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Feature ArticleIMA GIN G SPE CTR UM MA GAZI NE

International Imaging Technology Council

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

 provide an in-depth overview of the fastest growing channel in the

imaging industry, the SOHO channel. This segment covers the entry-

level color laser market.

If the discussion about color lasers equated to the actual

installed base, then 99.5 percent of all printer installs would

be color. Fortunately, for a remanufacturing industry still

trying to master the particulars of color, laser monochrome still

dominates printing in the office environment (see Figure 1).

Clearly, this constant buzz about color is in anticipation of the

trends that we see on the horizon. And although color represents

many technical challenges that have been discussed in great detail in

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.He has more than 14 years of experience in the imaging

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

The SOHO Market, Part IV:

Entry-level Color Laserby Luke Goldberg, Future Graphics

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every circle of the industry, it also represents a tremendous oppor-

tunity for the aftermarket.

A New Phenomenon

First of all, color laser printers are voracious consumers of toner.

The average color user consumes twice as many cartridges as a

monochrome user and up to four times as many for workgroup

applications, such as the HP 4650. Color also represents the pinna-cle of the OEMs’ efforts to offer lower and lower hardware costs to

create incentives for consumers to transition to color laser printers,

especially in this entry-level space.

Believe it or not, as recently as one year ago, there was no such thing

as entry-level or SOHO (small office,home office) laser color.Color

was the privilege of larger businesses that could afford to plunk

down $2,000 for a color laser printer. In the last year, however,every 

conceivable OEM has entered the entry-level color market with sub-

$500 offerings.

This influx of product has now made color laser almost as afford-

able as mid-range monochrome printers, such as the HP 1300 and

Lexmark e321. Clearly, at this price, small businesses strongly will

consider color laser as the primary option when choosing a print-

er. It is this trend that is driving growth in this newly-discovered

product segment.

“Color for Free”

Taking a look at the key players in this category will help us to defin

how the aftermarket can capitalize on this growth. According

Lyra’s year-end report of 2004, 1.85 million color placements we

made. Of those, a staggering 47 percent were in this new category

entry-level color. The largest drivers of this growth are clearly pri

and product positioning.

As usual, Hewlett-Packard (HP) really upped the ante in this spac

with the release of the HP 2550 printer in the middle of last yea

This was HP’s first sub-$500 offering to compete with other OEM

like QMS/Minolta and its hot-selling 2300, and Samsung’s clp 50

All of these entry-level offerings were positioned by the OEMs

monochrome replacements, mostly due to the hardware costs hov

ering ever closer to competing monochrome offerings.

Aside from cost, the other incentive is that for end users who u

mostly black ink, there will be no sacrifice in monochrome pri

speeds. For example, in the case of the HP 2550 and Dell 3000/310

monochrome print speeds are 20 ppm, which competes favorab

with other monochrome offerings in this space. These entry-lev

printers are marketed for end users who get the option to prin

color. However, for serious color users, the HP 3700 or Phaser 840

is a better option.According to HP’s own marketing,“At under $50

 you get your color for free!”

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Goldberg:The SOHO Market, Part IV: Entry-level Color Laser

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Free,huh? What they do not tell the consumer is that, in many cases,

a set of four replacement toner units (not including the drum unit),

fuser or other parts are often more expensive than the entire print-

er! What they also do not reveal is that it costs more per page to print

a black page using a color printer than a black-only printer.

Dell Moves In

Cost per page is a concept unknown to most consumers; so thisgenerally would not have been a problem in this conversion effort

until Dell entered the color fray last fall. When Dell released the

3000/3100 entry-level color printers, they took the lead in terms of 

cost of ownership and cost per page.

Dell, as will be discussed in greater detail in next month’s article, is

taking the cost-per-page message to the masses. Its direct distribu-

tion model allows the company to communicate cost benefits

directly to the consumer.HP, on the other hand, must rely on distri-

bution partners and disinterested pimple-faced kids in the various

retail outlets to promote their products.

Dell is the first OEM to offer costs per page that are similar to its

own monochrome offerings. In the case of the Dell 3000,it offers the

same cost per page for black (approximately 1.6 cents) as the mono-

chrome comparable Dell 1700. It is too early to tell how effective

Dell will be in taking this message to the masses, but its direct-sales

model certainly seems to be a force to be reckoned with.

Remanufacturing Saves the Day

Generally, if you want to know what moves in the SOHO channel—

whether it be color or inkjet—all you have to do is see what is being

displayed in big box retail (Office Depot, Staples),consumer electron-

ics stores (Circuit City,Best Buy) and computer retailers (Comp USA).

In the case of entry-level color, there are certain models that are

dominating shelf space across these categories. They are the huge-selling Samsung CLP500/550, the QMS 2300 and now 2400,and the

HP 2550 (see Figure 2).

All of these printers can be purchased for less than $450 with a

manufacturer’s rebate; they all have scaled-down footprints ideal

for a small business environment and, in every case, the consum-

ables are more expensive than the printers themselves—which wil l

cause a collective yelp from the small businesses who thought they 

got a great deal.

This is where the aftermarket comes in to save the day and ease the

sticker shock. Here are some examples of the types of businesses

that would use these machines: small single-carrier insurance

agencies, dental offices, small real estate offices (heavy-duty use for

the printing of four-color home listings) and small CPAs.

The great opportunity in this segment should be clear by now. The

question is,“What about all of the technical challenges?”First of all,

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there are more reliable sources for high-quality chemical toner,

which is the major hurdle with color. Secondly, the average user in

this segment is not nearly as quality sensitive as the typical color

workgroup user (e.g., HP 4650/3700). Businesses that are serious

color users typically will be using color as a tool for the external

marketing of their message. For them the quality is primary and the

cost is secondary. For small businesses,which, in many cases, will b

using these printers primarily for black with a little color thrown i

the quality challenges will be less daunting due to the expectation

of the user and application of the printer. Entry-level color is a goo

place to learn the technology of color with a less rigorous standa

of evaluation from the user.

Waiting with Open ArmsCurrently laser color has a very low market penetration (less than 5 pe

cent). But now that chemical toners are more available, this is sure

increase. In the meantime, one positive benefit of the low aftermark

penetration of color is the plentiful supply of low-cost empties, makin

the remanufacturing of color a profitable endeavor (see Figure 3).No

is a good time to keep some stock of these empties,because as soon

good chemical toners are readily available,core prices will go up.

In summary, we always hear about the proliferation of OEM tec

nology as being a hindrance to the aftermarket. In the case of entr

level color laser, the challenges posed by color have limite

penetration by the aftermarket. Now that we are on the brink

overcoming many of these barriers, we have a virtually untappe

channel of business just waiting for an alternative product.As usua

the OEMs’ pricing strategy has created a receptive pool of angr

consumers hungry for savings and value.If we look for the busines

SOHO consumers should be waiting for us with open arms.