International Imaging Technology Council

Feature Article
IMAGING SPECTRUM MAGAZINE

The SOHO Market, Part IV:

Entry-level Color Laser
Copyright 2005 Imaging Spectrum and its licensors.All rights reserved.

by Luke Goldberg, Future Graphics

Editors 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 entrylevel color laser market.
f 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.

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Feature Article
every circle of the industry, it also represents a tremendous opportunity 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 pinnacle 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 affordable 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 printer. It is this trend that is driving growth in this newly-discovered
product segment.

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Color for Free
Taking a look at the key players in this category will help us to define
how the aftermarket can capitalize on this growth. According to
Lyras year-end report of 2004, 1.85 million color placements were
made. Of those, a staggering 47 percent were in this new category of
entry-level color. The largest drivers of this growth are clearly price
and product positioning.
As usual, Hewlett-Packard (HP) really upped the ante in this space
with the release of the HP 2550 printer in the middle of last year.
This was HPs first sub-$500 offering to compete with other OEMs
like QMS/Minolta and its hot-selling 2300, and Samsungs clp 500.
All of these entry-level offerings were positioned by the OEMs as
monochrome replacements, mostly due to the hardware costs hovering ever closer to competing monochrome offerings.
Aside from cost, the other incentive is that for end users who use
mostly black ink, there will be no sacrifice in monochrome print
speeds. For example, in the case of the HP 2550 and Dell 3000/3100,
monochrome print speeds are 20 ppm, which competes favorably
with other monochrome offerings in this space. These entry-level
printers are marketed for end users who get the option to print
color. However, for serious color users, the HP 3700 or Phaser 8400
is a better option.According to HPs own marketing,At under $500,
you get your color for free!

38 Imaging Spectrum Magazine June 2005 International Imaging Technology Council www.i-itc.org

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

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 printer! 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.

Remanufacturing Saves the Day

Generally, if you want to know what moves in the SOHO channel
whether it be color or inkjetall you have to do is see what is being
displayed in big box retail (Office Depot, Staples), consumer electronics stores (Circuit City, Best Buy) and computer retailers (Comp USA).

Dell Moves In
Cost per page is a concept unknown to most consumers; so this
generally 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.

In the case of entry-level color, there are certain models that are
dominating shelf space across these categories. They are the hugeselling Samsung CLP500/550, the QMS 2300 and now 2400, and the
HP 2550 (see Figure 2).

Dell, as will be discussed in greater detail in next months article, is

taking the cost-per-page message to the masses. Its direct distribution model allows the company to communicate cost benefits
directly to the consumer. HP, on the other hand, must rely on distribution 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 monochrome 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.

All of these printers can be purchased for less than $450 with a
manufacturers rebate; they all have scaled-down footprints ideal
for a small business environment and, in every case, the consumables are more expensive than the printers themselveswhich will
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

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cost is secondary. For small businesses, which, in many cases, will be
using these printers primarily for black with a little color thrown in,
the quality challenges will be less daunting due to the expectations
of the user and application of the printer. Entry-level color is a good
place to learn the technology of color with a less rigorous standard
of evaluation from the user.
Waiting with Open Arms
Currently laser color has a very low market penetration (less than 5 percent). But now that chemical toners are more available, this is sure to
increase. In the meantime, one positive benefit of the low aftermarket
penetration of color is the plentiful supply of low-cost empties, making
the remanufacturing of color a profitable endeavor (see Figure 3). Now
is a good time to keep some stock of these empties, because as soon as
good chemical toners are readily available, core prices will go up.
In summary, we always hear about the proliferation of OEM technology as being a hindrance to the aftermarket. In the case of entrylevel color laser, the challenges posed by color have limited
penetration by the aftermarket. Now that we are on the brink of
overcoming many of these barriers, we have a virtually untapped
channel of business just waiting for an alternative product. As usual,
the OEMs pricing strategy has created a receptive pool of angry
consumers hungry for savings and value. If we look for the business,
SOHO consumers should be waiting for us with open arms.

40 Imaging Spectrum Magazine June 2005 International Imaging Technology Council www.i-itc.org