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Feature ArticleIMA GIN G SPE CTR UM MA GAZI NE

International Imaging Technology Council

Editor’s Note: This is the third article in a six-part series that will pro-

vide an in-depth overview of the fastest growing channel in the imag-

ing industry, the SOHO channel. This segment covers entry-level 

monochrome laser.

As has been discussed in the two previous articles in this

series, across all product categories, the growth of 

SOHO-based printing devices has far out-paced the

growth of workgroup/corporate-based printers. In this segment,

we will discuss how this trend is consistent with entry-level mono-

chrome laser printers.

Evaluating the Monochrome Laser Marketplace

Much has been said about the rapidly proliferating technology in all

product categories in 2004,and a good deal of this growth has been

in small office and home printing. However, according to a Lyra

Research report generated at the end of last year, despite the torrent

Luke Goldberg is responsible for developing overall market/industry analysis and sales trends,expanding

dealer channels,managing the Future Graphics sales team of professionals as part of the new product

development and marketing/promotions team.Luke has more than 14 years of experience in the imaging

supplies industry.He may be reached at 800-394-9900.

Introduction to the SOHO Market, Part III:

Entry-level Monochrome Laser Printersby Luke Goldberg, Future Graphics

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of releases for workgroup products over 80 percent of the installed

base is more than two years old. And as the Lyra report suggests,

within the workgroup segment, the older printers are more expen-

sive and highly capable. Therefore, larger businesses seem less likely 

to do away with them in favor of new ones.

Visit any remanufacturer and he or she will tell you that the most

popular cartridges are still the HP 4100, HP 2100, HP 8100 andrelated models. Clearly, these printers have aged well and still offer

the functionality needed for the average corporate workgroup. So,

this is the question: “Is there enough benefit for a medium-sized

workgroup to upgrade from an HP 4200 to an HP 4250?”

How well this conversion takes place is still to be determined, but

other than Hewlett-Packard’s (HP) own efforts to shore up consum-

ables business through its direct sales efforts (HP’s print-manage-

ment strategy), there does not seem to be much incentive for

conversion. Likely, the great capabilities of older printers coupled

with more corporate business being tied up in cost-per-page con-

tracts with digital copiers are the main reasons why workgroup

monochrome printers only experienced growth of 2 percent,

according to Lyra’s year-end summary.

Conversely, according to the same Lyra summary, of 12.2 million

monochrome laser printers sold in 2004, a whopping 10.6 million

were in the entry-level segment (as classified by a sub-$500 pric

point). These numbers represented a 22 percent increase over 200

The Entry-level Conversion

The hallmark of these entry-level monochrome laser printers is th

ever-increasing price-to-performance ratio. In the early days of th

entry-level printer (HP 1100, Lexmark e210 and Samsung M

1210), customers got what they paid for: a relatively slow machinwith limited or no networking capability, basic paper handling an

no multifunctional capability.

However, with today’s offerings from Brother, Samsung, Dell, Le

mark, HP and other new players, such as Okidata and Minolta, cu

tomers pay very little and receive a lot, including average pri

speeds of more than 17 ppm and multifunctional capability for fa

ing, scanning, printing and copying. Most of these printers are cap

ble of networking and even duplexing—all for under $300.And it a

comes in a cute little package that fits neatly into the corner of th

desk. In short, these devices are ideal for an end user in a small offi

or home office who has limited space and is looking for a sing

piece of equipment that can perform several different functions.

Some OEMs believe that offering all this versatility and speed wi

motivate small businesses to switch from inkjet to laser printers.

some cases, this seems to be occurring as OEMs like Samsung ha

made huge headway in developing markets such as Russia an

China. This also may be the reason why HP is competing for th

segment with its business series of inkjet printers that have high

speeds and multifunctional capabilities.

Surveying the Major PlayersLooking back at 2004, it is clear that each OEM attempted to diffe

entiate itself from the pack either by virtue of functionality, spee

footprint or price. Here is a review of the key movers in this aren

and their product offerings.

Brother, the Multifunctional Leader 

Brother has long been the multifunctional lead

in this segment and its recent offerings are n

exception. The 5100 series highlighted by th

5140/5150 offers 21 ppm, multifunctional cap

bilities and even standard duplexing, all f

under $300. Brother also offers great margin opportunity to th

remanufacturer due to the usual razor/blades OEM sales strategy.

In most cases, the collection of empty cartridges and their cost a

the biggest problem with these SOHO laser products. Howeve

once the empties do become available, they suddenly become ver

profitable to remanufacture, as is the case with the older generatio

of Brother models for the 5000 series that use the TN430/460, 56

cartridge types. These cartridge models are now readily available

new compatibles in the marketplace for as low as $25 versus a

OEM retail price of $60.

