Issue #0508/1 - While a new round of price reductions on consumables heralds a revision of pricing strategy for Hewlett-Packard, aimed at injecting more stability and predictability for users, there is finally some evidence that some retail outlets are passing on savings – but others definitely are not!
Following six months of repeated price rises on supplies products in the UK, Hewlett-Packard EMEA has announced and implemented a price reduction averaging 7.8% on inkjet print cartridges and 7.3% on laser printer cartridges across all geographies linked to the Euro.
Also recently, CharisCo Printer Labs learned of a rumour that Hewlett-Packard has vowed to ‘become aggressive on consumables’, including the suggestion that it would make its Vivera inks available for use in other brands of ink jet printer, in the same way that many third party inks are available for printers from Canon, Epson, Hewlett-Packard, Lexmark and Xerox.
Our initial reaction was hope that major changes were about to occur in the industry – but – Hewlett-Packard strenuously denies that there is any plan to release Vivera inks for any printers other than Hewlett-Packard printers and indicates that the rumour about an aggressive strategy also has no foundation. In essence – Hewlett-Packard inks are for Hewlett-Packard printers alone and Hewlett-Packard will not start any form of price war.
Certainly, if the rumours had been true, this would represent a massive change of strategy for Hewlett-Packard, a company that has always resisted involving itself in third party supplies and has been strongly scathing of those that do. The other issue for Hewlett-Packard here is that it would almost certainly open the door for genuine Hewlett-Packard inks to find their way onto the market as refill inks – again, something that the company would not wish to see.
Very curiously, Hewlett-Packard itself owns a patent for a cartridge refill kit! In my opinion, this kit will never the light of day in any retail store or on any price list because it is not in Hewlett-Packard’s interests to bring it to market.
However, the existence of the patent leaves the door open for that eventuality should Hewlett-Packard ever decide that it would be of value to market refill solutions. From the opposite angle, there is value in owning a patent if a company decides that the ownership would offer protection against competitors building a device using that particular technology.
So, if Hewlett-Packard’s cartridge manufacturing process uses a particular technique for design, build or preparation of the cartridge, then to build and patent a refill device based on that technique would certainly provide a significant level of competitive protection.
Regarding the pricing adjustments, there is no doubt that reductions of 7.8% do not constitute ‘aggression’. However, Hewlett-Packard is making changes to the way in which pricing decisions are made and administered in order to try and inject more stability into cartridge pricing and push price adjustments caused by exchange rate movements into the longer term. This is partly being achieved by regionalising pricing to a greater extent, which helps to disconnect local pricing from currency fluctuations and should also reduce the opportunities for grey importing across national/regional borders.
At this point in time, the US Dollar to Euro and British Pound exchange rates have changed by around 5.5% since September when reductions of between 1% and 4% were made on a number of products in the UK.
Over the course of last autumn, prices in the UK crept upwards by several percent while prices around the Euro zone remained static, despite the sliding Dollar, because UK pricing is set from Euros rather than Dollars and Hewlett-Packard was resisting further Euro price reductions at the time, which would have compensated for the Euro/Pound exchange rate changes.
What this means in practical terms is that inkjet cartridge prices in the UK now, March 2005, are actually only about 4% lower than they were in September; laser cartridges are only 2% lower and media prices have actually risen by 3.4%, mainly because media prices are not included in this round of reductions. It would appear that the magnitude of the reductions is high to compensate for the recent increases, resulting in a real reduction since September that does not fully compensate for the change in the exchange rate.
Similarly, prices were last changed in the Euro zone in June, 2004, when they were increased by around 5% as a response to exchange rate fluctuations. Since that time, the Dollar has slumped in value by around 8.5% but this round of price reductions is limited to around the 7.5% mark. So again, price reductions fall short of the exchange movement.
Looking individually at the changes on a handful of products in the UK since September 2004, while ink jet cartridges checked all fall around the average figures quoted, there are a several laser products that do not. For instance, the toner cartridge for the LaserJet 4300 has increased in price by 2.7% since September, while the toner for the LaserJet 1150 has increased by 1.7%. In addition, toners for the low-end colour laser printer, LaserJet 1500, are reduced by only 1.4% on the colours and 1.7% on the black – not at all as high a reduction as should have been expected.
So, far from demonstrating any aggression, these adjustments are merely a response to exchange rate fluctuations – a factor that is readily admitted by Hewlett-Packard – and barely counteract the affect of the rate change.
More to the point – we need to know how the channel reacts to the price changes. Comment has been made previously in TCPglobal that frequent price adjustments are a nuisance to the channel and actually represent a deterrent to the channel passing on any adjustments to the user.
Hewlett-Packard is taking action to reduce this effect and thereby encourage the channel to make reductions in line with Hewlett-Packard reductions.
In fact, it appears that they would prefer to take the trade price increases in their stride in the knowledge that ‘what goes up must come down’ and, ultimately, the trend will be downwards rather than upwards. Reality is that, while they do not generally pass on price increases, neither do they reduce them in response to trade price decreases from the manufacturer.
Investigation of current pricing on a small selection of products at internet stores, comparing current prices with prices a year ago, indicates some inconsistency in responses to Hewlett-Packard’s price adjustments.
