*NEWS*TONER/INK PRICY & PROFITABLE
*NEWS*TONER/INK PRICY & PROFITABLE
2005-01-15 at 10:47:00 am #11302
printing money !
The cost of personal computing has been driven down by technology and competition, but ink is still high-priced — and profitable
Forget the next big thing. The real money in technology is being made from a product first introduced some 5,000 years ago: ink.
As consumers and businesses spit out computer-generated letters, reports, and photographs, the US market for ink cartridges is soaring into the tens of billions of dollars. Ink cartridge shipments are projected to exceed $34 billion this year — more than double the value of printer shipments — and then grow by about $1 billion a year through at least 2007, according to IDC, the Framingham research firm.
Needless to say, this big and growing market is sparking a rush for this liquid gold. Original manufacturers, like industry leader HEWLETT PACKARD CO OF Palo Alto, Calif., are investing hundreds of millions of dollars into building a better ink cartridge while a growing legion of remanufacturers, resellers, and refillers are devising methods they hope will produce cartridges of similar quality, but at lower costs. Among the latest entrants: Cartridge World, an Australian franchiser that opened its first New England store in Weymouth in June, and Staples Inc., the Framingham office supplies retailer.
Also coming to a store near you: an automatic cartridge refilling system for the home, introduced last year by Inke Private Ltd. of Singapore and selling for about $70.
Cartridge World, which now boasts more than 600 locations worldwide, including 200 in the United States, has applied two well-known consumer models to ink cartridges. Locating its stores in high-traffic retail areas, Cartridge World allows customers to bring in spent cartridges, which can either be refilled while they wait, like a 10-minute oil change, or swapped for a filled one, much as grill meisters swap empty-for-full propane tanks.
Either way, the cost is about half that of a new cartridge.
Chuck Leonard, the owner of the Weymouth franchise, estimates sales have doubled each month since opening.
“I use printer ink at home, and I don’t know anybody who doesn’t,” said Leonard, explaining why he bought the franchise.
“I also don’t know any-body who doesn’t want to save money.”
STAPLES Has a similar outlook on the market potential, viewing ink and paper as the “bread and milk” of small businesses and home offices, their target customers. Staples, hoping to gain a bigger share of the ink market with its house brand, recently completed a two-year process to upgrade the performance of its cartridges, which sell for 15 to 25 percent less than national brands.
Once content to leave the production of its house-brand cartridges to contract manufacturers, Staples now carefully selects and works with the component and ink suppliers, even employing a chemist along with quality control and product development experts. Staples also employs the Rochester Institute of Technology, which puts the house-brand cartridges through a 22-step lab testing program.
“The challenge has always been how do you get cartridges equal to or better than national brands,” said Jevin Eagle, senior vice president for Staples’ brands. “We think we’ve cracked the code.”
Cracking the code, however, is not easy, said independent analysts. While cartridges might appear to be simple plastic vessels, they in fact represent sophisticated technology and materials science.
Hewlett-Packard, for example, has more than 400 patents on its inks alone, which are formulated, among other things, to withstand temperatures of more than 600 degrees as the ink is blasted at speeds of more than 30 miles per hour from cartridge to paper
John McIntyre, vice president at Lyra Research Inc., a Newton firm that follows the imaging industry, suggests this example to understand how advanced the ink cartridge technology has become.
Today, an eight-year-old can produce the same quality photos that once had to be sent out to photofinishing companies.
“A lot of what they do is rocket science,” McIntyre said.
HP, which invented thermal inkjet technology and introduced the first inkjet printer 20 years ago, says it will fend off the challenges of Staples, Cartridge World, and other competitors as it always has: developing better technology and products.
HP invests $500 million a year in research and development for just supplies, much of which is spent on ink. The company operates two labs, one in Corvallis, Ore., the other in San Diego, which focuses on ink research and employ hundreds of chemists. They’ll test as many as 1,000 chemical variations before settling on a specific formula.
Earlier this year, HP introduced an ink, dubbed Vivera, which the company says can produce photos that last more than 100 years without fading.
Traditional photographs begin to fade in 20 to 40 years.
“The complexity of ink is that it touches everything — printer, paper, the semiconductor — and different chemical reactions can happen,” said Boris Elisman, HP’s vice president of marketing and sales.
“Our whole R&D begins with the ink, and then system is build around it.”