Color Compatibles’ Profit Pool: Time to Jump In?
This guest blog was contributed by Dr. David Cameron.
Toner compatibles have always been a risky proposition. The potential of a substantial profit contribution increase, typically in the range of 40 to 50 percent per cartridge, has driven both the independent resellers’ willingness to use the compatibles and the aftermarket industry’s quality and reliability improvements. In recent years, the quality of monochrome compatibles (from reputable sources) has stabilized, and their acceptance in the market has likewise grown.
However, the adoption of color compatibles has lagged, given the rise in use of color in the office. Aftermarket color represents another large source of potential profit to the independent reseller, and there is a large potential profit pool that, if successfully tapped with low risk, can further increase the profit contribution from supplies. This is of significant interest to independents and aftermarket manufacturers alike.
Currently, color compatibles are slowly moving into the mainstream. I continue to hear mixed feedback from resellers: “We used compatibles in new HP MFPs but received several customer complaints in the first week,” and “We have had return rates as high as 15 to 20 percent (for color compatibles).” Stories of failure, customer frustration and other negative impacts amount to market noise that has slowed the adoption of color compatibles. We used to call this the “FUD” effect, or the negative impact of market fear, uncertainty and doubt that slows market acceptance.
The other side of the market equation is the supply side. The aftermarket supplier that can consistently produce a reliable product and cut through the “FUD” with a clear and unequivocally strong message has huge profit to gain as well.
The rising use of color in the office (estimated at more than 20 percent and growing) fuels the interest in finding a reliable source of color compatibles. At roughly 25 percent color usage, the potential profit impact of compatibles is equivalent to that of monochrome toner. There are signs that the quality of aftermarket supplies is improving; however, convincing evidence is lacking. Color compatibles are at a crossroads with regard to market acceptance.
The question is, “Are color compatibles ready for prime time?” We would like to hear your experience in using them and which sources have proven to be the most reliable. Your input will play into a research project currently under way, supported by The Imaging Channel, to assess the potential risk/reward. Let us hear from you.
Dr. David Cameron has over 25 years of experience as an executive in the hardcopy industry. He launched Cameron Consulting Group (CCG) in March 2011 to meet a market need for proprietary client advisory services, market research and consulting for the print and imaging industry including managed print services. His background ranges from managing production lines and equipment to leadership roles in business management and product development for Texas Instruments, IBM and Dell. In addition to corporate business experience he has actively participated in developing and managing a high-tech startup as well as co-owning several small family businesses with his wife. Cameron was part of the early days of outsourced managed services, leading executive sales and business process design for software system integration at IBM. Most recently, he has been COO of Photizo Group responsible for guiding research and developing strategic relationships with clients and collaborative partners. He also teaches in the MBA program at Concordia University. Go to www.ccg1.net for additional information about available services.
Posted by David Cameron on 01/09/2012