Are New Zealand’s computer buyers dim-witted enough to fall for Dell’s foray into the printer business?
It would be nice to think they are too smart. Nice but, sadly, unrealistic. After all, Dell’s offering is only a refinement of what has become the standard way of making money from printers.
All the major players at the consumer end of the printer market operate on what is usually described as the Gillette razor blade model. They suck customers in by the main units for next to nothing - although they argue otherwise retail prices for many models are almost certainly lower than the cost of manufacture.
Then, once they’ve got a customer locked in with some hardware, they sell authorised replacement ink cartridges at a huge mark-up. Gross margins for ink are as high as 60 percent. Ink is extremely lucrative - indeed one could argue the entire Hewlett-Packard empire was financed by replacement cartridges.
When I investigated Dell Australia’s printer offerings some time ago, I noticed the company’s hardware was significantly cheaper than equivalent hardware from rival printer makers, but the ink was more expensive.
What’s more, Australian customers had to buy Dell ink over the internet, cutting out distributors and resellers, then pay inflated courier fees for the privilege -- presumably Dell makes money on this as well. And I don’t recall anyone selling third-party replacement cartridges that ate into Dell’s business.
At an educated guess, the hardware was sold way below cost, but the company would be in profit from the very first cartridge. The other revelation was Dell’s printers went through cartridges slightly faster than those from rival printer makers.
It wasn’t possible to check New Zealand ink prices at the time of writing because Dell’s web site was down. However, it’s safe to assume Dell’s ink margins will be astronomical.
Ordering ink online and waiting for a courier is a lot more trouble than hopping in the car and driving to the local New World whenever the printer runs dry.
All-in-all Dell printers are bad news for resellers and bad news for consumers. Let's hope the punters can figure this out for themselves.
I have a Dell 946 multifunction that came as a freebie with an LCD monitor. Once the ink runs out it is off to the tip or will be kept as a scanner/fax as I am not paying $130NZ for two high capacity cartridges, especially as I have a Canon IP4500 that I can get a complete set of carts for at $99.
Posted by: Tony Carr | September 24, 2008 8:45 PM