Dell Reduces Cartridge Dealers’ Profits Printer vendors are keeping a close eye on their own supplies profit margins—if not those of their dealers

The Recycler Trade Magazine reports that Dell has “alienated some dealers by abruptly decreasing the profit margins on their toner cartridges” from 15 percent to 5 percent. The article speculates that the decrease in discount offered to dealers may be a result of the firm’s plans to enter the managed print services (MPS) market. On the one hand, we were surprised to read that Dell has chosen to reduce dealer profits on toner cartridges. Dell has done a lot of work over the past few years to expand its printer and supplies distribution beyond the “direct from Dell” model. The firm has aggressively added to its laser printer and MFP lines with the goal of seizing market share from bigger competitors like HP, Lexmark, and Samsung, but maintaining good relationships with its distributors would seem to be essential to growing share in the hardware and supplies markets. By reducing dealer profits, Dell runs the risk of seeing fewer distributors carry its toner cartridges and instead follow Office Depot’s example. The office-supplies superstore carries no Dell-branded cartridges at all, but does offer a fairly extensive line of Office Depot-branded remanufactured cartridges for Dell devices. On the other hand, Dell’s move is in line with some trends affecting the supplies industry as whole. As Recycler points out, it is possible that the move is part of Dell’s plans to enter the MPS market. Another possibility is that printer vendors are faced with increased raw material costs and are looking to increase their profits on supplies by passing their increased costs onto dealers and ultimately end users.