INK REFILL-CO. TAKE AIM @ PRINTER GIANTS

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INK REFILL-CO. TAKE AIM @ PRINTER GIANTS

 user 2006-09-15 at 12:39:00 pm Views: 68
  • #16463

    Ink-refill companies take aim at printer giants
    GRAPEVINE
    – Every month, Mark Barnes used to buy $600 worth of new, name-brand
    inkjet and toner cartridges for printers that churn out a steady stream
    of contracts and marketing material in his real estate office.But
    lately Barnes has been taking his empty tanks to a Cartridge World shop
    near his office, where he buys cartridges that have been refilled with
    new ink.”I’m spending about $400 a month now,” Barnes said. “I like
    doing other things with my cash.”Customers like Barnes represent a
    small but growing segment of printer owners who are buying
    private-label cartridges from refill stores and office-supply chains
    and plugging them into their Hewlett-Packard, Lexmark and Epson
    machines. They account for less than a quarter of U.S. printer ink
    sales, according to Lyra Research, which tracks the industry. But
    analysts say the number is certain to go much higher.That poses a
    growing threat to the big manufacturers, who make more money from
    replacement cartridges than from selling printers.Take Hewlett-Packard.
    In its most recent fiscal year, HP earned more than half its $6 billion
    operating profit from its imaging and printing group. And some analysts
    believe that the number understates the importance of ink and toner to
    HP because the imaging group includes printers, which HP sells at
    little or no profit.HP doesn’t break out results for individual items,
    but ink and toner “are both nicely profitable,” says Pradeep Jotwani,
    the company’s senior vice president of imaging and printing.Name-brand
    ink cartridges can run $30 to $50, even more for some color versions.
    Toner cartridges can top $100. After a few trips to the store,
    consumers who bought inkjet printers and businesses that bought laser
    printers will usually have spent more on replacement cartridges than on
    the machine itself.”You sell inkjets [printers] to sell them ink,” said
    Cindy Shaw, an analyst with Moors & Cabot. “It’s very much the
    razor-and-blade business model.”The printer manufacturers say their ink
    is better, and they point to independent researchers who have reached
    the same conclusion.But Burt Yarkin thought the high price of
    name-brand cartridges left room for upstarts. A few years ago, he left
    a children’s clothing chain to lead the U.S. division of Cartridge
    World.”The price of cartridges has not moved down at all over the
    years,” Yarkin said. “If they give us their empty ink cartridges, we
    sell them a refilled one, and the savings are 30 to 50 percent.” The
    price break on toner cartridges, which are more difficult to refill, is
    closer to 15 percent to 20 percent.Privately held Cartridge World,
    which was founded in Australia in 1997, has nearly 1,300 stores,
    including 440 in the United States. It says it will have 600 U.S.
    stores by year-end.They are run by franchisees like Sheri de Wet, who
    was casting about for a new career after she and her husband left
    middle-management jobs at a software company. They considered and
    rejected haircutting, sandwich and window-cleaning opportunities before
    opening two Cartridge Worlds, in Denton and Frisco.”We wanted to get in
    on the ground floor for a product that is growing, and this made
    perfect sense,” she said. “Everybody has a printer.”De Wet said her two
    shops have gross sales of about $110,000 a month, much of it to
    business customers, and she wants to open more stores. The company said
    franchise fees and other startup costs run $75,000 to $130,000.Refill
    shops like Cartridge World, Island Ink-Jet Systems and Caboodle
    Cartridge also compete with office-supply chains such as Staples and
    OfficeMax, which sell private-label cartridges or offer in-store
    refilling kiosks.HP watches these competitors closely and has sued or
    threatened to sue several of them, alleging infringement on HP ink and
    cartridge patents.HP told Cartridge World last year that four of its
    inks violate HP patents. Yarkin said his company is trying to settle.
    HP recently lodged similar complaints about ink sold by OfficeMax and
    Walgreens, and sued a Chinese firm that makes cartridges that work in
    HP printers.