While the inkjet printer market has experienced flat growth over the past 18 months, consumer demand for inkjet technology remains strong. But customers are now demanding more from the technology. Although $90-$200 machines continue to dominate the inkjet market, consumers are increasingly opting for multifunction inkjet printers and mid-range ‘photo’ printers, which start at about $280.
GfK Marketing Services’ business group director, Ludovic Milet, said: “Inkjet sales weakened over 2002 compared to 2001. In 2000 the inkjet market boasted even stronger sales. In the month from November 2001 to December 2001, the value of inkjet printers dropped 10 per cent and volume dropped 4-5 per cent.”
A trough in the market’s buying cycle as well as a steady decline in PC sales contributed to the weakening of inkjet printer sales to the consumer market.
“Inkjets have reached a certain level of saturation in the retail sector,” Milet said. “They’ve enjoyed strong sales for the last three to four years, so it’s not surprising sales have lagged.”
A number of industry players agreed unanimously that inkjet sales in the retail sector have also been significantly impacted by the drop in price point and improvement in form factor of the multifunction device (MFD) which has made them an attractive alternative to home office users.
Milet said that from January 2001 to 2002, MFD sales doubled and prices dropped 25 per cent.
“Space efficiency is the big driver for MFDs,” he said. “A lot of home office users would prefer to compromise on the quality of the respective technologies an MFD offers in order save on cost and space.”
Harvey Norman’s national hardware product and marketing manager, Paul Schnell, said the retail giant’s MFD sales doubled in December 2002 compared to the previous year.
“This has had a huge impact on inkjet and scanner sales,” he said. “MFDs are cannibalising the inkjet market. Printers are a declining market and MFDs are a growing market. However, the MFD market growth should slow in 12 months.”
Sales manager of printing distributor Alloys International, Phil Gibbs, has also experienced a huge upswing in MFD sales since mid-2002: “We sold three to four times as many MFDs in 2002 than in 2001.”
In the face of dwindling inkjet sales, the top inkjet vendors are all vying for a slice of the MFD pie. HP and Lexmark were the first to make an aggressive play for the space. Epson and Canon promptly followed suit and are now going after it like blooded pitbulls, with Canon announcing the launch of seven new multifunction devices this year.
“MFD sales will continue to grow and consume the inkjet market,” said Stuart Poignand, Canon’s marketing manager of consumer imaging. “Clearly MFD inkjets are the fastest growing segment in the inkjet market but it has a much smaller customer base of about 110,000 compared to the total inkjet customer base of 800,000-900,000.”
Lexmark is also strengthening its position in the MFD market as inkjet sales weaken.
“Inkjet sales were flat over the Christmas season compared to the previous year, but we’ve seen significant growth in MFD sales since mid-2002,” said Stephen Waugh, Lexmark Australia’s general manager of its Consumer Products Division. “So we’re driving MFDs and focusing on that area. We’ve shifted our focus.
“Inkjets as a standalone product are still selling well even though the market has flattened and I think it will continue, but in terms of real value for money, consumers can’t beat the all-in-one MFD product.”
Gibbs said that while the mid-range inkjet printer market would slowly give way to the MFD market, the entry-level bundle inkjet printer market would always be there.
“At the moment, 60 per cent of the inkjets we sell are entry-level inkjets sold as part of a PC bundle, 25 per cent are inkjets with photo print capabilities and the remaining are enterprise inkjets,” he said.
Canon’s Poignant said the sweetspot in terms of price is between $100-200 for an inkjet.
“The inkjet entry-level market is by far the biggest part of our inkjet business, making up about 75 per cent of inkjet sales,” he said.
By contrast, several industry players believe that the sub-$100 inkjet market is fast reaching saturation point.
Although the size of the inkjet printer market has changed little, a paradigm shift is taking place in the market whereby consumers are buying more mid-range inkjets and less of the sub-$100 inkjets.
Subsequently, the average retail price of inkjets has gone up from $183 in February 2002 to $208 in November 2002, Milet said.
This shift in consumers’ buying habits can in part be attributed to the top inkjet manufacturers’ heavy emphasis on marketing the photo printing capabilities of their mid-range inkjet printers.
