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empty promise?
As the market in refilled inkjet cartridges really takes off, the battle for empties is becoming key in an ever more competitive environment. And because of the returns involved, it is set to hot up even more in the future Selling refilled inkjet cartridges has become a high profit exercise and the battle for those precious empties is becoming a cut-throat business. “Collecting empties is like the war on terrorism,” one remanufacturer says. “We will get them anytime, anywhere and anyway.”
Aggressive words, but when you look at the cold hard cash being made from items that are effectively being picked out of bins, then it is easy to see why things are getting so serious. Picking up empties, refilling them and selling on for 15% to 25% under OEM prices is a simple and clean exercise, as long as you are keeping yourself in empties and this is where things could erupt.
war
Avi Wazana, CEO of Micro Solutions Enterprises (MSE), says: “The real war is going to end up on the empties battleground. We collect them in many ways. Through alliances with large companies, dealers, retailers and websites. I don’t care if it comes from an accountant down the street that has two empties or if it’s a guy that has a container full. That’s the reality.”
Jim Forrest, an analyst at Lyra Research, adds: “The remanufacturing industry relies on empties. Empties are the life blood of the industry. There are various ways of collecting them. There are a number of companies here in the US that use schools and churches and clubs. For example, they will go to a high school and put in a recycling bin for empties and say that in return for every 100 cartridges we’ll give you so many points that you can collect and at sometime turn them in for a new PC or some other kind of hardware.”
In August Staples announced its intention to raise up to $5 million for Ohio schools with statewide cartridge recycling programme. It will donate $1 for every eligible cartridge recycled in its stores. That’s good news for Ohio schools and good news for Staples too. The company collected more than 530,000 empties in 2002 and expects to “exceed that number considerably” in 2003. Staples says: “Ink and toner is a very competitive business. Staples is working to ensure that we make it easy for customers to buy these products at a good value. We’ll continue our focus on collecting empty cartridges as it enables us to provide customers with a Staples brand offering that is high quality and great value. Our brand cartridges sell 10% to 20% below the branded-product makers.”
Meanwhile, Depot, which like Staples sells refilled cartridges under its own label, launched its Ink Depot in-house stores in April with the intention of making the corralled shops the “best destination for ink, toner and fax supplies”.
The collection of empties has become increasingly sophisticated and some firms are even setting up websites and offering money for those used cartridges.
MSE is one company that has set up a website to do this and even has a sister firm, called WBI Recycling, created for the sole purpose of collecting empties.
Wazana explains: “We developed a very extensive technology that allows us to automate and collect pretty much anywhere in North America and bring it in. I think collecting empties is only going to get more sophisticated. I think what we’ve done differently in WBI is we put in quite a bit of money to have really sophisticated technology to help collect empties.”
Another online empties facility is the empties.com site that has morphed into an Ebay style auction service. Forrest adds: “It is not uncommon for empty cartridges to fetch up to $7. People don’t think of empties as being valuable but there’s actually a world market for them.”
This has become such a hot topic that there is even a market in home user DIY refill kits.
Lying somewhere between the cost of an OEM inkjet cartridge and a refilled inkjet cartridge, the kits supply the home user with the necessary tools to get into the cartridge, drill a hole in it and then refill by injecting ink through a syringe. Despite being stocked heavily in some computer retail stores, the kits appear to fail the all important user-friendly test.
Wazana explains: “Refill kits are very profitable but you don’t get customer loyalty with them. The people who sell it make money, but I don’t think that there’s a lot of reorder business. I think people try it once, they either love it or they’re going to hate it with a passion because it leaked, or they got dirty.”
According to Lyra Research, refilled cartridges are hitting Lexmark less than other OEMs such as Hewlett-Packard, Canon and Epson as its cartridge design makes them more difficult to fill.
tussle
Lyra’s figures show that the market has an 8% penetration on Lexmark ink cartridges, 20% on Canon and 27% on Epson. So where is the latest tussle between OEMs and the aftermarket likely to end up?
Forrest says: “The aftermarket always figures a way around things such as patents and whatever the OEMs do to make it difficult. They figure out a way to open up cartridges that have been ultrasonically welded and they’re very clever people.”
At the moment, OEMs are comforting themselves with the fact that refilled cartridges do not have comparable quality to their original product. Wazana agrees that the quality of aftermarket cartridges have to improve to enable it to make the advanced penetration of remanufactured toner cartridges.
He says: “I think that there is still much more room for technology and improvement on refilled inkjet cartridges. I don’t think that today’s refilled inkjets are as good as OEMs’ in terms of failure rates and performance. There is still much more room for improvement.”
Nevertheless, recent Lyra surveys suggest that mid to large companies are broadly happy with the quality with 80% stating that the quality was equal to that of the OEMs. Ultimately, it would seem likely that an element of co-existence may have to occur as cartridges can only generally be safely refilled around two or three times before fresh empties are needed. Wazana explains: “We’ve a really interesting relationship with OEMs. If you look at HP for example, we are relying on their empties. They are your lifeline. If you suddenly had 70% penetration and HP sold only 20% of the market, it’s self-correcting – you don’t have the empties. We can only max out at a certain percentage. It’s like a baby with an umbilical chord. We can grow so much as they feed us.”
The cat and mouse game between remanufacturers and OEMs will go on as the refills market continues to profit despite running on empties.
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