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To: Oeconomicus who wrote (1786)	9/25/2002 1:42:52 PM
From: Oeconomicus	Read Replies (1) \| Respond to of 4345

PS: Dell is trying to spin this as a major new growth opportunity for them when it's really just a necessity to maintain their position as an online retailer of other people's printers. The branding is an indication of Lexmark's willingness to dilute its own brand to get into this particular retail channel.

To: Oeconomicus who wrote (1786)	9/25/2002 2:13:50 PM
From: Dave B	Read Replies (1) \| Respond to of 4345

Bob, First of all, for Dell to compete in printers on the basis of price, either they or Lexmark will have to give up a big chunk of the margins on printers - and aren't the big margins in ink and toner, anyway? Give away a big chunk of the margins on printers? As far as I know, there are no margins on the printer <G>. But of the various manufacturers, Dell is generally considered the lowest cost producer, so they can cut the prices even lower before they cut the margin to zero. As for the margins on ink, I'm sure that's where they make money. But I have an Epson Photo 700 printer (it's way past time to upgrade!) and I haven't used an Epson cartridge in 2 years, I'll bet. There are much cheaper alternatives that work just fine. I wonder if Dell will set up a facility (as part of their regular e-mails, possibly?) that would allow customers to easily respond with a quantity of cartridges they'd like to order (and just bill it to the credit card you already have on file, thank you). Second, unlike PCs, servers and other more-complex categories, Dell is not buying cheap components overseas and assembling them here to fill customized orders. They are buying a finished product and reselling it with a markup. No value-add except distribution. Good point. It'd be interesting to see how much Lexmark gave up in margin to get the Dell account. Remember, Lexmark will be able to claim Dell's market share as their own. Third, based on how Dell sells other non-customized or non-"build-to-order" products like monitors, price is not the driving factor - their prices are much higher than what one would pay for comparable products at online competitors and probably as high as at brick & mortar retailers. They sell them because many buyers want a Dell brand monitor, preferably in black, to match their Dell PC. I agree. But you may have answered the "how important is the Dell name" question above. If they're paying more for the monitors, do you suppose people will pay a little extra for the convenience of having cartridges delivered right to their door if they have the Dell name that you think has so much value on them? Fourth, if the goal is the razor-blade model, they have a problem because Lexmark will have to supply those as well. They won't get the margins on the blades to make the model pay. In the end, the same channel vs direct economics apply. Cartridges bought through the channel are higher priced than they need to be because of the extra hands out taking a cut. I just bought a dozen cartridges for my printer from 123inkjets.com at 80% of the price that I could find the cheapest ones in the channel (also, I just found a site that sells the same Sony Hi8 videotapes at 2/3's the best price I could get in the channel). Without the extra hands taking a bit of the "profit", Dell could sell cartridges at the same price as you find in the channel and still make more on them than HP or Epson makes. Also, an interesting thought just occurred to me. I wonder if customers will be able to use the Lexmark cartridges in the Dell printers when you run into the "emergency" situations? This helps Dell sell around the issue of the customer not being able to get a cartridge quickly when those emergencies arise. Dell will probably try to sell customers ahead of time, and let the "emergency" situations be handled in the channel. Fifth, they probably won't sell a whole lot of the blades anyway. Ink and toner is, for business customers, likely purchased as part of routine office supply purchases. This is your best point, I believe. Customers are going to want to continue to order supplies from their local supplier. Could be Dell's biggest bug-a-boo. Dave