The Great Office Supplies Caper: the variability of ink and toner cartridges costs

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Toner Cartridges

Laser Cartridge Schematic Showing Major Components

Laser printer cartridge

The material cost in a typical laser cartridge is around $15 to $20. Of course there are variables between cartridges, some have more and some have less toner, some are fully integrated structures (as shown here) and some are not. The two examples selected for these examples show a 24,000 and a 10,000 page yield style. However, cartridges can yield anywhere from as little as 1,500 to as many as 40,000 pages, and typically, the hardware selected is based on the customer usage requirements.

A cartridge used in a high volume business environment may have as much as thirty times the yield of a small personal printer cartridge but would be priced at only around four times that of the lower yield cartridge. For the most part the components of a low yield cartridge compared to a high yield cartridge are similar. The amount of toner and the size of the molded parts will be different but the overall technology and component parts are very similar.

Broadly speaking, most cartridges manufactured by the OEMs have a delivered cost somewhere between $8 and $25 depending on the page yields.

Here are two examples showing the listed prices of OEM brand products as of April 2016 alongside the estimated manufacturing and distribution costs:

Laserjet cartridges

Ink Cartridges

Ink jet printing is enabled through deployment of sophisticated technology that’s evolved over the last 40-50 years. After going mainstream in the mid to late 1990s it’s quite incredible how sophisticated and advanced today’s technology is, both in terms of print quality and speed of output. Millions of dollars have been invested by the OEMs to get the technology to where it is today.

Ink cartridges

The material cost in a typical ink cartridge is $2 to $3 with most of the cartridges manufactured in highly automated facilities in low labor-cost locations around the world. Because of their compact design and relatively low weight, the cartridges can be transported around the world at very low “per-piece” freight costs.

Of course, some ink cartridges have more ink than others, some cartridges are multi-color and some just one color, so actual costs will vary to some degree depending on the design. However, regardless of these variations, most OEM cartridges cost very little to manufacture and most OEM sell prices are very high in relation to the manufacturing cost.

As can be seen from the two example costed bills of materials below, the cost between a cartridge with an integrated print-head and one without are not significantly different, but it’s not uncommon to see a 30%+ pricing differential between the two as a result of different aftermarket competitive pressures.

Here are two examples showing the listed prices of OEM brand products as of April 2016 alongside the estimated manufacturing and distribution costs:

Ink cartridges

What's the takeaway?

Laser cartridges that cost between $15 and $20 to get from the offshore factory to local distribution centers across the United States for resale between $200 to $300 doesn’t seem right.

Ink cartridges that cost between $3 and $4 to get from their factories to local distribution centers for resale between $25 and $35 also doesn’t seem right.

  1. The underlying reason for the high prices on consumables was the desire of the original equipment manufacturers (OEMs) to build the largest possible installed base of printing devices that would go on to consume the high priced cartridges. In order to achieve this objective, the printing devices were priced at or below their true cost. By offering businesses and consumers low cost printing devices then mass adoption was enabled. The cartridges subsidize the hardware so ultimately the consumers of the cartridges end up paying the true cost of the printer – it was just put off to some point in the future!
  2. The OEMs are now caught between a rock and hard place. There’s too much competition on the hardware side for them to successfully raise prices and charge consumers a fair market price for printers, so they have no choice but to rely on the profits from cartridges to subsidize the losses on the hardware. Because of this, there’s unlikely to be any change to the OEM cartridge pricing model and the aftermarket competition is here to stay. Consumers can benefit from lower prices on high-quality aftermarket products.
  3. Competition works in many predictable and sometimes unpredictable ways. However, what’s quite normal is for high prices and the potential for profits to attract competition and this is why we have an aftermarket for imaging supplies. Of course, the aftermarket ink and toner manufacturers are not encumbered with having to subsidize printer hardware so, high quality aftermarket alternatives are available at much lower prices than the original brand equivalents.
  4. The high-quality aftermarket options that exist today are a far cry from those that existed 20-30 years ago and the OEMs are now forced to recognize both the threat and legitimacy of the aftermarket. By leveraging their market power with the few remaining Tier-1 resellers such as DepotMax, Staples, Walmart, etc., the OEMs have been able to restrict lower cost options from access to the largest markets and consumers have been deprived of choice. However, the internet has leveled the playing field and the superstores are becoming increasingly irrelevant in terms of providing an outlet for office products.