PRICE WAR OVER PRINTER INK & TONER

[Anonymous]

Price war over printer ink
May 
2006For anyone who’s marveled at the low cost of today’s color printers
— then cursed when buying yet another costly ink cartridge — relief
is on the horizon.
A
war over ink prices is unfolding in the backyard of one of the world’s
biggest high-tech companies, Hewlett-Packard Co., which employs about
1,800 people at its printer research and design campus in Vancouver.Ink
has long been highly profitable for HP and its top competitors —
including Epson, Lexmark and Dell. Each printer these companies make
works only with manufacturer-approved cartridges, and the ink wells in
these cartridges have been shrinking in recent years.The result:
Customers are paying more — generally $15 to $30 per cartridge — and
getting fewer printed pages in return.But now companies such as
Cartridge World, which recently opened outlets in Hazel Dell and off
Northeast 104th Avenue, and Rapid Refill, which opened its doors on
Mill Plain this month, are giving consumers a cheaper option.These
stores clean and refill used cartridges, then sell them for as little
as half the cost of a new one.And unlike the messy refill operations of
the late 1990s, the printer company’s newest competitors promise clean
cartridges, quality ink and an easy experience. Some will also rebuild
laser cartridges and fill them with new toner at significant
savings.It’s a winning proposition for people like Paul Post, a
Vancouver-based commercial real estate broker and financial services
adviser. “I have a very, very old laser printer,” Post said. “It was
close to $40 per toner cartridge.”By purchasing refilled laser toner
from Cartridge World, Post estimates he’ll save around $120 per year,
nearly cutting his toner costs in half.”And I think the quality is
better.”

The franchisees
Cartridge
World and Rapid Refill are the big chains to watch, according to a
presentation by Joy James, a consultant specializing in the printer
cartridge aftermarket, but there are others — like Island Ink Jet —
making inroads.There are also the little guys, like Inkworld in
downtown Camas, run by Tim Shepherd.”Everybody’s trying to save a buck
— it’s a no-brainer,” said Shepherd, who taught himself to refill
cartridges with a syringe.His refill process will work once per
cartridge, and offers a savings of 20 percent to 50 percent, depending
on the cartridge.At Cartridge World and Rapid Refill, cartridges go
through a much more elaborate process involving centrifuges and refill
machines. Ink jet cartridges can be refilled a half-dozen times this
way.Laser toner cartridges, which are rebuilt from scratch, can be
remade indefinitely.Though getting into these businesses as a
franchisee requires a hefty up-front investment, local store owners say
the return has been rapid.Mike Morton, 59, spent more than $200,000 to
become a franchisee for Minnesota-based Rapid Refill, he said.This
month, he opened a store at 308 E. Mill Plain.”I’m contractually
committed to opening two more stores in the next 18 months,” he said.He
plans to open eight to 10 stores in Clark and Cowlitz counties in the
next five years.Morton expects to focus on business customers. He also
plans to set up “drop boxes” around Vancouver, where customers can
leave a cartridge with a neighborhood retailer, then pick it up and pay
a week later.For his efforts, Morton said he’s optimistic his first
Rapid Refill store will be profitable within two or three months.Teri
Harwood, who in December opened a Cartridge World in Hazel Dell with
her husband, Jake, expects her store to be profitable by the end of
summer.”So far, we’ve actually beat our revenue projections,” Harwood
said.Today, 40 percent of current customers are businesses and 60
percent are home users. Teri Harwood hopes to get that ratio to 50-50
by networking, offering on-site pickups for business owners, and
presenting cost benefit analyses.”We’re targeting small to medium
businesses,” she said. “Based on one cost analysis, we showed an
accounting company that we could save them $1,400 to $3,000 over five
years.”

A threat to the big guys
But not everyone is smiling at the arrival of the independent refiller competition.
HP
did not respond to a request for comment on the recent proliferation of
cartridge refill stores, but last year the company accused
Australia-based Cartridge World of using its patented ink formulas and
asked the newcomer to stop.”HP spends millions of dollars annually in
R&D to create innovations that benefit our customers, and we are
rigorous in our protection of this investment,” Pradeep Jotwani, senior
vice president of supplies in the company’s Imaging and Printing group,
said in a statement released in October.Of HP’s total profits, 57
percent come from its Printing and Imaging Group — most of that from
replacement ink jet and laser printer sales, according to Forbes
magazine.With retail refillers gaining market share, the big printer
makers are likely to keep re-engineering cartridges, and they may also
lower prices to stay competitive, according to Cindy Shaw, an analyst
with Moors & Cabot Capital Markets who watches the printer
industry.Rapid Refill franchisee Morton describes the pressure his
business puts on the big guys as “a win-win.””As they defend against
shops like ours, their product gets better,” he said. “The customer
wins. Because if we don’t bring something positive to the table other
than price, we don’t deserve to be here.”

Did you know?

 Eight printer cartridges are thrown away every second in the U.S., according to Recharger magazine.


Quality refills will work fine for most people, but analysts single out
Hewlett-Packard’s Vivera inks as superior for photos and papers that
must be archived.

 Brand name matters — not all print cartridge refill companies are created equal, and quality can vary widely.


Walgreens and Staples stores are rolling out refill kiosks that will
compete with storefront refillers such as Cartridge World and Rapid
Refill.

[Author]

May 24, 2006 at 1:01 PM