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 user 2009-02-19 at 3:41:00 pm Views: 33
  • #21490
    The cartridge divide
    customer awareness and the entry of organized players has led to the
    growth in the demand for remanufactured and refilled cartridgesOver the
    last couple of years, the non-OEM (original equipment manufacturer)
    cartridge segment, which earlier used to be largely unorganized, has
    witnessed steady growth in the demand for cartridge remanufactured and
    refilled (CRR) products. The increase in demand can be attributed to
    the entry of global franchisee chains such as Cartridge World, and the
    decision of LFRs like Staples and Reliance Digital to stock non-OEM
    cartridges in their stores. This has not only increased the awareness
    of CRR among consumers, but also helped to organize the CRR industry,
    leading to its growth.In FY2008, according to industry estimates, the
    overall printer consumables market—which includes OEM and non-OEM
    inkjet cartridges, laser toners, and ribbons for dot matrix and line
    printers—was worth around Rs 1,940 crore, recording a growth of 68
    percent from the previous year—Out of this, compatible cartridges or
    non-OEM cartridges (which included refills and remanufactures) had a 52
    percent market share at Rs 1,008 crore of which 60 percent is
    contributed by couterfeits, while OEM vendor cartridges had about 43
    percent marketshare at Rs 834 crore.Adds Naveen Rakhecha, CEO, South
    Asia, Cartridge World, “Out of the 52 percent non-OEM market share, the
    organized non-OEM sector has only 40 percent share while the remaining
    60 percent is dominated by counterfeits. The opportunity is in
    converting the counterfeit market in our favor. We have been growing at
    45 percent. Within two years of starting our operations we have opened
    47 stores in 21 cities, and plan to have at least 250 stores by the end
    of FY2010.” At present Cartridge World has 1,650 stores in 51 countries
    with a turnover of $450 million.Says Gopi Varma, MD of Chennai-based
    Black Magic Toners, which remanufactures cartridges for HP printers,
    “We are increasingly seeing demand not just from individual customers
    but also from large and small enterprises. This shows that consumers
    are becoming more aware about the benefits and quality of non-OEM
    cartridges, and are learning to accept them.” Black Magic has added
    clients such as Larsen & Toubro and Reliance Money.

    Growth drivers
    of the main reasons that has led to the growth in demand for CRR is the
    difference in prices. According to a recent user survey analysis of
    customers in India by Gartner, cost savings ranked as the most
    important factor influencing the decision to purchase refilled or
    remanufactured consumables—other factors included local availability
    and delivery—while nearly 40 percent of the respondents said they
    believed that refilled cartridges are as good as those that come from
    original manufacturers.“Consumers often focus on value, that is, the
    cost of the pages printed, hence refilled cartridges, which cost 20
    percent of the original cost of the cartridge, and remanufactured
    cartridges, which cost 50 percent of the original price, often prove to
    be a cheaper option for consumers than OEM cartridges,” explains Deepak
    Jalihal, Secretary of the Indian Cartridge Remanufacturers and
    Recyclers Association (ICRRA).