While we see that there have been a number of changes, there are also a number of instances where prices have not changed at all over the 12 months. Worse than that though, a number of prices have actually risen – in some cases by a significant percentage.
Note, in particular, the change in Store 4 on its Hewlett-Packard compatible range! I believe it is worth stating that this store is the Dixons Group because this situation is outrageous and Dixons should be boycotted for this behaviour.
Having decided not to sell Hewlett-Packard original No.56 and No.57 cartridges, Dixons has increased its prices on its own PC Line compatible range by upwards of 50% in the last 12 months so that they are now HIGHER than the price of OEM originals in other stores! They are selling at 27% and 12.5% above Hewlett-Packard MRSPs on these two products.
Note also that Store 3 (business oriented stationers/supplies) has increased the price of more products than it has reduced, with all but two of the products (both laser cartridges) priced significantly (up to 30%) higher than Hewlett-Packard’s price.
Overall, though, it is encouraging to note that so many of the stores have actually reduced their prices. I would suggest that in those instances where price rises have occurred, it is because the product is in particular demand and the store has seen the potential for high profit. In most of these instances, as suggested, the prices are above the MRSP set by Hewlett-Packard.
| MRSP | Store 1 | Store 2 | Store 3 |
Store 4 (compatible) |
|
|---|---|---|---|---|---|
| No. 56 ink | -11.8% | -4.6% | -3.1% | +7.1% | +54.6% |
| No. 57 ink | -11.1% | -14.7% | 0.0% | +2.0% | +50.0% |
| No. 58 ink | -10.0% | -12.2% | 0.0% | +8.1% | |
| No. 59 ink | -15.0% | 6.7% | 0.0% | n/a | |
| No. 29 ink | -8.4% | -0.9% | 0.0% | +11.1% | |
| No. 45 ink | -8.7% | -13.2% | +33.3% | 0.0% | |
|
C8061X (LJ 4100) |
-9.7% | -19.5% | 0.0% | 0.0% | |
|
Q1338A (LJ4200) |
-9.9% | -12.7% | -4.8% | 0.0% | |
|
Q1339A (LJ4300) |
-3.7% | -7.3% | 0.0% | -5.1% | |
|
Q2610A (LJ2300) |
-10.2% | -9.0% | 0.0% | 0.0% | |
|
Q2613X (LJ1300) |
-9.2% | -14.9% | n/a | 0.0% | |
|
Q2624A (LJ1150) |
-4.9% | 9.8% | 0.0% | - | |
|
Black (CLJ1500) |
-7.3% | -9.2% | 0.0% | -3.1% | |
|
Colours (CLJ1500) |
-6.6% | -14.8% | 0.0% | -6.3% | |
Another change from Hewlett-Packard, that is designed to help define a price point for photo printing and increase predictability of cost, is the introduction of media and ink bundles for photo printing.
Not an original concept, Hewlett-Packard is following the example of Epson, with its cartridge-plus-media packs, and the various packs available for dye sublimation printers such as Canon’s CP range, Kodak’s Printer Dock range and Dell’s Photo Printer 540.
Two bundles are available, a Home Photo Pack and a Pro Photo Pack:
Priced at £36.99 / €44.90 including VAT for the Home Pack, including one No. 344 (14ml) tri-colour cartridge and 130 sheets of 10×15 glossy paper, users should be assured of a cost per print of no more than 28 pence / 35 cents. Whether this will be reduced in practice because some ink is left after using all the paper is dependent on the type of photos being printed.
One would hope that Hewlett-Packard has designed the pack to avoid much danger of the ink running out before the paper but this cannot be guaranteed! Users should remember that this is based on the No. 344 cartridge alone and is therefore capable of producing only 3-colour prints. Hewlett-Packard specifically indicates that these packs will produce ‘up to’ 130 prints. In other words, there is no guarantee that the user will not run out of ink before the 130 sheets of paper are used.
This situation is likely to occur when the user has a batch of photographs with a predominant colour – such as blue sea and sky on a set of holiday photos. Hewlett-Packard assures me that there will be sufficient ink for 130 prints ‘more than 90% of the time’.
On the basis that in the use of nine out of ten packs the user will have more than enough ink to print 130 photos, by the time they have used the tenth pack, the balance will probably compensate for the possibility of a shortfall in one pack.
For 6-colour printing, users need the Pro Photo Pack, which includes one No. 343 (7ml) tri-colour cartridge, one No. 348 (13ml) photo cartridge and 120 sheets of 10×15 glossy paper. At £48.99 / €67.90, this pack offers 120 prints at 41 pence / 57 cents per photo. The same caveat should be stressed here regarding guaranteed number of prints.
These bundles certainly represent a useful means for users to be a little more certain about the costs linked with photo printing. Hewlett-Packard has indicated that there are more of these packs in the marketing pipeline but cannot provide detail yet relating to which products they will affect. To speculate, I would expect the range at least to include packs for the No. 57 and No. 58 cartridges.
However, whichever of these bundles, with associated print quality, one considers, this pricing is still a long way from the current 10 pence / 15 cent prices available from some high street outlets for bulk photo printing.
To draw a conclusion, the signs are encouraging that pricing will be more stable as the pricing strategy takes a firm hold. In addition, any assistance that can be given to users to help them manage their expectations regarding print costs can only be beneficial.
~End~