While entry-level inkjets have dominated the inkjet consumer market for the last two years, vendors such as Canon and Epson began marketing their mid-range inkjet printers towards digital camera users. Industry watchdogs are unanimous that this marketing angle is paying off.
“The main driver in the inkjet market recently has been digital imaging,” Poignand said. “The photo printing market has become very aggressive.
“I think we’re in an upgrade cycle at the moment and many consumers are buying their second or third bubblejet printer and now want to see extra capabilities.”
Poignand said that while entry-level inkjets had the capability of printing photos, consumers looking to upgrade were now turning to the mid-range inkjet printers, drawn by the photo printing capabilities heavily featured on the mid-range products’ packaging.
“The inkjets that are selling well at the moment are those that include the word ‘Photo’ in their product name, and those that make strong visual references to the inkjet’s photo printing capabilities through its packaging or marketing,” Milet said.
“A lot of end users and SOHOs want both the capability of printing standard paper documents as well as photos of reasonable quality.”
Gibbs said: “This is the year of the digital camera. As digital cameras come down in price over 2003, there’ll be an increase in sales of inkjet printers that promote photo printing capabilities.”
As digital cameras become increasingly popular and consumers are lured away from entry-level inkjets towards the more sophisticated photo printing capabilities of mid-range inkjets, it is essential for resellers to offer a range of both, as well as a range of MFDs and, of course, inkjet consumables.
“It is apparent that the inkjet market is segmenting,” Gibbs said. “There is an enormous range of printer technologies out there now so resellers must have a range to get the most out of the market.”
For resellers, the margins on entry-level inkjets, mid-range ‘photo’ inkjets and MFDs remains at between two to five points. Thankfully, the cream that is the consumables market remains unharmed. Vendors are focusing their marketing efforts on mid-range inkjets and MFDs, but the realisation that the market for consumables is far greater than the hardware market has well and truly arrived.
Epson was the first company to act, launching its Gold Seal program in an effort to control the consumables market. HP has also taken a stand, building silicon chips into its cartridges to increase their printers’ functionality. Despite numerous attempts by third-party manufacturers such as Calidid, these chips haven’t been replicated with any success.
“Printing consumables are why these guys are in it,” Gibbs said. “Epson and Canon are starting to wake up to the fact that their consumables business is being eroded by grey marketing and cloned products and they can’t afford to lose it. I don’t think it will be long before the top printer vendors follow Epson and take definitive steps to try and seize control of the consumables market.
“My advice to resellers is flog those consumables. See how creatively you can screw over your vendor partners by grey marketing your consumables. There’s more money in selling cartridges than selling heroin.”
Bundling grey marketed consumables such as high-grade photo paper, ink cartridges and accessories with mid-range inkjet ‘photo’ printers provides resellers with a tidy margin and is a more convenient, less costly purchase for consumers.
Poignand said Canon encouraged its resellers to bundle its inkjet printers with gadget bags made up of Canon consumables. When asked if Canon offered resellers cost incentives to bundle their Canon printers with Canon consumables, Poignand said that the vendor reviews each case individually.
Despite the price sensitivity of the retail market, Poignand said, “Resellers don’t necessarily need to lower the counter price of the bundled goods. They need to create a bundle of co-dependent products that are an appealing and convenient purchase for the customer and which take the focus off price.”
In terms of quality and compatibility, there is no substitute for using authentic vendor consumables designed specifically for respective inkjet printers. Inevitably when vendors use this warning in their sales pitch it is met with scepticism by consumers. But numerous reports are filtering through to back up the assertion.
If resellers decide to bundle grey marketed consumables with their inkjets in order to lower pricepoint, they are wise to inform customers about how the cheaper products might impact the technology’s performance.
Effectively educating the customer and demonstrating expertise in the inkjet market, will not only secure repeat business, but it will also take the customer’s focus off price.
By showing customers what they can get out of the technology in such a way that they can replicate it when they get home, resellers almost guarantee that the consumer will seek their expertise when buying more consumables or upgrading their hardware.