Capturing Your Share of the $25 Billion Color Opportunity

by Luke Goldberg, Senior VP, MSE

A Huge Color Market

Since the introduction of color laser in the late ‘90s there have been countless articles portending the rapturous day when we finally capture this great, yet elusive, untapped well of profits. We already know that color laser consumables and printers are one of the few areas of optimism and growth in the imaging industry. Most industry analysts peg the color laser market at approximately 25 billion dollars, and both consumables and printers are growing at approximately 5 percent every year.

Okay! We get it! The market is large, it’s growing, and the OEMs enjoy a huge 90-plus percent share. This makes color the ultimate blue ocean opportunity. By the way, for those who haven’t heard of the blue ocean versus the red ocean strategy, I’ll briefly explain: In the case of color laser, the blue ocean is the 90-plus percent share the OEM currently enjoys. This blue ocean is untouched by the cannibalistic practices plaguing the red ocean, which is the 10% percent or so share the aftermarket already has. Unlike the pristine blue waters of the OEM ocean, the aftermarket ocean is stained red, chummed with the blood of aftermarket rivals fighting for scraps, leftovers from the OEM table.

A Huge Aftermarket Problem

So why the 90/10 split? Why after 15 years don’t we have the 30-plus percent we enjoy in the monochrome space?  The answer is simple: Quality. The global aftermarket has not convinced consumers that there is a viable alternative to high-priced OEM supplies. Otherwise, why would 90-plus percent of global consumers choose to pay top price for OEM supplies? In the case of many workgroup printers, this is more than $1,000 for a set of color toners. In the entry-level space, low-end printers cost less than $150, and cartridge sets can cost upwards of $300.

This is the ultimate razor/blades selling strategy. You would think that these consumable prices would cause OEM customers to desert in droves, seeking a safe haven from the fiscal pain. Our industry could have been the extra strength Tylenol had we succeeded in offering a true alternative. The sad fact is we haven’t done so up to this point.

The aftermarket has struggled mightily to master color technology. We have had issues with leaking, streaking, component issues, differing technology platforms…and the list goes on and on. The positive effect of these struggles is twofold:

1. New mold products have not penetrated the color market, certainly not for all-in-one cartridges. For all of the noise about new molds and their deleterious effect on the global imaging market, they have not succeeded in wresting share from quality-conscious OEM color users. This shows that color users aren’t swayed by price. New mold products have taken a large share in the low-end mono space, but not in color. The technological challenges referenced above are compounded when dealing with new molds in all-in-one cartridges. Mold tolerances and critical cartridge gaps create additional variables affecting color quality. I would say that in higher-end color applications (e.g., HP 5500/5525/4525/m551) nearly 100% of the 10% percent share we have is with quality remans and NOT new molds. Where new molds have penetrated color is in the non-all-in-one toner tube designs used by OEMs, such as Samsung and Oki. We also know of the potential IP risks with these products, as evidenced by recent Samsung actions against vendors in European Union countries.
2. For the aftermarket to thrive, leaders must establish themselves by overcoming these challenges. True leadership and differentiation is possible. There are manufacturers out there, MSE included, who have invested millions in engineering, patented technologies, and market education. MSE, for example, derives over 40% of its revenue from color. This has been accomplished by a genuine commitment to overcome the technological barriers. For MSE this differentiation involves tangible benefits by way of patents, proprietary technologies, engineering infrastructure, automated processes, and finally, the proper management of expectations, strategic planning and dealer education.

I really feel for the average dealer as they seek a fair share of color’s pot of gold. How can every one claim leadership in the color space? If we are all as good as we say we are, if we are all claiming to be “OEM alternatives,” then why is ours just a paltry share?

I wrote an article some time ago about how to qualify a toner cartridge vendor. The questions dealers need to ask apply here when they encounter that inevitable sales pitch about color quality. Here are some basic things you need to do in order to qualify these claims: ask tough questions, and more importantly, go visit the factory making these claims to learn what they have truly invested in to ensure you can capture your share of the color market.

The ABCs of a Solution

A.   If you are a true OEM alternative how can you substantiate these claims? What patents or other differentiators do you have that enable you to overcome the market’s 15 year legacy of poor quality?

B.   What are your QC and R&D processes? For example, “How do you qualify your bill of materials?”

C.   What is your engineering infrastructure? Have you invested in capital equipment and instrumentation that enables you to perform the appropriate tests on color products?

D.   What certifications do you have?

E.   What is your warranty?

F.    How will you help me translate these capabilities to the end user?

If you ask these questions and do the proper due diligence in really understanding the capabilities of your partner, then you can avoid another big pitfall we face in growing our color business. We don’t properly manage consumer expectations because in many cases we don’t really understand the limitations of our products.

If you are a dealer, and you ask some of the questions posed above, and you are told that: “Our product is just as good, or better than the OEM,” or the common “Our product looks the same as the OEM,” then you had better demand some specifics.

As we know, part of the challenge with color is that it’s subjective.  No single user likes exactly the same hues and color matches. In the case of color laser, we also are limited by the technology itself. Even the OEM’s toner can exhibit color shifts through the life of a cartridge. Color laser wasn’t really designed for exact color values and that’s why we have to be careful when we say things like “Our product looks identical to the OEM.” Even the OEM doesn’t look exactly the same, print after print, so how can we say it does?

Offer a Drop-In Replacement

Bottom line, as an industry, we need to get away from the language that we are “as good as,” the “same as,” or “better than” the OEM. Sometimes, and for certain applications, we need to realize the limitations of our products and advise the customer to use the OEM’s product. You can never underestimate the credibility you establish when you properly manage expectations. It will open doors for other products.

If we address the quality issues in color that have caused HARD failures such as leaking, image background, streaking, stuck seals, toner sweating, et cetera,  then we will have gone a long way toward becoming a true alternative, a drop-in replacement for the OEM.