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 user 2011-01-10 at 8:42:39 am Views: 71
  • #24273

    Lexmark Surprises Channel by Increasing Inkjet Cartridge Prices
    Actionable Intelligence has learned that earlier this week Lexmark raised the price of certain inkjet cartridges. The increase included pricing on the new Lexmark 100 and 100XL ink tanks, which are used in the Vizix machines. According to our information, the price increase was not expected. Some retailers did not learn of the high prices from their distributors until after the price increase went into effect on January 3. It is not clear if Lexmark has increased prices for others products such as hardware or toner cartridges.

    Lexmark raised prices from about 5 to 15 percent on over 20 of its inkjet cartridges and tanks. The new 100 and 100XL tanks experienced the sharpest increases—between 10 and 15 percent. Despite an advertising campaign claiming that Vizix machines offer some of the lowest printing costs in the industry, most of the models in Lexmark’s new line of inkjet all-in-ones are some of the most expensive to operate. Now, with higher-priced cartridges, those operating costs are even higher. We should point out, however, that we have not heard that Lexmark raised the price of its 105XL tank. It continues to retail for about $5, so machines that accept this tank can print a black-and-white page for under a penny.

    We view Lexmark’s sudden move with great interest and wonder if it may be a sign of things to come. We’ve seen the price of other inkjet products increase recently as oil prices rise (see News Briefing, “Sun Chemical Raises Ink Prices”), which is reminiscent of a similar occurrence in the second half of 2008. At that time, OEMs announced they would implement price increases on both hardware and consumables after months of higher oil prices. The announcements led to the channels stuffing warehouses with lower-cost products ahead of the price increases. OEMs watched in horror as orders vanished when the economy tanked and demand evaporated early in 2009. Inventory levels in the channels remained high, which resulted in supply-chain nightmares for many OEMs including Lexmark.

    With the price of oil beginning to climb, we wonder if Lexmark may be in the vanguard of hardware manufacturers raising prices. If that’s true, it will be interesting to see if Lexmark’s competitors use the same tactic of raising prices without warning to avoid any channel stuffing. Moreover, we will be watching to see if prices increase for hardware and toner supplies to keep pace with the growing price of a barrel of crude.

    As an aside, we must wonder if Lexmark’s move to higher inkjet cartridge prices will be unique to the company. Could it be that the firm is attempting to grab as much revenue as possible from its inkjet line before it pulls the plug on the business? The firm announced last year that it was restructuring to combine its inkjet and laser businesses (see News Briefing, “Lexmark Combines Laser, Inkjet Printing Divisions into Single Organization”). After seeing inkjet sales wither for a number of years, many industry watchers wondered if  the reorganization signaled the end of the road for Lexmark’s ailing inkjet business. A sudden increase in cartridge prices may be a sign that the company plans to maximize revenues before it turns the lights out in the inkjet factory.