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Tuesday, November 08, 2005

Printer companies, market share and competition

This is somewhat related to work, but detached enough that I feel comfortable talking about publicly.

If you have an inkjet printer and run out of ink, you will buy a new inkjet cartridge from the same printer manufacturer. For example, if you own a HP printer, you will buy HP inkjet cartridges. You won't buy Epson or Canon cartridges.

I've only recently realised how silly this whole notion is. Not because you could save money by refilling your inkjet cartridges (an area that I won't go into publicly), but because you are restricted to buying supplies from the same manufacturer forever and ever, amen.

The silliness arises because in any competitive and capitalistic field, if a company produces goods for a certain class of product, it will produce those goods for as many products in that class as possible.

For example, Verbatim makes CD-R discs that can be used with Pioneer CD writers and Sony CD writers and other brands of CD writers, but not just for one brand of writer alone. Or for something less computer-related, Esso or Mobil won't produce a fuel specifically for Hondas or Fords or BMWs, but for all vehicles.

So why would a printer manufacturer produce ink only for its printers? The simple and only answer that I can think of is because they have to support their own brand. But as most people know or can figure out, the money isn't in printers, but in ink. So a printer manufacturer should more logically support its ink, not its printers.

Aside: Yes, I realise that there are differences between different brands of ink, e.g. water content, droplet size, etc. But I'm sure that the printer manufacturers have more than enough resources to find ways to overcome these issues.

To take a real world example, more than 50% of the world's printers are HP printers. Therefore, 100% of HP's inkjet cartridges can only support 50% of all printers in the world. That leaves another 50% of all printers untouched by HP. But the money is in ink, and 50% of hundreds of thousands of printers is a mind-boggling number. Taken together, that's a lot of untapped revenue.

Now if HP owned 100% of the printer market, then of course it would logically support its printers only. But it doesn't own 100% of the market, and neither does Epson or Canon or any other brand.

What if Epson or Canon came out with inkjet cartridges that can be used in HP printers? Epson has less than 20% of the world's printer market. If it produces HP-compatible inkjet cartridges (containing its own Epson ink, of course), then it could sell to 20+50 = 70% of the world's printer market! That's a lot of money to be made!

So why don't these printer companies do that? It smacks rightly in the face of capitalism and competition. Unless I haven't thought of something, or there's some conspiracy somewhere...


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Beach-yi said...

The problem of other companies producing ink of other printers is that of patents aka legalised monopoly.

My guess is that whenever, say, HP comes out with a new printer, it also comes out with 3-4 different catridges type. There isn't much difference between the catridge except whether they contain black or colour pigments. Where the patent comes in is how the 'ink' is being applied to the paper, for example an ultra fine nozzle that HP innovated is being used.

Producing a catridge that suits HP printers therefore entails knowing their technology. Which in this day and time, is not too difficult to reverse engineer once you throw in a few Phd and Masters engineers. That's where patents come in to protect HP's market share.

Hm hope I make sense.

Yuhui said...

Yes, that makes sense. Except that there are already companies that either produce the ink or compatible cartridges, so it's just a matter of R&D, which I think is worth it in the long run.

Anonymous said...

Its all good theory. I actually work for one of those Printer companies, but the problem is this.

H/W (Printer) prices are dropping so fast that the manufacturers are making loss with H/W sales. No profit and sometimes they are sold very close to the material cost and hence no margin.

The rational behind this is that they can recover this loss with consumable sales (ink/toner). So that is why they are producing brand specific consumables and not universal ones.

So in effect, HP will be the last company to support making the consumables compatible with other brands.

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