Razors and Blades: Making Money on the Refill

How companies sell a base product cheaply and profit from consumables or services, from razors and printers to game consoles and water purifiers.

Some companies sell a main product cheaply, sometimes at a loss, and make their money on the refills, accessories or services that go with it. This is called the razor-and-blades model.

How it works

The base product, such as a razor handle, is priced low to attract customers.
The consumable, such as replacement blades, is sold repeatedly at a high margin.
Because the consumables only fit the base product, customers keep buying from the same company.

Examples

Razors: handles are cheap; branded replacement cartridges are costly.
Printers: inexpensive printers, profitable ink cartridges.
Game consoles: consoles have sometimes been sold near cost, with profits from games and subscriptions.
Water purifiers: companies earn from filter replacements and annual service contracts.
Coffee machines: capsule machines with proprietary pods.

Reverse razor-and-blades

Some companies do the opposite: charge a high price for the device and sell content cheaply, as with some smartphones and their app stores.

Risks and responses

Third-party refills: cheaper compatible cartridges or filters undercut the model. Companies respond with chips, patents or warranties that discourage substitutes.
Customer frustration: people dislike feeling trapped.
Regulation: some regulators examine restrictions on third-party supplies as unfair practices.

For consumers

When buying such products, look at the total cost of ownership: the price of the device plus the expected cost of refills over its life. A cheaper device can end up costing much more.

Ink tank printers

In India and other markets, ink tank printers, with refillable bottles of cheap ink, became popular. They cost more upfront but much less per page, reversing the razor-and-blades logic for customers who print a lot.

The printer comparison

One printer costs 3,000 rupees, but each cartridge costs 1,200 rupees and prints about 200 pages. An ink tank printer costs 10,000 rupees, but bottles printing thousands of pages cost a few hundred rupees. For a student printing 2,000 pages a year, the ink tank printer is far cheaper over three years.

Thinking the cheapest device is the best deal

Consumables can cost far more than the device over time. Always compare the total cost of ownership.

Key takeaways

The razor-and-blades model sells a base product cheaply and profits from consumables.
Examples include razors, printers, consoles, water purifiers and coffee machines.
Third-party refills and regulation challenge the model.
Consumers should compare the total cost of ownership.