*NEWS*RISING GAS PRICES? WHAT ABOUT INK ?

[Anonymous]

Rising gas prices? Sure, but what about ink?
Ask the average person about the biggest ripoff going, and they’ll probably reply gasoline.They’ll give chapter and verse about supposed conspiracies within the oil industry to fleece customers, because that’s the prevailing wisdom, no matter how misguided it may be.Meanwhile, other out-of-whack pricing strategies flourish without so much as a whiff of controversy.Take the refill canisters for ink-jet printers for an example. According to one estimate, the refills cost up to $8,000 a gallon, turning the colored liquid into figurative gold for the producers. The prices posted on the shelves are about $18 to $30 for single refills, but that’s for a couple of ounces at best.Printer manufacturers use what’s called the “razor blade strategy.” Sell the product at a loss. Then make up for it and far more on the refills that are essential for operation. It’s been a proven strategy for the razor blade industry for decades. Ink-jet printer manufacturers have merely perfected the method.
The total market for printer ink: $32 billion annually.

My Epson printer cost about $100 new, but the Epson refill cartridges cost me about $55 a shot for a color and black ink set.After his company acquired an industrial printer manufacturer, a former technology industry representative once confided to me that selling colored water for a fortune was one of the best business opportunities going. He marveled at the profit potential of printer ink. Though not quite achieving the 80 percent margins in the software industry, it came pretty darn close. USA Today estimates that ink margins run close to 75 percent.Yet, not a peep from the buyers — the same ones who are so willing to bellyache about the oil industry, where profit margins are a more acceptable 10 percent.Some relief for buyers comes from the remanufactured cartridges that sell for a slight discount. But some printer manufacturers use proprietary technology that keeps remanufactured versions of their inks off the shelves, and others try to limit the availability of spent cartridges in the after-market.Consumer Reports also reports that remanufactured cartridges may not be the bargain they may appear to be. They usually have shorter lives than the name-brand cartridges, according to research by Consumers Union, and colors, especially for photos, are less vibrant.There’s much talk about conspiracies in the oil industry, but not a word about the unusual uniformity in refill pricing among the ink-jet market participants. How come not one of the manufacturers has tried to challenge what appears to be an industry standard pricing model?Until now, that is. One company appears to be ready to disrupt the status quo. Kodak announced this past week that it will introduce a line of ink-jet printers that will have more affordable refill cartridges. It’s a hopeful sign. Let us hope the move will inject a bit of competition into a field where the uniform pricing among all the players fails to pass the smell test. The manufacturers may not be acting in concert in an overt manner, but it’s seems clear that there are clear price signals being sent among the printer producers.

[Author]

March 20, 2007 at 9:42 AM