We discovered something very interesting about the 3D printer business by reading a stray email.
I should point out that this publication receives an awful lot of stray email. Every day we are besieged with many emails that seem to be sent to us simply because we have “something to do with 3D printing”. Sometimes these messages are quite funny and we write them up as such; For a good laugh, check out our most recent comedic mailbag review.
But this week we received a curious email from a notable Asian manufacturer of desktop 3D printers, who seemed to want us to resell the company’s new 3D printer model. (By the way, it looks like a very good machine.) It seemed that this was a form letter likely sent to a number of parties. We’re not going to reveal which company contacted us, as you will come to understand.
The email seemed to be recruiting resellers for their equipment, and was clearly sent to us because we “have something to do with 3D printing”. We are most definitely not resellers of 3D printing equipment, have never done so in the past and most likely will not in the future. We report news.
The email said it was their strategy to avoid price competition between distributors and they recommended that if we were to become a reseller, that we should not post the equipment for sale on any popular online store, such as Amazon, AliExpress or others. It was only acceptable to sell the equipment from one’s own website.
Further, they said the price must be no less than the manufacturer’s approved price.
The email then went on to explain what that price was (which seemed reasonable given the nature of the specific machine and the current state of the market), and that the distributor’s price would be a lower figure.
3D Printer Reseller Margin
How much lower? It was a 58% discount off the recommended price. That seems to be a huge amount: a 58% margin on a device that is supposedly in a highly competitive market. I would have expected a far lower margin.
But thinking about this, the 42% fee paid to the manufacturer itself must have margin, too, for the manufacturer to make its own profit. If it’s at the same level, then the actual price to produce the machine could be something around 20% of the retail price.
Could a US$2,000 machine be made for only US$400? A US$1,000 machine for only US$200?
We just don’t know, as such things are kept close by manufacturers and distributors. That’s why this email was so interesting to us: it puts the costs of equipment into a bit better perspective.
Why enforce these restrictions? It seems to be a policy to maintain their network of resellers. If some of their resellers significantly discount the device, which they could given the huge margin, then business for other resellers of the machine could dry up. This could leave the manufacturer with many fewer nodes in their sales network, and that can’t be good.
3D Printer Reseller Strategy
Thus their strategy seems to be to grow the sales network.
There could be a good reason for this, too. As the market is slowly shifting towards professional and industrial users, so too are the manufacturers. Asian manufacturers of inexpensive desktop equipment are caught in a kind of “race to the bottom” with countless other cheap manufacturers, and eventually everyone will lose.
Thus a good strategy might be to accelerate a shift into more profitable markets, and those are best addressed with a strong, large and competent reseller network.
That’s exactly what seems to be going on here. Expect more Asian 3D printer manufacturers to begin marketing industrial machines.