    The entry of global retail chains
    such as Staples and Office Depot has helped lend credibility to the CRR
    industry, and is also helping to drive out the negative perception that
    is prevalent among consumers due to the presence of the unorganized
    sector. While Staples has already signed an MoU with the Future Group
    to open a shop-in-shop at their Big Bazaar and other outlets, Office
    Depot has a similar agreement with Reliance Retail. Local organizations
    like WeP and TVS-E have also joined the bandwagon, thus providing more
    credibility to the CRR industry.“Retail chains like Office Depot and
    Staples usually stock both OEM and non-OEM cartridges at their stores,”
    notes Jalihal. “This has helped to increase awareness among consumers
    as they can now walk into any of these stores, learn about the benefits
    of non-OEM cartridges, compare the products, and judge which one is
    better.”Looking at the success of these global franchisee chains, a lot
    of local refillers are also starting their own retail chains. Abbee
    Consumer and Peripherals Sshope, a Pune-based company, plans to open 60
    retail stores (under the name of Abbeefill Cartridge Refill Stations)
    across the country within the next three months. Comments B B Somani,
    CEO of Abbee, “We think this is the right time to cash in on the
    opportunity and expand our refill stations across India. We are
    focusing on opening stores in metros and state capitals, after that we
    will shift our focus to smaller cities such as Indore and Mangalore.”
    The company already has 18 stores in cities like Pune, Mumbai, Baroda,
    Bangalore and Bhopal.Some people are also leaving their jobs and taking
    up franchises of refilling chains like Cartridge World and Abbeefill.
    For instance, Santosh Vasant Jagtap left his job as a marketing officer
    for a paint manufacturing company and became a franchisee for Abbeefill
    in Kalyan in February 2008. The results didn’t prove him wrong. Jagtap,
    who started his franchise with Rs 5.5 lakh as seed investment, achieved
    operational break-even five months after opening the store. “We are
    currently witnessing growth of 15 percent month-on-month, and our
    monthly turnover is Rs 12 lakh,” reveals Jagtap. He is now planning to
    open his second franchisee store by October 2009.The economic slowdown,
    which has had a negative impact on most industries, is also expected to
    fuel the demand for non-OEM cartridges. As Varma of Black Magic points
    out, “SMBs and SOHOs are more price-sensitive than larger enterprises,
    thus these segments would be looking at remanufacturing and refilling
    as a means of cost-saving.”


    Inevitable challenges
    large part of the CRR industry still remains unorganized, and is ruled
    by refillers and remanufacturers who use low-quality inks and
    remanufacturing methods. Many OEM vendors like Canon and HP have used
    this to negate the use of non-OEM cartridges for their printers. OEM
    vendors say that non-OEM cartridges bring harm to their printers, and
    these vendors also run campaigns which state that their cartridges last
    more than a refilled or remanufactured one. This has led to a negative
    impact on the CRR industry which a lot of refillers and remanufacturers
    are finding it tough to shake off.“Other than the cost factor, not many
    consumers are aware of the benefits of getting a cartridge refilled or
    remanufactured,” complains Jalihal of Soft Tree. “This has been
    heightened by the negative campaigns that the OEM vendors have been
    doing for the past few years. All we can do is try and spread awareness
    through the media, through various seminars and exhibitions, and
    through organized players such as Cartridge World, WeP, Staples and
    Office Depot.” To combat the negative perception that is prevalent
    among customers, remanufacturers like Black Magic offer free repair and
    replacement services to their customers, while refillers like Cartridge
    World offer a 100 percent money-back guarantee on all refills as an
    assurance to their customers.Associations like ICRRA believe that with
    the help of the government the CRR industry will be able to grow and
    capture a larger market. Yet for this to happen, the government needs
    to bring a change in the law and also designate a zone in India as an
    export hub. “The current law does not allow the import of empty ink
    cartridges as they are classified as e-waste,” says Jalihal. “However,
    a change in the law could pave the way for India to become a global
    export hub like Zhuai in China. Zhuai, which was developed by China as
    an SEZ dedicated solely to CRR, has become the manufacturing and export
    hub for the world. However, it has now reached saturation, and if India
    sets up a similar export hub we can cater to the large global export
    market. The government needs to wake up and see the vast opportunities
    in the CRR industry.”

    ICRRA plans to lobby with the government
    to promote the industry. It has also undertaken an initiative to infuse
    among its members quality standards like ISO 9000 and 1400, as well as
    the Standardized Test Methods Committee (STMC) certification, a global
    standard for testing and evaluating the performance of toner printer
    cartridges.As consumers become more aware of non-OEM cartridges,
    refillers and remanufacturers should witness an increase in the demand
    for these products, particularly in the color cartridges segment. And
    with the entry of organized players and associations trying to combat
    the unorganized market, the CRR industry should witness continuing
    growth in the coming years.