STAPLES DUMPS OWN-LABEL TONERS & INKS

Staples dumps own-label print supplies
Big box secretly ushers in new era of cooperation as it agrees not to stock HP-compatible printer consumables.
Despite a lengthy series of emphatic denials, Staples has taken the plunge and dumped a significant line of its own-branded imaging supplies. With no official announcement, the big-box giant has quietly dropped Staples-branded compatible cartridges for Hewlett-Packard (HP) and Epson printers from its retail catalogues. Sources report that removing HP and Epson cartridges from the Framingham, MA-based office superstore’s catalogue is the first step in what may amount to significant changes in the Staples line of aftermarket printer consumables. Staples is expected to remove all its Staples-branded HP ink and toner cartridges from retail stores early in the first quarter of 2007, and there are strong indications the same move is being planned for Staples-branded Epson compatibles. The suppliers for Staples’ own-brand products have had their contracts rescinded and commentators are describing the switch as a victory for the OEMs. The settlement Epson recently reached with various aftermarket companies is probably behind the office superstore’s decision to drop its Epson compatibles.Last month, a number of companies that market Epson compatibles announced that they would immediately discontinue selling these cartridges. The companies included the French firm Armor, which had supplied Staples with its branded Epson compatibles. Staples’ decision to stop selling certain non-OEM cartridges is being seen by commentators as a victory for printer makers in their battle for market share with third-party supplies vendors. With over 1,500 stores in North America, Staples’ move will affect the sales of tens of millions of dollars worth of ink and toner cartridges and will undoubtedly have significant knock-on results for OEMs and third-party imaging supplies vendors alike. The move will also severely dent the company’s aspirations to develop their own-brand business into their targeted $3 billion-a-year revenue earner. Imaging industry expert Jim Forrest, who is also senior analyst at Lyra Research, told OPI: “The suppliers of Staples brand remanufactured inkjet and toner have been ‘relieved’ of their contracts. They told InkCycle, who were the suppliers of their remanufactured ink, and Clover and GCCI, who were the suppliers of the toner, that they were no longer needed. “At the end of December, Staples published their US retail Winter 2007 catalogue and there are no Staples brand remanufactured cartridges – in fact, there are no HP remanufactured ink cartridges of any kind. “There are also no Epson-compatible remanufactured cartridges featured in the new retail catalogue, but I think that has more to do with the pending lawsuits and is not connected with the HP agreement. “It’s obviously been a long-time coming because the catalogues have to be printed well in advance. However, they’re all still present in the contract stationer catalogue but I suppose they have to get clear of their existing inventory. “We believe there have been some serious behind-the-scenes negotiations. HP does a lot of business with Staples; we don’t know the exact figures, but it’s a lot.” Forrest said he believed the landmark decision was based on simple maths.He added: “Let’s say, for example, all of HP’s business through Staples – all of the computers, the printers, scanners and the rest of the hardware as well as all of the consumables, such as the paper – if we pick a random, round number for the value of that business, let’s say $2 billion. “Staples have an annual turnover of about $18 billion. Everybody knows companies like HP give their retailers discounts, rebates and market development funds (MDF), which usually amounts to about two percent. “What do you think would happen if HP went to Staples and said ‘we will give you five percent if you discontinue your own brand of remanufactured cartridges’? That means they will get three percent more on $2 billion, which is worth about $60 million. “We think that Staples records roughly $120 million a year with the Staples brand HP-compatible ink and toner cartridges and they make about 30 margin points, which means they make roughly $45 million in profit. “You can imagine the discussion in the boardroom. They can make about $45 million selling these things and run the risk of the legal implications and return problems or take the $60 million and sleep soundly at night.” When asked what the Staples decision meant for the other big boxes, Forrest said: “I’ve got to believe that HP are talking to them as well to try to create a similar sort of deal. But now the likes of Office Depot and OfficeMax will be thinking how many customers they can pick up who are remanufactured cartridge fans who were buying Staples’ own-brand consumables. “This is the first time I can recall that one of the big boxes has yielded to pressure from one of the manufacturers.”