From Non-OEMs to Koala Yummies

We meet again blog-readers!  First things first, I am the new analyst for the BRC categories here at gap, and I am looking forward to learning my way around Brazil, Russia, and China (though currently I only travel via interweb).  The world of consumables and printers is quite different from my comfort zone of notebooks, but equally exciting in terms of following products and pricing trends.  The categories are also different in the sense that notebooks don’t come in lower-priced versions from non-OEM vendors, as is the case with printer supplies.

Upon beginning my BRC journey, I had a sneaking suspicion that this disparity would be most prevalent in China, but I had no idea just how many non-OEMs there would be.  To more closely examine this trend, we will investigate toner products in China.  In April 2011, non-OEM products showed up from 26 different non-OEM manufacturers.   Just in the past two months (May included), toner products from 10 different non-OEM brands became active at various gap-tracked online retailers in China.

China’s third party market continues to develop as new non-OEMs try to establish themselves in the increasingly competitive market.  This ever-changing marketplace reminds me of shopping at the grocery store, where we are constantly bombarded with new products that either weather the storm of competition, or fall victim to products that perform better in the market.  French Toast Crunch cereal anyone?  But at least we are left with its equally delicious counterpart.

Though shopping for toner is not exactly like shopping for food, which is something I hope everyone does much more often, the two can be likened to the disparity between generic and brand name products.  The ingredients are often similar and the quality can be comparable, although with the immense number of non-OEMs available in the Chinese market, some are bound to be sub-par quality.  But the primary difference between genuine and off-brand products is the price.  In the past year (April 2010 to April 2011), the average price disparity of non-OEM and OEM products increased from 55 percent to 60 percent, while overall prices of OEM and non-OEM products fell by 6 percent and 14 percent, respectively.  If only this were true for food, which only seems to increase in price.
The growing price difference between OEM and third party products could be the result of an overall increase in the number of available non-OEM products during the same time period as the average prices of non-OEM products drop.

During the April 2010-2011 period, notable changes in the volume of non-OEM toner products by manufacturer in gap intelligence’s panel include a two-fold increase in Epson non-OEM products from 15 to 30, while the number of non-OEM Lenovo products increased from 6 to 16.  Other non-OEM volume gains worth noting include those for Canon (61 to 75 products) and Brother (20 to 35 products).  Conversely, the volume of non-OEM products for Fuji Xerox and Panasonic actually decreased from 5 products to 2 products and from 5 products to 1 product, respectively.

Only two non-OEM vendors carry toners for Fuji Xerox and Panasonic in China.  It could be that following the introduction of these non-OEM consumables, the products were not absorbed and eventually pulled back by channel retailers or non-OEM vendors.  The fall in volume is further supported by the 50 percent drop in the overall price of non-OEM Panasonic products between April 2010 and April 2011. I like to think of the volume drops as food products that never really made it (a personal favorite of mine, Koala Yummies).
So what do we have to gain from an increasing number of off-brand products?  Since businesses are the primary target of laser supplies, organizations now have a wider selection of products to choose from.  The choice will likely come down to brand loyalty or price.  Will businesses be willing to shell out extra dough (money, not bread) for a brand name product with a reputation for quality, despite it’s availability from off-brand vendors at deep discounts?  Although it is unclear to know ALL of the factors that go into decision making, one thing is clear: consumers in China put a strong emphasis on price, and it could be the case that many will they take a money-saving approach with a non-OEM, regardless of its reputation for comparable quality.  This price-centric approach likely  adds fuel to the fire with regards to the continuous inflow of new non-OEM vendors and brands.  However, regardless of the reason, the Chinese market will likely continue to grow with introductory brands that will ultimately wait for the signal of whether they will survive, or ultimately perish with the Koala Yummies?