Stealth Inflation – Are you getting what you think you paid for?

You ever get the feeling that printer ink is rising in price faster than the rate of inflation? The inflation rate in Canada is 2.9% and 2.6% in the USA which does not seem real to most shoppers who have a limited budget. It does not make a lot of sense when one realizes that the prices for raw commodities have soared worldwide.

Who is kidding who? Whether it is printer ink and toner cartridges or foodstuffs, I think the average consumer has recognized that the way the companies have held their prices steady is through stealth inflation, that is to say by giving shoppers less for the same price.

No doubt the average consumer has noticed that while prices appear to have remained consistent…
Ivory dish detergent shrank from 30 oz to 24,
Haggan Dazs ice cream has moved from 16 oz to 14 oz,
Kraft American cheese slices have gone from 24 to 22 slices.
Heinz Tomato ketchup lost 4 oz, 24 to 20oz,
Nabisco saltines have 15 fewer crackers.
Pringles potato chips 6.31 to 4.93oz
Bags of Doritos, Tostitos and Fritos now hold 20 percent fewer chips than in 2009

I am sure that the list is endless. Many of the containers stayed the same size except the contents dropped. A 1000 gram coffee container may only have 750 grams inside. Printer cartridges are no different.

In late 2011 Lexmark announced a price increase to take place January 1, 2012. Since then the other manufacturers such as Canon, Brother, and HP have followed suit. HP notified retailers of a 15% price increase to 25+ skus of toner cartridges and a 2% increase on all other skus effective Jan 1, 2012. While most manufacturers did not provide reasons to explain the price increase, Lexmark did in stating they were “increasing prices due to higher than expected product costs in such things as raw materials, transportation, and labor.”

So do prices that appear to be increasing at roughly the rate of inflation have you scratching your head because you felt like prices have risen significantly higher? Perhaps the answer lies in stealth inflation.

Having refilled over 10 million cartridges to date, we have been compiling information on printer cartridges for over 10 years. Back in the early 2000’s, the most popular ink cartridges were the HP 45/78 combination.

HP 45 ink cartridge

The HP 45 retailed for $46.95, contained 42ml of pigmented ink at $1.12/ml, and had an approximate yield of 930 pages. The matching colour cartridge – the HP 78 retailed for $68.95, contained 30ml of Ink at $2.30/ml, and had an approximate yield of 970 pages. The cost per page (cost divided by yield) using these cartridges was $.12 cents.

Compare the above with the most popular cartridge combination today (the HP 60 black & HP 60 colour) and the results are shocking!
HP 60 black retails for $45.89, contains 14ml of ink and yields 600 pages). The HP 60 colour retails for $51.39, contains 18ml of ink, and yields 440 pages. That’s right; the black contains 65% less ink and costs $3.28/ml of ink which is a 193% increase in price per ml of ink. The colour contains 40% less ink at a cost of $2.86/ml which is a 24% increase in price per ml. The cost of using these cartridges comes in at $.22 per page.

WOW! Cost per page has increased by a whopping 83% in the above example on the top selling cartridges of today vs. those of yesteryear meaning the cost of consumables has risen substantially in real terms.

You may have noticed that we refer to the “full version of the cartridges”. HP refers to these as “XL” or “High Capacity” however we recognize they nothing more than full and it follows then that regular capacity cartridges are often “not full” which really make us mad never mind every customer we show. Imagine how you would feel if you purchased a bottle of water that used non see-through materials and you opened it to find it was only half full! You would likely be a little upset to say the least.

This has been the practice of numerous manufactures for many years. Cartridges that are full are called “high capacity” or “XL”

HP 60 ink cartridge

What is despicable in our opinion is that manufacturers such as Lexmark and HP have stooped so low as to add manufacturing processes that result in cartridges working less! Have a look at this picture of a HP 60 normal capacity cartridge.

Your eyes are not deceiving you. This regular capacity HP 60 has been manufactured with two plastic retaining walls on either side of the sponge and results in two chambers filled with air.

In the past, the regular capacity cartridges simply contained less ink in the sponge as opposed to creating additional manufacturing costs through adding retaining walls to the inside of the cartridge.  Take a minute to think about this-  It costs more money for the manufacturers to manufacture the “regular” version of the cartridges than the XL versions yet they charge more for the XL cartridges!  Why would any company add this manufacturing cost when they can simply limit the amount of ink inserted into the cartridge?  The answer is obvious – as far as we can tell it is simply to ensure that cartridges are less refillable and push consumers towards cartridges that have higher cost-per-page due to lower yields.

What you can see from the above examples is that while the prices of cartridges may not appear to have changed significantly, the cartridges themselves contain significantly less ink and lower yields which result in a significantly higher cost per page.

Here are some great photos from Greg at http://www.hpinkcartridges.co.uk which tell the story in a visual way:

Melisa Riofrio recently noticed the short term cost per page price increasing trend as she pointed out in her blog entry on PCWorld.com however there was no postulation on why this may be the case Curiously our comment which contained documented statements released by the manufacturers was removed from the site.

We believe that among the main reasons for cost-per-page prices increasing is so that the manufacturers could combat the growing printer cartridge aftermarket.

We postulated very early on that at some point in time the cartridge aftermarket would become so large that it would affect the manufacturer’s bottom line forcing them to take action. By 2006 this was likely the case as Island Ink-Jet had opened over 200 stores in North America offering cartridge refill services as did a couple companies offering similar services as ourselves.  Combined we were likely converting over 5 million ink cartridges/year into refill sales instead of new cartridge purchases at that time.

Manufacturers took action by making cartridges more difficult to be refilled (especially Epson), by making lower quality cartridges that failed sooner (especially Lexmark) by making smaller cartridges with lower yields and lower price points (especially HP). All these steps (and many more not mentioned here) encouraged purchases of OEM’s over refilling.

Of course all the above practices resulted in either increased costs, lower sales, or a combination of both to the manufacturers. Lower yields result in consumers having to purchase more cartridges to get the same amount of printing so one would expect that lower yield cartridges at a higher cost per page would increase manufactures revenue as consumers were forced to buy more.

The reality is that the amount of printing has dropped which means consumers are not buying more cartridges as a result of the lower yields. The results speak for themselves. HP is now in the position of having to lay off significant amounts of the workforce. Lexmark’s profits are decreasing and according to Joel Levington, managing director of corporate credit at Brookfield Investment Management Inc. in New York, “I do not believe the business is worthy of investment grade status”.

What does this all mean? Well for one prices of OEM consumables will likely continue to rise. It also means consumers need to be well informed about the printers they are buying. Can the cartridges be refilled? What is the cost per page of the printer using OEM vs refilled cartridges? We encourage consumers to call Island Ink-Jet prior to make their printer purchase in order to find the most cost efficient and environmentally friendly printers on the market.