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 9:44 AM