After attending the Inside 3D Printing Conference in New York City, it became painfully clear how crowded the consumer 3-D printing space has become. Beyond 3D Systems' (NYSE:DDD) Cube and Stratasys' (NASDAQ:SSYS) MakerBot brands, there are countless other competitors hoping they'll win over the hearts of consumers. Taiwan-based XYZprinting is one of those competitors, and with the backing of Taiwan manufacturing giant New Kinpo Group, it comes willing to accept lower profit margins that would send 3D Systems and Stratasys investors into a tizzy.
Currently the best seller in Amazon.com's 3-D printing store, XYZ's entry-level $499 da Vinci 1.0 printer has clearly been able to strike a balance between features and price. 3D Systems' and Stratasys' entry level 3-D printers cost at least double, don't offer as large of a build area, and their consumables cost significantly more than XYZ's offerings.
As far as investors should be concerned, a competitor like XYZ that's been enjoying success in the consumer 3-D printing segment may force 3D Systems and Stratasys to lower their prices to remain competitive. If 3D Systems and Stratasys were to succumb to pricing pressures, it could negatively impact profit margins and potentially lead to profitability headwinds. Because the consumer 3-D printing revenues represent a small percentage for both Stratasys' and 3D Systems' total revenue, it isn't likely to move the needle too greatly, but it could lead to writedowns related to remaining inventory. Depending on how much inventory 3D Systems and Stratasys carry related to consumer 3-D printers, pricing pressures that develop in the consumer segment could actually have a more profound negative impact on investors.
In the following video, 3-D printing specialist Steve Heller asks Gary Shu, senior marketing manager at XYZprinting whether or not the company has future plans to lower prices on its products. Going forward, 3D Systems and Stratasys investors should continue to monitor companies like XYZ that are willing to undercut competitors, which may result in future pricing pressures for these 3-D printing giants.
A full transcript follows the video.
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Steve Heller: Let's talk a minute about commoditization. Obviously, your printers are much cheaper than the competition. If you do well, the prices of Stratasys MakerBot, the [3D Systems] Cube, they're probably going to have to go lower to compete.
Do you anticipate putting further pricing pressure in the future to get the price right, like you said earlier? What is the right price, do you think? Maybe a year or two years from now, do you anticipate again lowering the price to make it even more affordable?
Gary Shu: I don't think we are interested in initiating any kind of price war. That's not our goal. We're just putting our first step to bring the price down to consumer level pricing. But we're not initiating any kind of price war.
In the future, we will have a product line with even higher price of more features, and we might have even lower price for smaller-footprint printers. We might have printers with different technologies, different integration of applications, so we will have different aspects of different product lines.
But I think a pricing war is not our goal here.
Steve Heller owns shares of 3D Systems and Amazon.com. The Motley Fool recommends 3D Systems, Amazon.com, and Stratasys. The Motley Fool owns shares of 3D Systems, Amazon.com, and Stratasys. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.