64 Epson ME1+, a 2880dpi inkjet printer with a claimed printing speed of 12 pages per minute, appears to be one of the world’s cheapest inkjets in terms of running costs.Black ink cartridges have a recommended retail price of 45 Chinese yuan ($5.50), and colour cartridges sell for 72 yuan ($9).Epson China claims that the $5.50 black cartridge holds enough ink to print 330 pages. This indicates an average printing cost as low as 1.6 cents per page for black and white printing.The ME1+ does not appear to be available outside China. A comparable entry-level Epson printer sold in the US, the Epson Stylus C88+, costs almost the same to buy, but appears to be three times more expensive to run.According to Epson, the C88’s black ink cartridges cost $19 and but only hold enough ink to produce about 400 pages of text, indicating an average cost of at least 4.75 cents per page.Colour printing costs are higher for both printers, as colour ink prices are higher and colour printing typically uses more ink.Epson’s cut-price Chinese ink cartridges appear to provide similar performance to products selling for two or three times more in the US and Europe.While this appears to offer an opportunity for grey market importers to buy printers and compatible cartridges in China and resell them overseas, there are so far no reports of this occurring.

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January 10, 2007 at 1:03 PM