Cracking high cartridge costs

Fierce market competition is seeing printing vendors drop hardware margins, and make up the loss in a more profitable area - ink and toner cartridges.

While printers can now be bought for a few hundred rands, their original cartridges can cost nearly the same amount, meaning consumers are resorting to buying remanufactured versions, or refilling empties, which can damage printer hardware and functioning.

Vishal Tripathi, principal analyst for printing and imaging at Gartner, says: “Because hardware margins have come down, vendors are getting their profits from supplies, which are more profitable, because customers have to continue buying them, while hardware is a once-off.”

Markus Kluwe, a member of Optimum Print Technology, says for most companies, printer cartridges are something of a grudge purchase. “Some companies are spending millions every year. It's a huge problem; there's hardly anyone who doesn't want to save.”

End-users are resorting to almost desperate measures, according to Kluwe, such as refilling cartridges. “It's always been a problem and costs are just going up. Suppliers have a big profit margin on cartridges.”

Lexmark MD Mark Hiller says the cost of cartridges goes beyond the shelf price. ”There are a number of concerns consumers have to take into account when considering the cost of printing. You have to look at the yield the product will continue to generate.”

According to Epson SA, a lot of resources go into manufacturing the inks and production processes like quality control. “We do not believe our cartridges are expensive when considering the investment made to develop printing technology, inks and media, and also the enormous improvements in printer technology we have made in the last decade.”

The company says its prices are competitive with other manufacturers that have made similar investments in research and quality.

Canon issued a statement in response to the issue last week, saying its products are subjected to “a rigorous testing and development programme... to bring the most competitive and robust products to market with the guarantee of both quality and performance, key assets our customers are happy to pay for”.

Canon adds that its pricing is transparent “allowing customers to make an informed choice when purchasing the printer”.

Dell declined to comment on the matter, saying it had no information available when asked about the high cost of printer cartridges.

While entry-level desktop printers are now available for around R500, it seems cartridge costs have not kept up.

However, Munna Desai, Brother Printers director of products for east, central and south Africa, says there's a misconception that printer hardware has become cheaper. He argues that hardware prices haven't come down as such, but that vendors are using different strategies in selling printing supplies.

Printer cartridges are something of a grudge purchase.

Markus Kluwe, member, Optimum Print Technology

“Some of the brands discount the hardware, hoping to recoup the profits through cartridges. If you look at things now, in 2010, where are you going to find a manufacturer that can make a printer for a few hundred rands? The cost of the labour alone is more than that. Some vendors are compromising the cost of printer, and recouping their losses through the sales of consumables.”

Hiller says printer hardware is aggressively priced with little or no profit margin. When asked whether manufacturers are following a razor-and-blades approach, he said: “It's about more than just buying a cartridge, it's an overall relationship. You have to consider things like the warranty and technical support.”

According to Hiller, the cost of the hardware makes up less than 20% of the overall amount the customer pays over the printer's lifetime. “At a consumer level, the cost of consumables is larger than the cost of hardware over the life of a printer. It's like putting petrol into a car or airtime on a phone - that's the consumption model.”

Refilling cartridges is one way of avoiding the ongoing expense of buying new ones, but there are concerns around quality and damage to the printer.

According to Hiller, many cartridge refilling service providers use an unsophisticated method to inject ink into used cartridges with a syringe, so they can be used multiple times. “There's a price difference, but also considerable questions about quality.

“The design of the cartridge is optimised to deliver a certain degree of quality and the compound itself is scientifically formulated to give the results promised. So if you use a generic ink and are not respecting the formula required, you can't expect to get the same level of quality.”

Tripathi says refilling, when it simply involves opening up the cartridge and putting in new ink, is unlikely to deliver desirable results. “A roadside refiller is never going to be able to provide that quality, because they don't have the resources. Refillers really struggle to get the colours right, even good remanufacturers struggle with colour.”

Epson SA adds: “We've seen problems such as inferior image quality, the misfiring of nozzles and other printer malfunctions due to contaminants and air bubbles in the ink delivery system and print head as a result of using refilled cartridges.”

Kluwe points out that there's a major disparity between the prices of cartridges locally and in some other countries, with people overseas “paying a fraction of what they're paying here”. He says this is mainly because the market price for cartridges is high in SA. “Manufacturers are getting away with it; it seems SA is a high market price country.”

Hiller, however, says this would be an unwise practice for manufacturers. “Any brand would be foolish to have a significant price difference between countries - it would simply create a grey market.”

He notes that while there are subtle differences from market to market, due to distribution costs, local market dynamics and tax laws, “I wouldn't expect a material difference between product pricing.”

HP's answer to the high cost of cartridges is that a lot of research and development goes into its printing supplies technology, with the cartridge making up 70% of the printer's imaging system.

Bernhard Bette, HP supplies category manager for Europe, Middle East and Africa, said during a presentation on original supplies held in Turkey last month that the cost of printing should be seen in broader terms. This includes things like labour costs and hardware downtime due to using cheaper, but poorer quality cartridges.

According to G'eraldine Morel, marketing product manager for the HP Imaging and Printing Group, the cartridge is not just a 'vessel for the ink', but developed as part of the printer system. Desai agrees: “The cartridge is not just a bottle for ink. It's designed to do certain things like channel the ink and press it onto the page; there's a lot of investment into technology.”

On the remanufacturing side, Tripathi notes, some suppliers are getting more organised, and improving their technology, but it differs from market to market. He agrees that remanufactured cartridges will ever be able to deliver the quality originals do, but notes they can be up to 70% cheaper. “So the choice between the two really depends on cost versus quality.”

Tripathi explains that it comes down to the specific printing need. “You have home users, smaller companies and enterprises. The latter are more worried about quality, yield and output, so multinationals are still using original cartridges. But for a home user, who doesn't print very often, it's the savings that matter.”

He says there's no denying remanufactured supplies provide huge savings, but it depends on the focus. If it's quality, go for the OEMs, but if saving is your objective then look at established remanufacturers which have the right approach. Do a proper comparison and compare apples with apples; if you feel the quality of the remanufactured cartridge is sufficient for you, then use it, but also compare the number of pages you're going to get against the money spent.”

Tripathi adds that vendors are unlikely to lower the prices of cartridges anytime soon, given the competition in hardware sales. Instead, they run promotional campaigns on why original supplies are better, benefits in yield, quality, and so on. ”But in terms of price point, that's where they make their money.”

As long as the actual cost of supplies remains the same, says Kluwe, management solutions that lessen the amount of ink and toner used could be helpful. He says companies can use software programs that calculate ways to optimise the deployment of ink on a page, making cartridges last longer.

This also includes things like rules for various users regarding the amount and types of copies they make, their access to printers, as well as reports on employees' printing activities.

Kluwe notes there's a certain pressure for manufacturers to reduce prices, but he's sceptical it will come down by a huge amount. “I suspect the high cost of printer cartridges is here to stay.”

Hiller, however, believes the price is likely to drop. “As with all technology, it's likely to come down, but also bear in mind the sophistication of the cartridges. In the next couple of years, you'll probably see higher onboard storage capability, so more ink can be stored on the cartridge, meaning less frequent purchases.”

Ultimately, says Epson SA, the choice is with the consumer as to what they consider to be more important: cost or quality.