RUMORS ,RUMORS , WILL STAPLES CARRY HP REMANS AGAIN ?

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RUMORS ,RUMORS , WILL STAPLES CARRY HP REMANS AGAIN ?
Will Staples once again make it “easy” to purchase store-brand HP remanufactured cartridges?We are not in the habit of trafficking in hearsay stories. Sometimes, however, a rumor become so ubiquitous it becomes news and gains credence as it circulates and is not refuted. Such is the case with a rumor currently circulating at industry events in North America and Europe. Traveling in January and February, we have repeatedly heard that Staples plans to once again sell store-branded remanufactured inkjet and toner cartridges for HP printers and MFPs at its retail office superstores. Although this is just a rumor—and we emphasize we have no evidence in support of it—the sheer persistence of the story and the fact that it is being told on two continents makes this rumor worthy of note.

As you probably know, Staples offers a comprehensive list of remanufactured ink and toner cartridges in its Staples Advantage catalog, but the selection of Staples-branded remanufactured inkjet and toner cartridges at retail is limited to a couple dozen SKUs, which is far fewer than it once carried. Like other office superstores, Staples quickly learned the value of the digital imaging supplies category, both OEM and third-party. But unlike its competitors, Staples’ ardor for house-branded consumables cooled as OEMs filed one lawsuit after another against third-party supplies vendors and their channel partners.

Gone but not forgotten: Staples once carried a line of Staples-brand Epson compatibles

Staples was one of the first office superstores to offer a full line of third-party branded cartridges at its retail stores in the 1990s. In 2001, the office superstore decided to drop branded remanufactured ink and toner from companies such as Dataproducts and Xerox and launch its Staples brand of non-OEM supplies. The office superstore ultimately became a significant channel for non-OEM supplies, allowing the aftermarket to gain share at the expense of OEMs. As late as 2006, Staples-brand remanufactured and compatible cartridges were available for a variety of inkjet and toner devices from a number of hardware manufacturers including Brother, Canon, Epson, HP, IBM/InfoPrint, Lexmark, Panasonic, Samsung, Sharp, and Xerox.

In the second half of 2006, rumors began to circulate that HP and Staples struck a deal requiring the office superstore to pull Staples-brand remanufactured and compatible inkjet and toner cartridges for HP machines from its retail shelves. Like the rumors we are now hearing about these SKUs returning, rumors of the end of Staples-branded HP consumables were rampant. Shortly after the HP rumor started making the rounds, it was joined by similar unconfirmed reports that the office superstore would also drop its line of Epson compatibles. World had it that Staples was concerned that Epson would prevail in the landmark cases it filed with the ITC and in federal court alleging widespread patent violation by dozens of third-party supplies vendors and their channel partners.

As it turns out, both rumors were true. In early 2007, Staples pulled its private-label cartridges for HP devices from retail stores and dropped Staples-branded Epson compatibles altogether. Staples was the first office superstore we know of to remove Epson compatibles from its website and catalog. While HP remanufactured products eventually were also removed from the website, the Staples Advantage catalog has continued to offer alternative HP supplies. Today, the catalog features Staples-branded inkjet cartridges for HP machines along with the Sustainable Earth line of remanufactured toner cartridges for HP laser machines. The catalog also features select refilled inkjet and remanufactured toner cartridges under the Diversity Products Solutions line, which is marketed in support of women- and minority-owned businesses.

Although many in the industry believe that Staples inked some sort of deal with HP to drop Staples-branded HP compatibles and remans from its retail shelves, such a deal has never been verified by either company. The consensus on the street is that HP, with its wide portfolio of products spanning dozens of categories, had enough clout to pursued Staples to drop its branded HP SKUs. In terms of a carrot, it has been said that HP offered Staples as eight-digit amount to drop the line along with some nice marketing dollars and other perks. There is plenty of evidence that the two companies have a special relationship. HP gets some prime real estate in Staples retail stores. Aside from the retail planogram, there are plenty of other indications that a very close bond exists between the OEM and office superstore. An exclusive arrangement, for example, was initiated a couple of years ago allowing Staples to collect spent HP cartridges and ship them back to HP for recycling. Just one look at a Staples circular quickly reveals whom the favored printer OEM is at the office superstore.

