HP may shift away from its tried-and-true business model revolving around overcharging users for printer ink cartridges, Morgan Stanley predicts. However, such a move will likely only materialize if it’s accompanied by a proportional increase in printer prices. Morgan Stanley’s newest report claims one in five HP customers aren’t printing enough for the company to turn a profit on toner refills and justify selling aggressively priced printers.
HP let down by the “razor blade” business model
Like every major player in the printing business, HP’s been utilizing the so-called “razor blade” business model for decades now. Named after the original cutthroat industry, the concept is based on selling aggressively priced products, then charging extra for their replacement parts, be that razor blades or toner ink.
The strategy isn’t working as well as it used to, both due to the rapidly increasing number of third-party ink cartridge suppliers and the fact people simply aren’t printing as much as they used to. HP previously attempted to reimagine its core consumer-level portfolio by refocusing on environmentally friendly printers and related technologies.
Given that state of affairs, Morgan Stanley analysts are positive HP will be jacking up its printer prices while making toner cartridges more affordable. HP has yet to comment on that forecast, though Morgan Stanley has a rather stellar track record with anticipating printing business trends, so we’re filing this under the “likely to happen” category.