(READ)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 1:05 PM