HP’s All-In Plan – Capturing More of the Print Value Chain

For years, the printer and imaging folks at HP have pointed out the benefits of the contractual selling business model for its printers and supplies. This view, in part, explains why the firm has fiercely targeted the BTA dealer channel, where the large majority of dealer revenues rely on a leasing model that includes — and dictates — the use of OEM supplies, hardware, and dealer maintenance/service and support.  On February 29, HP announced a new selling model for a limited assortment of its printers, described as a subscription versus an outright purchase. If you have been following HP for a while, it appeared inevitable that the company would take the next step from the “Instant Ink” supplies subscription plan to offering printer hardware on a subscription basis. Thus, the HP All-In Plan is now available to customers in the U.S. — outlined here, but summarized below:

HP explains the All-In Plan is a comprehensive offering including a printer, a service plan, ink delivery, 24/7 support, and an option for customers to upgrade their printer every two years. According to HP:

  • The program has high customer satisfaction and loyalty, with a 90% retention rate among the 20,000 customers who participated in a two-year pilot.
  • 64% of HP Instant Ink customers expressed a desire for this all-encompassing service model, and 45% of customers using competitive brands’ printers showed interest in the plan.
  • There is an overall 40% growth in HP’s services and subscriptions, and Instant Ink has grown to become a $500 million dollar business, with an annual growth rate of 30%.

While I was not surprised that HP took the next logical step up from Instant Ink to All In, I was unsettled thinking that there were people who would think a leased or rented printer was an attractive bargain. If some of the user stats about the All-In plan from HP are representative of a segment of buyers out there willing to lease/rent (sorry: subscribe) a printer, we will know in reasonably short order because other OEMs might follow HP’s lead.

However, let’s face it: the BTA channel is completely dominated by an all-in-one leased equipment model, so why wouldn’t there be a segment of consumers out there willing to pay for the convenience of not having to focus much time or attention on an item most people don’t like to begin with. After all, about 20% of cars in the U.S. are leased — and most everybody understands that isn’t the least expensive way to get a car. Leasing as a purchase option varies by brand, but:

  • 77% of BMWs in the U.S. are leased when new.
  • The computer industry in its infancy (1960s -1970s) relied on a leasing model for mainframe and many minicomputers.
  • Leichtman Research found that 83% of all U.S. households have a subscription video on-demand (SVOD) service from Netflix, Amazon Prime, and/or Hulu.
  • In the US, the consumer product rental industry has combined annual revenue of about $20 billion, including products such as furniture, electronics and appliances, DVDs, formal wear, personal health/exercise equipment, bikes and e-bikes, party/event decor and equipment, tools, and water sports equipment.

The above represents a fluid mix of longer-term (more like leasing) and short-term rentals depending on the product — for example, longer-term furniture rental compared to renting a bike for a weekend. The All-In plan is presented as a convenient subscription service and is a bit unique from many hardware-focused electronic products because of the ink supplies element — it isn’t just about the hardware.

Rentals or long-term leases of consumer electronics hardware have not generated a groundswell of consumer enthusiasm. Take PCs as an example: in the US, PC sales are estimated at roughly $11B while PC rental/leasing represents only about $1.4B. Another example is cell phones — though that comparison is murky when a significant portion of cell phone “sales” are made through carriers in multiyear contracts and a monthly payment plan, which makes it feel more like a lease, and it is typically a rent-to-own agreement. TVs can be, but are not frequently, rented, and most TV buyers use revolving credit card financing anyway.

Even though many consumers may not be excited about a subscription service for a printer, this program can probably be a positive contributor to HP’s bottom line if it recruits just 10% of current consumer printer shoppers who are affluent and don’t care about metrics such as cost-per-page. Seen in that light, the All-In plan amounts to the replication of the successful BTA all-in-one (including hardware, service, supplies, support) business model adapted to traditional consumer market segmentation strategy. A simple truth is that the BTA value chain model has successfully worked for the OEMs, the dealer channel, and business clients for decades. What HP has done is, to the extent possible, recreate the successful elements of the BTA channel model and adapt them to the consumer/very small business — turning hardware printer sales into a service. Transitioning any product-based company into a service-based business model is all the rage these days.

Small business buyers not being served by the BTA channel will likely be attracted to the All-In plan for the same reason as consumers: convenience of acquisition, automatic supplies provisioning, replacement machine service plan, and better technical support. As with consumers, businesses will likely suppose that the All-In plan isn’t the cheapest way to get printing capability, but it offers attractive attributes that make it a good choice for some buyers. As a business expense, All-In’s monthly payment is a convenient way to track as a tax deduction instead of having to remember every ink cartridge and paper ream purchased in the past year, and could be an attractive way to provide printing capability — with auto supplies and service delivery — for work-from-home employees.

