PRINTER CTG REFILL…GAINING MARKET SHARE

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Printer cartridge refill services gaining market share
Even as computer prices have steadily dropped, the cost of printer cartridges are so costly that printer giant Hewlett-Packard Co. has long made more than two-thirds of its profit from selling them.
Now, in a move that could save consumers hundreds of dollars in replacement costs, several major retailers are starting to offer speedy refill services that replace the ink rather than the entire cartridge.
Early next week, drugstore chain Walgreen Co. plans to announce an ink-refill service — at less than half the cost of buying new cartridges — in 1,500 of its stores, with the rollout starting in mid-March. With an eye toward launching a national service, office-supply chain OfficeMax Inc. is pilot-testing an ink-refill service in 40 stores in the Chicago area. And Office Depot Inc. is also testing an ink-refill service in 15 stores in Minnesota and North Carolina.
The new services allow consumers to get their cartridges refilled quickly while they shop, rather than having to fill the cartridges themselves as the do-it-yourself kits on the market require. Matt Davidson, 46 years old, a pharmaceutical salesman in Norwalk, Iowa, says he has been going to a Walgreens store that has pilot-tested ink refills for the past six months. The drugstore, located a mile from Davidson’s home, refilled his black-ink H-P cartridge within minutes at “half the price it would normally cost me for a new cartridge,” he says. “It was easy.” Davidson says he has returned for four other ink refills and has stopped buying new H-P cartridges.
The new services strike a blow at a major profit center for companies such as Lexmark International Inc. and H-P, which rely heavily on ink for recurring revenue and profits. Indeed, H-P actually loses money on its printers — money that it recoups through new ink and toner sales. H-P won’t say what its margin on cartridges is, but analysts estimate the margin to be at least 60 percent on both ink and toner cartridges.
Each year, about 1.3 billion ink cartridges are sold world-wide, according to market watcher Lyra Research. Such sales generated $30.1 billion in revenue in 2005. But the market share of refilled and re-engineered ink cartridges is now projected to hit nearly 29 percent in North America by 2009, up from 23 percent in 2005, according to Lyra.
Tuan Tran, an H-P vice president of ink and toner supplies, says consumers should be wary of refills, however. Since H-P designs its printers and its ink cartridges to work together as one seamless system, a refilled cartridge may not be as reliable and can cause streaking on printouts, he says. With a refilled cartridge, “there’s a big sacrifice in terms of quality,” Tran says

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February 7, 2006 at 10:35 AM