THE CARTRIDGE DIVIDE

[Anonymous]

http://www.crn.in/The-cartridge-divide-Market-Focus-001Feb009.aspx
The cartridge divide
Increasing
customer awareness and the entry of organized players has led to the
growth in the demand for remanufactured and refilled cartridgesOver the
last couple of years, the non-OEM (original equipment manufacturer)
cartridge segment, which earlier used to be largely unorganized, has
witnessed steady growth in the demand for cartridge remanufactured and
refilled (CRR) products. The increase in demand can be attributed to
the entry of global franchisee chains such as Cartridge World, and the
decision of LFRs like Staples and Reliance Digital to stock non-OEM
cartridges in their stores. This has not only increased the awareness
of CRR among consumers, but also helped to organize the CRR industry,
leading to its growth.In FY2008, according to industry estimates, the
overall printer consumables market—which includes OEM and non-OEM
inkjet cartridges, laser toners, and ribbons for dot matrix and line
printers—was worth around Rs 1,940 crore, recording a growth of 68
percent from the previous year—Out of this, compatible cartridges or
non-OEM cartridges (which included refills and remanufactures) had a 52
percent market share at Rs 1,008 crore of which 60 percent is
contributed by couterfeits, while OEM vendor cartridges had about 43
percent marketshare at Rs 834 crore.Adds Naveen Rakhecha, CEO, South
Asia, Cartridge World, “Out of the 52 percent non-OEM market share, the
organized non-OEM sector has only 40 percent share while the remaining
60 percent is dominated by counterfeits. The opportunity is in
converting the counterfeit market in our favor. We have been growing at
45 percent. Within two years of starting our operations we have opened
47 stores in 21 cities, and plan to have at least 250 stores by the end
of FY2010.” At present Cartridge World has 1,650 stores in 51 countries
with a turnover of $450 million.Says Gopi Varma, MD of Chennai-based
Black Magic Toners, which remanufactures cartridges for HP printers,
“We are increasingly seeing demand not just from individual customers
but also from large and small enterprises. This shows that consumers
are becoming more aware about the benefits and quality of non-OEM
cartridges, and are learning to accept them.” Black Magic has added
clients such as Larsen & Toubro and Reliance Money.

Growth drivers
One
of the main reasons that has led to the growth in demand for CRR is the
difference in prices. According to a recent user survey analysis of
customers in India by Gartner, cost savings ranked as the most
important factor influencing the decision to purchase refilled or
remanufactured consumables—other factors included local availability
and delivery—while nearly 40 percent of the respondents said they
believed that refilled cartridges are as good as those that come from
original manufacturers.“Consumers often focus on value, that is, the
cost of the pages printed, hence refilled cartridges, which cost 20
percent of the original cost of the cartridge, and remanufactured
cartridges, which cost 50 percent of the original price, often prove to
be a cheaper option for consumers than OEM cartridges,” explains Deepak
Jalihal, Secretary of the Indian Cartridge Remanufacturers and
Recyclers Association (ICRRA).

The entry of global retail chains
such as Staples and Office Depot has helped lend credibility to the CRR
industry, and is also helping to drive out the negative perception that
is prevalent among consumers due to the presence of the unorganized
sector. While Staples has already signed an MoU with the Future Group
to open a shop-in-shop at their Big Bazaar and other outlets, Office
Depot has a similar agreement with Reliance Retail. Local organizations
like WeP and TVS-E have also joined the bandwagon, thus providing more
credibility to the CRR industry.“Retail chains like Office Depot and
Staples usually stock both OEM and non-OEM cartridges at their stores,”
notes Jalihal. “This has helped to increase awareness among consumers
as they can now walk into any of these stores, learn about the benefits
of non-OEM cartridges, compare the products, and judge which one is
better.”Looking at the success of these global franchisee chains, a lot
of local refillers are also starting their own retail chains. Abbee
Consumer and Peripherals Sshope, a Pune-based company, plans to open 60
retail stores (under the name of Abbeefill Cartridge Refill Stations)
across the country within the next three months. Comments B B Somani,
CEO of Abbee, “We think this is the right time to cash in on the
opportunity and expand our refill stations across India. We are
focusing on opening stores in metros and state capitals, after that we
will shift our focus to smaller cities such as Indore and Mangalore.”
The company already has 18 stores in cities like Pune, Mumbai, Baroda,
Bangalore and Bhopal.Some people are also leaving their jobs and taking
up franchises of refilling chains like Cartridge World and Abbeefill.
For instance, Santosh Vasant Jagtap left his job as a marketing officer
for a paint manufacturing company and became a franchisee for Abbeefill
in Kalyan in February 2008. The results didn’t prove him wrong. Jagtap,
who started his franchise with Rs 5.5 lakh as seed investment, achieved
operational break-even five months after opening the store. “We are
currently witnessing growth of 15 percent month-on-month, and our
monthly turnover is Rs 12 lakh,” reveals Jagtap. He is now planning to
open his second franchisee store by October 2009.The economic slowdown,
which has had a negative impact on most industries, is also expected to
fuel the demand for non-OEM cartridges. As Varma of Black Magic points
out, “SMBs and SOHOs are more price-sensitive than larger enterprises,
thus these segments would be looking at remanufacturing and refilling
as a means of cost-saving.”

 

Inevitable challenges
A
large part of the CRR industry still remains unorganized, and is ruled
by refillers and remanufacturers who use low-quality inks and
remanufacturing methods. Many OEM vendors like Canon and HP have used
this to negate the use of non-OEM cartridges for their printers. OEM
vendors say that non-OEM cartridges bring harm to their printers, and
these vendors also run campaigns which state that their cartridges last
more than a refilled or remanufactured one. This has led to a negative
impact on the CRR industry which a lot of refillers and remanufacturers
are finding it tough to shake off.“Other than the cost factor, not many
consumers are aware of the benefits of getting a cartridge refilled or
remanufactured,” complains Jalihal of Soft Tree. “This has been
heightened by the negative campaigns that the OEM vendors have been
doing for the past few years. All we can do is try and spread awareness
through the media, through various seminars and exhibitions, and
through organized players such as Cartridge World, WeP, Staples and
Office Depot.” To combat the negative perception that is prevalent
among customers, remanufacturers like Black Magic offer free repair and
replacement services to their customers, while refillers like Cartridge
World offer a 100 percent money-back guarantee on all refills as an
assurance to their customers.Associations like ICRRA believe that with
the help of the government the CRR industry will be able to grow and
capture a larger market. Yet for this to happen, the government needs
to bring a change in the law and also designate a zone in India as an
export hub. “The current law does not allow the import of empty ink
cartridges as they are classified as e-waste,” says Jalihal. “However,
a change in the law could pave the way for India to become a global
export hub like Zhuai in China. Zhuai, which was developed by China as
an SEZ dedicated solely to CRR, has become the manufacturing and export
hub for the world. However, it has now reached saturation, and if India
sets up a similar export hub we can cater to the large global export
market. The government needs to wake up and see the vast opportunities
in the CRR industry.”

ICRRA plans to lobby with the government
to promote the industry. It has also undertaken an initiative to infuse
among its members quality standards like ISO 9000 and 1400, as well as
the Standardized Test Methods Committee (STMC) certification, a global
standard for testing and evaluating the performance of toner printer
cartridges.As consumers become more aware of non-OEM cartridges,
refillers and remanufacturers should witness an increase in the demand
for these products, particularly in the color cartridges segment. And
with the entry of organized players and associations trying to combat
the unorganized market, the CRR industry should witness continuing
growth in the coming years.

[Author]

February 19, 2009 at 3:41 PM