Who has (or needs) a printer?

If HP is targeting some consumers who have only an occasional need to print, there are so many options available that those consumers may not be a rich target after all. Consider these possible options used by non-printer owners when they occasionally need to print:

  • Printers at work — more of this printing goes on than many companies or their employees want to acknowledge.
  • A friend’s printer
  • A family member’s printer (yes, I have a laser-based MFP and I do receive requests to print from various family members)
  • Print shop/retail print, such as Staples, UPS stores, public libraries, school print resources, cafes

Fair or not, it has become fashionable in some circles to abandon personal printing altogether, as explained in articles like this one from the Washington Post. Another consideration, however, when you are the undisputed market share leader for the supplies of your brand of printers, is that any paid (directly or indirectly) printed pages produced by an individual without using a home/small business inkjet printer is only substituting one ink consumption source for another of the same brand — no new/additional pages/value are created.

Another step away from its channels

The aim of any print OEM these days is to retain as much of the value associated with the print business model as possible — which, of course, means retaining or even regaining any ink and toner cartridge market share from aftermarket brands. This considered, the greatest total value to be captured in the total supplies value chain is the revenue dollars expended at the end-user/consumer-level point of purchase. This glaring truth is hard to ignore for OEMs struggling with a declining page volume outlook for the foreseeable future. That same stark scenario applies to distribution and retail channel players carrying the OEM machines and supplies.

Like many OEMs, HP started down the road of selling direct to consumers and small business years ago when it launched HPShopping.com — a direct-to-consumer or small business channel. HP has initiated several programs in the past few years to direct interested shoppers on HPshopping.com back to its authorized resellers for the actual sale, though the results of those plans aren’t generally discussed.

HP is an innovative and successful company and the acknowledged leader of the print/imaging industry — though Canon is slowly catching up — and HP was an early entrant to establish an online direct sales presence. There is no question that HP’s online sales are significant:

  • HP says Instant Ink is a $500M supplies business on a steep growth curve.
  • HPshopping.com is an online sales powerhouse and a point of reference for comparison shoppers. HPshopping.com can easily be $1B+ in overall sales for print-related hardware and services.

In its Q1 2024FY 10K filing, HP reported $4.375B for its combined print business, adjusted to $17.5B for a 4-quarter rough forecast. Suppose HPshopping.com is a $1.5B operation; then it represents about 8.5% of its printer revenue sources.

HP shopping.com is aggressive in its online presence including:

  • Free shipping for most ink and toner items, delivery in 1-2 business days
  • Steep discounts on HP Care (extended warranty service) packs
  • Aggressive discounts on models being phased out
  • Now offering HP paper delivery, another part of the value chain

One wonders what HP’s channel partners, such as Staples, Office Depot/Office Max, Amazon, CDW, and others, think of the success that HPShopping.com has become and its potential to become even bigger in the future. Analysts have pegged the online direct sales channel is growing at a CAGR of roughly 16% between 2023 and 2032 … obviously it is the place to be.

Walking the tightrope

Any manufacturer serving the markets that HP does has to offer a worthwhile online sales presence — end buyers both expect and demand it these days. So every company targeting consumers and small/medium business faces the challenge of how to capture the greatest revenue possible in what is generally acknowledged to be, at best, a flat or declining category. From that viewpoint, HP’s moves are logical and successful — for HP anyway. One can guess that online sellers of HP hardware and supplies understand that the firm, like most if not all of their suppliers, has to have an aggressive online retail presence. That does not mean they are happy about it. As in many other industries, the paradigm-breaking effects caused by the sweeping influence and presence of the internet as an information source and sales/purchase channel aren’t over; more disruption and realignment of manufacturers/distributors and retailers is certain to come. As Die Hard character John McLane shouts, “Welcome to the party, pal!” — a refrain that printer OEMs, distributors, and retailers recognize every day.

serves as a senior analyst for BPO Media. With more than 40 years of experience in the printing industry as an analyst, product developer, strategist, marketer, and researcher, he has covered the printing and supplies sectors for prominent market research firms such as Lyra Research, InfoTrends, and BIS Strategic Decisions, and served with major OEMs such as Samsung, NEC, and Diablo Systems/Xerox. McIntyre is the former managing editor of Lyra’s Hard Copy Supplies Journal and has conducted research and consulting engagements examining issues such as market and business strategies, product positioning, distribution channels, supplies marketing, and the impact of emerging technologies.