Toner News Mobile › Forums › Latest Industry News › *NEWS*LEXMARK’s INK-QUISITION !
- This topic has 0 replies, 1 voice, and was last updated 9 years, 8 months ago by Anonymous.
-
AuthorPosts
-
AnonymousInactiveINK-QUISITION: Lexmark plans to weaken competition by rewarding customer’s loyalty
Lexmark fired a new salvo last week in the war for consumers’ ink allegiance.
In
an industry first, the printer maker announced that one of its newest
inkjet printers will use cartridges that can come with an upfront
discount if the consumer agrees to return them to Lexmark, not
remanufacturers or refillers.”This is big news for this industry. It’s
huge,” said Jim Forrest, a senior analyst at Lyra Research, which
follows the imaging industry.It’s the newest chapter in a long
unfolding saga that pits printer makers against remanufacturers and
refillers in a struggle for the lucrative ink market, the most
profitable piece of the printer industry.Lyra Research estimates that
consumers will pay $32 billion for inkjet cartridges in 2006. Of that,
remanufacturers and refillers have about 21 percent of the market.Lyra
estimates the market for inkjet cartridges that go in Lexmark printers
is about $4.3 billion. Third-party companies, such as refillers, take
$790 million of that revenue, or about 18 percent.Forrest said
refillers and remanufacturers have been steadily gaining on Lexmark and
other printer makers.”It’s a matter of awareness and availability,” he
said. “Five years ago, many people weren’t even aware there was a
choice.”Lexmark’s cartridge return program offers a $4 discount to
consumers who agree to return the cartridges to Lexmark when they run
dry. So far, the program applies only to Lexmark’s new Z845 inkjet
printer, a low-end device that sells for under $50.The suggested retail
price for black and color cartridges that are part of the program is
$17.99 and $18.99, respectively. Similar cartridges that can be sold to
remanufacturers go for $21.99 and $22.99.The cartridge packaging is
identical on the front except for a prominent band that reads “Return
Program Cartridge.” On top, it tells buyers to read details about the
program listed on the back.If consumers have the return-program
cartridges refilled and then attempt to reinsert them into the printer,
a chip on the cartridges will disable them, Lexmark spokesman Tim
Fitzpatrick said.Lexmark likely started the pilot program on the
low-end printer because its buyers are more price-sensitive and more
likely to buy cheaper alternatives, analyst Toni Sacconaghi Jr. of
Sanford C. Bernstein & Co. said last week in a research report.The
company will “evaluate the program and its market acceptance” before
deciding if it should be extended to other printer lines, Fitzpatrick
said.The availability of remanufactured cartridges has exploded in
recent years, as franchises like Cartridge World expand rapidly, and
top retailers like Staples, OfficeMax and Office Depot offer
self-branded ink and toner. Walgreens announced earlier this year that
it plans to place in-store ink refill services at 1,500 stores.Refilled
and remanufactured cartridges can cost up to 50 percent less than
original cartridges, but some have had quality issues when tested by
independent researchers.Consumer impact
While Lexmark
emphasizes its new program is meant to offer customers a choice, the
head of a trade group that represents remanufacturers said consumers
will suffer.”If you give the consumer two identical choices and one is
$4 less, they’re going to take the one that’s $4 less … without
paying attention to the details,” said Tricia Judge, executive director
of the International Imaging Technology Council.She said Lexmark, in
particular, goes “out of their way” to lock in consumers.”Lexmark sets
out to confuse or contractually bind the customer or intimidate them.
‘You must return this cartridge’ sounds intimidating,” Judge
said.Whether Lexmark’s $4 discount will reduce the appeal of refillers
remains unclear. However, the company succeeded with a similar program
offered on toner cartridges for laser printers.Sacconaghi estimated
that Lexmark captures about 90 percent of the aftermarket supplies for
its laser printers.In an interview earlier this year with the
Herald-Leader, Lexmark CEO Paul Curlander said he believes Lexmark is
“the largest remanufacturer of laser cartridges in the world, and we
just do Lexmark pretty much.”A remanufacturing group challenged the
legality of the laser cartridge return program in a lawsuit in 2001.
The Ninth Circuit Court of Appeals upheld the program last August.Hoarding empties
Despite its laser success, Forrest said he doubts Lexmark will remanufacture the inkjet cartridges and sell them.
Inkjet
cartridges can be tough to remanufacture and have quality issues. The
primary advantage to the program is that it keeps empty cartridges out
of refillers’ hands, Forrest said.”Empties are the lifeblood of the
remanufacturing industry. They can’t produce a product until they get
empties. It’s the highest material cost they have,” he said.If
Lexmark’s program is widely accepted, analysts say remanufacturers will
have a smaller supply of cartridges to buy, thereby driving up prices
on remanufactured cartridges and making Lexmark’s products more price
competitive.Fitzpatrick said Lexmark hasn’t decided whether it will remanufacture or recycle the cartridges.
“This
is limited to a single printer, so remanufacturing would presumably
require a substantial number of cartridges,” Fitzpatrick said. “But we
really aren’t getting into predictions at this point. We will most
definitively do one or the other.”Forrest said he doubts other printer
makers will follow Lexmark’s move.”The rest of the industry hasn’t
followed suit on the toner side,” he said.The return program beckons
the question, though — will Lexmark succeed in luring back people who
use refill services or will it just offer discounts to loyal Lexmark
customers, thereby reducing the profit margins on their ink?”I assume
they’ve done their homework,” Forrest said -
AuthorSeptember 19, 2006 at 11:19 AM
- You must be logged in to reply to this topic.