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Goldberg: Introduction to the SOHO Market, Part III 

Due to the emergence of these compatibles,empties prices are com-

ing down. This will invariably occur as well with the TN 570,which

is used in the newer Brother 5100 models.Consider, for example,the

cost to manufacture a TN 560 toner cartridge:

Empty ............................... ................$3.50

Toner...................................................5.00

Developer roller (two cycles).. ...........3.00Labor,15 minutes ($10.00/hr.) ..........2.50

Overhead................................. ...........3.75

Packaging/misc. .................................2.00

Total: $19.75

The suggested retail price for the toner unit is $45, which offers

great margin opportunity for the remanufacturer. Additionally,

Brother drum units also offer great margin potential: The OEM

retail price on the dr400, 250/500,etc.,averages more than $150.The

average cost to remanufacture these cartridges is around $32,

including empties, material and labor. They then can sell for $110,

which clearly offers great margins.

Samsung, the Entry-level Low Price Leader 

Samsung is the clear-cut price leader in the

entry level arena and until recently, before the

release of the Konica Minolta Pagepro 1350w, it

had no eager challengers. Samsung has done a

terrific job of selling the ML 1710/1740 as well

as multifunctionals, such as the scx4216, and is clearly a force to be

reckoned with in the SOHO market.

There are a number of compelling features in these Samsung printers,the first of which is the sub-$100 retail price (the first printer to reach

this milestone). Additionally, this printer offers speeds of 17 ppm and

the smallest footprint in its class, which is a benefit not only to the small

office users, but also to the retailers selling it. The Samsung and now its

price competitor,the Konica Minolta 1350w—a 21 ppm printer being

offered in retail as low as $90—have very small footprints, which make

them attractive to retailers concerned about shelf space.

As the Brother profit examples demonstrated previously, huge margin

potential is also offered by cartridges for Samsung entry-level printers.

Additionally, most entry-level printers have short cycles, which means

that their components are more likely to be reused. Here is an example

of the profits that can be realized with the Samsung 1710/1740 cartridge:

Empty ................................. ............$10.00

Toner...................................................3.00

Drum (two cycles)..............................4.00

Labor 15 minutes ($10/hr.) ................2.50

Overhead................................. ...........3.75

Packaging ................................... ........2.00

Misc. ............................... ....................2.00

Total: $27.25

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The suggested retail price for the remanufactured cartridge is $60;

therefore, based on an OEM street price of $79, the profit margin

equals 53.4 percent.

In addition to these models that can be seen everywhere in retail

outlets, from office superstores to consumer electronics stores, Sam-

sung also now is the world’s number-two provider of engines to

other OEMs, such as Xerox with the 3150 and Dell with the 1600,which are both based on the Samsung 2250 engine.

Hewlett-Packard, Banking on Quality 

Looking at HP in this market, it seems that it con-

tinues to try to play the quality card. Its products

are typically the highest priced in this segment,

and its printer-placement strategy seems to be

attempting to better its own previous models. In

the case of the HP 1160 (replacement for the 1150) and the 1320

(replacement for the 1300), these printers offer faster speeds and

better networking capability. Most importantly for HP, they also

address one of the failings of these older models in the competition

with Samsung and Brother in the footprint wars. HP did away with

the bulky external paper trays in favor of an enclosed paper tray,

making these newer models much more compact. Generally, it will

be interesting to see if HP changes its pricing strategy or if it contin-

ues to take the high road.

Dell, Emphasizing Cost per Page

Conversely, as we will discuss in subsequent

articles, Dell is taking price strategy to a dif-

ferent level in this area, concentrating on

cost-per-page messages aimed at convertingsmall business users. For example, the Dell

1700 printer, which is based on the Lexmark E232, offers 30 to 40

percent savings over competing HP products. An interesting fact

about this printer is that it is actually faster at 25 ppm than its Lex

mark counterpart the E232 at 22 ppm.We will discuss Dell’s succe

in the SOHO channel and its direct-distribution model in great

detail in next month’s issue.

Opportunity Knocking for the Aftermarket

As printer prices plummet and consumables cost almost as much a

the printer,it raises the obvious question, “Are we entering the era the disposable printer?”The answer remains to be seen,but it seem

anathema to consumers to dispose of computer-related hardwar

Many garages in America have become virtual museums of ant

quated technology. In addition, a great many older computers an

printers wind up at Goodwill and are not thrown away. In the mean

time, the aftermarket must continue to seize the opportunity an

take advantage of these high-priced consumables and the stick

shock consumers are bound to experience when they go to reorde

their cartridges.

In the SOHO channel, monochrome printers are alive and we

and are well-suited to meet the needs of a growing population

small business and home office users. These users will look f

lower price points with greater performance, and they will con

tinue to seek alternate sources for supplies. In the case of sma

businesses, the owner, CFO and purchasing agent is usually th

same person. There is no gatekeeper to prevent salespeople fro

reaching the decision maker in most cases. Remanufacturers ca

offer to ease the pain of high-priced OEM consumables and kee

these printers from winding up in the trash or in cluttered garag

the world over.

Stay tuned for next month’s article that discusses the newest, moexplosive SOHO product category: entry-level color laser.