The ink and toner business is changing, and changing rapidly. The market is shifting and the big players are adjusting their strategy to try to retain the market share they’re rapidly losing to rivals offering less expensive ink and toner cartridges.
For years the printer industry traditionally sold hardware at a loss with the true profit being generated by the sale of consumables over the life of ownership, much like the razor industry. Sell the razors inexpensively, and charge more for the consumables, in this case the blades.
Today, however, the balance of power has shifted as the quality of compatible and remanufactured cartridges have improved and prices have dropped.
HP has announced that it is going to try a new business model to compensate for the loss in supplies revenue, but this shift is going to mean an increase in price, affecting the businesses of printer dealers, toner resellers, and Managed Print providers.
Two Big Reasons HP is Changing Course (and Raising Prices)
The two major reasons HP is changing its business model are the prevalence of good quality aftermarket third-party toner options for consumers, and the fact that they can no longer afford to lose money on hardware because their business model is no longer working.
HP’s approach to this market shift is to offer two types of New printers. One that is cheaper to buy up front, but which can only use OEM consumables and the second is more expensive to buy, but which is unlocked so that aftermarket supplies can be utilized. HP has already been trying to change its hardware model by launching the Smart Tank and Neverstop printers which come fully loaded with an estimated two-year supply of ink or toner.
Tuan Tran, incoming HP President told an analyst meeting that HP is trying to “rebalance the system profitability, capturing more profit upfront. This model is for customers who want to exclusively buy HP printers and supplies. Customers will get a model that delivers a more secure, reliable, higher quality, and sustainable print experience,” he continued.
However, Toni Sacconaghi, tech watcher at Bernstein isn’t so confident, suggesting that HP may be left with uncompetitively priced hardware if their competitors don’t follow suit. He says “it’s not clear if HP will be better off financially.”
The Takeaway…
Other major manufacturers will be watching to see the results of this shift in strategy. Dealers and resellers need to be aware of how HP’s price increases and shift in technology will impact their existing businesses as it is likely that they may choose or end up with the lower priced hardware locked to OEM consumables in their new and fleet in place agreeements.
Partnering with aftermarket manufacturers like LD Products, producers of the Gold Line Series of toner cartridges (a brand-new disruptive line of premium quality, non-infringing, new build cartridges) can help them stay competitive.
LD recently tested their Gold Line cartridges against HP OEM cartridges and the results showed that the quality and performance were nearly identical. The obvious difference was that the LD extended yield cartridges cost about 70% less in a formal test. The best part is that dealers and resellers can save up to 20% over other leading remanufactured cartridge brands.
If you’d like to learn more about the new LD Products Gold Line Cartridges, click here for all the details, and give us a call! We’re always happy to answer all of your questions.