Staples pulled its branded line of non-OEM supplies for HP printers from retail stores and its website back in 2007. The office superstore did not jettison HP remans completely, however, and still offers them in its catalog.

Because neither HP nor Staples has confirmed the deal, there is no way to ascertain that it is lapsing. But for argument’s sake, let presume there was a deal and it fell apart. We do not feel that the end of such an arrangement will be as earth-shattering as when rumors of Staples and HP’s deal began surfacing five years ago. In 2006, HP was losing significant market share to third-party supplies vendors. The OEM has invested heavily in its retail consumables business since 2006. It has initiated a number of marketing campaigns promoting the performance of HP-branded supplies over third-party products. More importantly, it has introduced a broad portfolio of cartridges featuring a range of price points that make cheaper remanufactured product less attractive to price-sensitive consumers.

Staples may welcome the opportunity to return its line of branded ink and toner SKUs to retail cartridges aisles. We are certain, however, that the office superstore does not expect the robust growth it experienced five years ago from these products. In its heyday, digital printing was a hot category, and a wide assortment of digital consumables could be found throughout office superstores Shelves were filled with multiple facings of the same ink and toner cartridges, and there were yards of retail shelf space featuring dozens of different photo papers from multiple vendors. Inkjet and laser specialty media products were also in vogue and ranged from business cards and shipping labels to exotic stuff like window decorations and squares of coated material to assemble quilts with digital photos. While these products have not disappeared completely, they have been scaled back considerably. Since 2006, Facebook, iPads, and numerous other technologies have emerged to supplant printing, and adjustments to Staples’ plan-o-gram and product mix attest to the fact.

Nevertheless, we don’t want to downplay the significance of the potential return of Staples-branded ink and toner cartridges for HP machines to the office superstores’ retail shelves. If the story proves true, it should be worth tens of millions of dollars to Staples. Though numerous advertisements and marketing campaigns, the company has established itself as the destination spot for purchasing cartridges. Adding high-margin Staples-branded HP cartridges will certainly add to the firm’s bottom line. The line will most likely also drive top-line growth as the office superstore reenters the markets and goes gunning for some of its competitors’ business.

No doubt, the remanufacturing industry is paying attention to the recent round of rumors. Landing the Staples contract could be a huge boon to one or more non-OEM cartridge makers. Our bet is that Staples will source its branded ink and toner products from North American vendors to prevent running afoul of U.S. patent law. Thanks to the quirky Jazz Photo Corp. v International Trade Commission decision from U.S. Court of Appeals for the Federal Circuit, a product may retain certain U.S. patent protections if the first sale of that product occurs outside of the United States. So, we think that Staples will tap a remanufacturer from within the United States because such a company would be better situated to collect empties first sold in the United States, which guarantees most patent-holder rights have been exhausted.

We think InkCycle and Clover Technologies are the most likely beneficiaries of additional business from Staples. In the past, Lenexa, KS-based InkCycle has supplied Staples with some of its non-OEM inkjet cartridges, although the office superstore has had other suppliers. It is our understanding that InkCycle has retained some of Staples’ business even after Staples-branded HP cartridges disappeared from the retail store. Clover Technologies has supplied Staples with some of its Staples-brand toner cartridges, although, once again, the office superstore has had relationships with other non-OEM toner cartridge suppliers. We understand that both Clover and InkCycle supply at least some of the products sold through the Staples Advantage catalog.

Rumors about Staples’ plans in regard to its private-label brand of cartridges have proven accurate in the past. We cannot know for sure that industry innuendo will prove accurate again in this instance, but, if Staples is indeed planning to relaunch its line of Staples-brand HP remanufactured car.

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February 16, 2011 at 11:48 AM