Continuous Ink Supply Systems Update

What are Continuous Ink Supply Systems (CISS) systems?  They are inkjet printers which typically have large ink reservoirs which are filled from bottles of ink. There devices are promoted as being cartridge-less which is smart marketing approach since most people cringe when they even hear the “cartridge” word.  These CISS printers are often shipped with enough ink to last for two years but users will pay a premium upfront when they purchase a CIIS printer.  Epson, HP, and most recently Canon, all offer CISS systems.  Epson claims that their EcoTank CISS printers currently account for over 35% of their total inkjet printer shipment volume and that % is expected to increase dramatically over the next few years.

These CISS systems use a very different business model from the past when many manufacturers included very low yield starter cartridges when shipping new printers as a way to reduce costs upfront (and in some cases price as well) and then hoping to get the ongoing cartridge revenue and profit at the back end. As we all know, with the aftermarket suppliers offering cartridge prices that are on average 40% less than OEM branded cartridge with quality levels comparable to the OEM cartridges, the share of the printer manufacturers’ brand will continue to decline over time.  When you consider that on average, cartridges account for about 60% of overall printer business revenue, this is a big, ongoing challenge for printer manufacturers using the traditional business model based on making little margin on the hardware and counting on the cartridge annuity later.

For CISS systems, this whole paradigm changes since more margin is made on the hardware which is bundled with enough ink to last two years under “average” print volume.  It is a pretty well known fact that most users will prefer to purchase an OEM branded replacement cartridge (or bottle of ink in the CISS case) during the warranty period.  So, if a CISS printer manufacturer offers a 1 or 2-year warranty, their recurring ink revenue is protected for 3-3 ½ years from the day the printer is installed, getting really close to the life of the printer.  An interesting model?  You bet it is.

What about advantages/disadvantages of CISS systems vs. comparable performance cartridge based inkjet printers?   First, there are manufacturers who are offering cartridge based solutions to offer some of the benefits of CISS systems.  Some manufacturers are offering comparable printers with very large, high yield cartridges such as Brother’s InkVestment printers which ship with Super High Yield cartridges which should last for two years.  When comparing Brother’s system to a CISS system, the difference then comes down to a comparison of cost/page and certainly a bottle of ink has a lower cost than an entire cartridge.  However, it does take more time to refill ink cartridges than replacing a set of ink cartridges so certainly a cartridge is more user friendly.  But, a bottle is more environmentally friendly than a a cartridge when they are being disposed.  The bottom line is that both are good solutions.

At least one manufacturer, in an attempt to match the two years worth of ink, is simply bundling multiple sets of standard yield cartridges with their printer.  However, since they are not high yield cartridges, the # of user interventions is high.

So, who are these CISS manufacturers really targeting?   It is Photizo’s view that one target is the low-end laser market where hardware margins are slim or non-existant and where aftermarket cartridge suppliers are very aggressive.  It is expected that some manufacturers may consider withdrawing from the low end of the laser market. The other market is the higher performance business inkjet printer segment.

Photizo’s Office Supplies Advisory Service tracks CISS hardware and supplies separately so we will continue monitor and report on changes in this segment.

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