TCPglobal - news, views and issues on total cost of printing

Issue #0532/2 - Oki has increased pricing on consumables products but can they be justified?

Oki Printing Solutions recently raised its consumables prices around the world because ‘Hewlett-Packard says so’!

A global directive has been implemented by Oki companies around the world that raises consumables prices on 90% of its products. Only ribbons for Dot Matrix printers are exempt from this directive, along with four black laser products (two black toner cartridges and two waste toner bottles).

When the rises were queried, because there can be very little justification for increasing prices on the grounds of exchange rate fluctuations, Oki’s reply was that it was a ‘response to price increases from Hewlett-Packard and subsequent increases by Lexmark’!

Oki C5200 Colour CPP
up 13% since May

Certainly the UK market is sensitive, largely because most goods tend to purchased in the Euro and then prices converted to UK Pounds. Also, Hewlett-Packard did raise prices on many inkjet and laser products in the Euro zone at the beginning of September (TCPglobal Issue#0526 - "European consumables pricing hit by (slightly) strengthening US Dollar"). Increases were around the 6% mark and were generally related to exchange rate fluctuations – though some strategic changes to prices, of up to 21%, were made at the same time.

An additional factor, that affects UK pricing as well as others, is the danger of grey imports. For this reason, a manufacturer must ensure that its pricing in any country is not significantly higher or lower than pricing in other countries, particularly neighbouring countries.

However, what is so unusual about these changes from Oki, that tends to nullify the claim that exchange rates are to blame, is that this is a Japanese company - not an American company. In real terms, recent Yen to Euro exchange rate fluctuations have not justified a price adjustment. Epson has not made wholesale changes to prices, nor has Kyocera Mita, Ricoh or Canon. Even US manufacturer, Xerox, has not followed suit with price increases.

Furthermore, Hewlett-Packard did not raise prices in EMEA countries that are tied to the US Dollar except in Russia and Kazakhstan. Indeed, apart from Russia and Kazakhstan, the price trend in countries where prices are published in US Dollars was downwards by a percentage point or two.

While awaiting confirmation from Hewlett-Packard regarding prices in the US, it is my belief that they have NOT been changed at all, let alone increased, at least since June 2004 and probably not for a long time before that.

Lexmark’s increases during September (TCPglobal Issue#0527 - "Xerox holds European consumables pricing while Lexmark imposes further increases") amounted to an average of 3% across 85% of its products. Lexmark is known to be exceptionally responsive to pricing moves by Hewlett-Packard and has even been suspected of pre-empting Hewlett-Packard pricing adjustments in years past.

There is no difficulty in understanding that a manufacturer would feel the need to follow a downward price change from Hewlett-Packard in order to maintain competitivity. But, why should there be a need to follow an upwards movement?

Surely the response to price rises from Hewlett-Packard is ‘great, we can persuade more people to buy from us because we now have a greater competitive edge’!

Or is it actually, ‘great, now we can wring more profit out of our customers by putting our prices up as well’!

I am in very little doubt that it is the second reaction that is closer to reality and this is almost tantamount to price-fixing!! This industry is so entrenched in the ‘make as much profit as possible from consumables’ mentality that there is almost no room for consideration of the customer despite the fact that those all-important profits are reliant on the customer.

For competitors to be raising their prices just because Hewlett-Packard does so is an appalling abuse of commercial privilege.

Oki has made one further tactical error in its consumables pricing strategy. In the spring of this year the decision was made to remove the bulk purchase discount applied to Rainbow Packs of toners for colour laser printers. This means that the price of the Rainbow Packs is now the same as the sum of the individual cartridges – no benefit to the customer for buying all four at once.

Oki C5200n - Running Costs

In practice, this represents a 14% price rise on cartridges for the C7000 series, pushing the nominal colour CPP up by 13% and the overall long-term CPP up by 8% (more for high coverage pages).

Oki C7350dn - Running Costs

You will note from the table included that the overall CPP for the Oki C7350 is almost the highest of the group, second only to the solid ink Xerox 8550 and clearly higher than the new Hewlett-Packard model and almost twice the cost of the Dell C5100.

Other rainbow packs affected are for the C9000 series, price increase 13%, and for the C5000 series, price increase 4.3%. However, the C5000 colour cartridges experienced a price reduction in the same month (perhaps being the reason they have now been increased by more than the average!) of 7.6%, making an increase in real terms of about 11.5%.

Reactions from the customer base have not been as expected and the company head office is now under pressure to reinstate the discounts. If this happens it is likely to be applied in the spring of 2006.

~End~

This entry was posted on Friday, October 21st, 2005 at 12:02 am and is filed under Pricing, Issues. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.