Xerox Raises Consumables Prices

Since the start of 2012, at least eight OEMs have raised consumables prices. We recently learned that Xerox became the ninth as of March 22. The company has provided us with some details on the increases.

In February, Xerox sent a letter warning resellers that it would raise U.S. list, estimated retail prices (ERP), and distributor net prices on select supplies as of March 22.

It is a scenario that has become all too familiar. Since December, the industry has seen similar announcements from: Brother, Canon, Epson, HP, Kodak, Lexmark (which has instituted two rounds of price increases on consumables), Ricoh, Samsung.

A Xerox spokesperson confirms that the company has raised prices on Xerox-brand consumables for Xerox hardware. Xerox also markets a branded line of third-party cartridges for Brother, Hewlett Packard / HP, and Lexmark devices, but to the best of our knowledge, the OEM is hiking prices only on branded supplies for its own hardware.

The spokesperson attributed the price increases to currency fluctuations and increasing freight and fuel costs.

Altogether, Xerox is raising prices on about 225 consumables, including solid ink sticks, toner cartridges, drums, imaging units, fusers, and other maintenance items used in ColorQube, Phaser, and WorkCentre-branded devices, both monochrome and color. The spokesperson points out that the price increases impact roughly half of Xerox’s lineup of consumables for Xerox hardware.

Xerox tells us that prices have gone up an average of 4 percent, with the lowest increase being 2 percent and 12 items seeing double-digit percentage increases in price. The spokesperson adds, “Increases are inline with market-based costs for comparable consumables on competitive legacy and current products.”

Some OEMs, such as Brother and HP, have increased prices most steeply on legacy supplies items, and it seems that Xerox may be doing the same. Profit margins narrow over time on legacy supplies as the installed base of hardware dwindles, demand decreases, and the aftermarket increases its share of the replacement supplies market. Meanwhile production costs for the OEM increase as cartridges for legacy products are needed in smaller volumes.

The Xerox consumables price increases apply not only to the United States but other geographies as well. The spokesperson says, “Xerox has harmonized pricing and other geographies are changing or have changed their prices.”

Most of the OEMs that have raises supplies prices have cited as reasons for the increases currency fluctuations, global economic conditions, and rising production, transportation, and raw material costs. However, there is another far more depressing reason that to date we have only heard beleaguered Kodak mention outright—the need to make better profit margins. The need to maintain and even increase supplies margins becomes more pressing as print volumes and thus supplies sales decline in some segments.

As most who follow OEM financial results know, printer and copier OEMs had a tougher-than-expected year in 2011, and thus far 2012 has provided no relief. HP, for example, reported a 6 percent decline in supplies revenue in the first quarter and said that the overall printing market is mature. Meanwhile, in the fourth quarter, Xerox saw a 3 percent decline in sales of hardware, flat revenue from annuities including supplies, and a 4 percent decline in sales of third-party cartridges, paper, and other products.

With so many OEMs raising supplies prices, no one OEM stands to benefit or gain share at the expense of another. However, the aftermarket may see some increase in business resulting from OEM price increases, particularly on legacy products. Higher prices on original supplies make end users more likely to use remanufactured or compatible cartridges. That said, third-party supplies vendors are dependent on a healthy OEM hardware and supplies business to thrive long term. Thus, everyone in the industry will have their eyes on OEM financial results when they start coming in at the end of April.

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Original source: Xerox Raises Consumables Prices