This Week in Imaging: The End of ‘Razors-and-Blades?’; Sharp, Xerox Back in the PC Game
This week we came across an interesting article in The Motley Fool. Writer Timothy Green discussed HP Inc.’s new proposed business model that at the lower end would consist of: 1) higher-priced “subsidized” printers/MFPs that would accept use of third-party toner and ink supplies, and 2) lower-priced models that would only accept HP-brand ink and toner. (Number 2 is the traditional razors-and-blades business model, in which the product is sold at a loss, but profits are recovered through the sale of supplies.) At the higher end (A3 and A4), HP would continue to promote managed print services (MPS) for locking in use of HP-brand supplies.
Green wrote, however: “This plan could backfire spectacularly if HP’s competitors don’t follow suit, and instead choose to undercut it on hardware pricing. Even if the plan does work out, it seems unlikely that the lost profits from high-margin supplies sales will be fully offset by additional profits from hardware sales. “
This is true, as there’s always a chance that HP’s primary competitors in the lower end, Epson and Brother, could drastically cut model prices in order to try to undercut HP. But both have been heading out of the very low end segment of very low-priced models into the higher-priced office segment, and Epson in particular has already adopted a business model with primarily higher-priced printers/MFPs and lower-priced supplies. Canon and OKI Data are also in the lower-end segment, and there’s the possibility of course that they could cut prices to undercut HP, but Canon’s traditional focus has been on the A3 office, and OKI is more likely to continue its strategy on focusing on moving upstream into the office and on commercial models, not on very low-cost models.
In his article, Motley Fool’s Green concludes that “The most likely scenario is that the printing business becomes less profitable for HP over the long run.” This will likely be only partly true, with the long-term future for HP’s printer group likely to be a less profitable low-end printer business due to lower print volumes and poaching of supplies revenue from third parties. But this will likely be offset by gains in the A3 office segment (where supplies revenue can be locked in with MPS), and with 3D printing, label printing, graphics printing, commercial printing, and package printing.
As for the razors-and-blades business model for printers – which has been hated by many users for years – it’s likely that although such low-priced models will continue to be available for some time, in general the industry is gradually shifting away from it.
Meanwhile, HP’s two-tier supplies model at the lower end – along with partner Canon’s continuing campaign against patent-infringing third-party supplies, particularly those sold on Amazon – should help HP.
Sharp Back in the PC Business
Until very recently, in the last several years, HP Inc. has been the only printer/MFP company that also sells PCs. That recently changed with Sharp getting back in the PC business by acquiring a majority interest in Toshiba’s laptop PC business earlier this year.
At its U.S. national dealer conference earlier this month, Sharp took the next step, introducing four laptop PCs for its dealers. Of course, Sharp laptop PCs, branded Dynabook, have a long way to go before they can come even close to HP’s leadership in the global PC market (HP comes in second with 21.7 percent global market share compared to Lenova’s leading 22.5 percent share, according to Gartner). Sharp is encouraging its dealers to incorporate the laptops as part of a Smart Office strategy that entails bundling everything it says is necessary for the Smart Office – which includes laptops, printers, MFPs, and conference-room displays and solutions.
There is of course another printer/MFP company that’s got back in the PC game, Xerox. Xerox expanded its partnership with HP in June, with the expansion enabling Xerox to sell HP PCs, displays, and PC accessories. But this won’t be the first time Xerox will be selling PCs. Back in 1981, it introduced the Alto personal computer, which it marketed as a system called the Xerox Star, which in turn consisted of several PC workstations, storage, and a laser printer, and which cost $100,000 (no, that’s not a typo). While Star achieved some success, it was eclipsed by Apple’s lower-cost Macintosh – which sadly – used technology copied from the Xerox Alto. Let’s hope this time Xerox has better luck.
This Week in Imaging