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Cartridge refillers get makers’ attention
Lexmark plans to focus on value(YEA RIGHT )
Peter Healy knows how the market is supposed to work: Lexmark loses money selling many of its printers, but it makes it back by selling replacement ink.
So Healy knew that he was going after the Lexington-based printer maker’s profit center last summer when he opened a Cartridge World store that refills empty ink cartridges about four miles from Lexmark’s headquarters.
“We’ve gotten a lot of Lexmark employees coming in and looking around,” he said.
Last year remanufactured and refilled ink cartridges made up about 17 percent of the $11.5 billion replacement-ink market in North America, according to Lyra Research, a Boston-area firm that tracks the printing and imaging industry. By 2009, off-brand ink is expected to bring in 20 percent of replacement sales.
Lyra analyst Elisabeth Wightman said refillers’ revenue is expected to grow by 22 percent over the next three years, compared with 8 percent projected growth for branded-ink sales.
The growth of refillers and remanufacturers has sent printer makers to the courts.
In October, Hewlett-Packard sued Cartridge World North America, a company that sells remanufactured cartridges and offers in-store refilling services, for allegedly violating patents on HP’s inks. Cartridge World is to open its first Louisville-area store in April in Clarksville, Ind.
On Tuesday, printer maker Epson sued 24 cartridge remanufacturers, claiming ink-patent infringement.
Lexmark spokesman Tim Fitzpatrick said the company sees the refill market as a niche business at this point, and it plans to compete by continually upgrading its products. To address consumer concern over high cartridge prices, Lexmark last year launched a line of cheaper units that contain less ink.
“Our job at Lexmark is … to provide a compelling value that gives consumers high-quality printing and the ability to choose economical cartridge options,” Fitzpatrick said.
Jana Munford, a Dallas-based analyst with market research firm Current Analysis, said Lexmark and HP have little to fear from ink refillers now because the public does not believe the smaller companies can offer the same quality. Even Walgreens’ entrance into the market isn’t a huge problem as the drugstore chain has never been a major supplier of printer ink.
But if superstores such as OfficeMax, Office Depot or Staples begin advertising heavily and guaranteeing quality, “that could start a major change,” she said.
Healy said he doubts the refillers will force any of the printer manufacturers out of business, but if their services take off, it will force companies to change their business models.
“Right now, we’re a small part of the business, but as that grows to 30 percent of the market or so, something will have to change,” Healy said. “Who knows? Maybe HP or Lexmark will buy Cartridge World.”
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