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Monday, August 11, 2003

Refilling gets lucrative
Ellis Mnyandu & Steve James

Illustration by Sandeep JoshiTHERE'S gold in those empty inkjet printer cartridges. A thriving new economy has grown from selling refilled or remanufactured cartridges for up to 80 per cent less than what manufacturers like Lexmark International, Epson, Canon and Hewlett-Packard charge.

And, the big office-supply superstores, such as Staples and Office Depot, have got into the act, collecting empties and shipping them to third parties for refilling and selling in their stores under their own labels.

The cash value of empty cartridges — a used Lexmark can fetch up to $7 — has spawned a vast recycling movement and the Internet is clogged with ads for companies offering refill kits or remanufactured cartridges for computer printing.

A Website for buyers and sellers lists prices for the estimated one million empty ink cartridges thrown out daily around the world, mostly by individuals with home computers. Most cartridges can be refilled at least two or three times, or even as many as 10 times, according to experts.

In contrast, laser printers that use toner are used more by companies, which return empties directly to the manufacturers.

It may not be an ink war yet, but the big manufacturers have already felt small-arms fire from refill-merchants, who can operate out of their own kitchens.

Such is the value of empties that tales are told of armoured vehicles delivering cartridges in Latin America. And, Office Depot has acknowledged that shoplifting of ink cartridges ate into its second-quarter profits.

As a result, the big makers are trying to hit back with technology like ‘killer-chips’ that can disable equipment, to keep consumers buying their higher-priced brand-name cartridges.

Snatching the market

"They absolutely hate us. We are taking market share from them," Mark Ansier, vice president of Toner Plus, an Austin, Texas-based remanufacturer, says about the big makers.

"They (cartridges) are a valuable commodity. That’s why they are collected in all parts of the world and resold. In some parts of the world they are being stolen."

"Buying and selling cartridges is a $100 million business at the moment," says Ian Marzonie, president of Anzen Corp., which remanufactures and refills 1,00,000 cartridges a month at its 40,000-square-foot facility in Denver.

For example, his company, which operates the InkjetUSA.com Website, offers the Hewlett-Packard 78 cartridge online for $20. The same name-brand item in a store retails for $53.

Lexmark, which warned last week it would miss third-quarter earnings estimates because of slowing demand for ink cartridges, downplayed the threat.

"The proportion of total sales of supplies that is taken by these refills is a real minority," Chief Financial Officer Gary Morin recently told Reuters. "In many cases, it is actually a declining phenomenon. It has not been a successful foray."

Not so, says Jim Forrest, of Lyra Research and managing editor of the Hard Copy Supplies Journal, a publication for the digital printing and imaging industry. He said refillers now control 15 per cent of the market, and that is rising.

According to Lyra’s research, the total value of the inkjet business, including after-market and refill kits, is $21 billion. Forrest said 794 million ink cartridges were shipped worldwide last year, working out at 2.2 million per day, including refilled and "compatible" cartridges.

Boom time

"There is a booming market for empties, they are worth money, up to $ 7 or $ 8 each," he says. "Companies are prepared to pay lots of money for large quantities of clean empties."

Staples plans to donate $1 for every cartridge recycled in its stores, with a goal to raise $5 million for public education. It said 80 per cent of inkjet cartridges are thrown away.

"The customer is looking for value and we feel we offer a wider selection of remanufactured ink cartridges," says David D’Angelo, Staples vice president for global sourcing.

He says remanufactured cartridges sold at 10 to 20 per cent below the price of those made by branded-product makers. "We hope to gain more market share. This is a very competitive business."

Forrest says the problem now is getting empties, because inkjet printers are used mainly by home users who get through maybe one, two or three a year and throw them in the trash.

Of the major inkjet printer makers, Lexmark has the lowest rate of remanufacture — 6.6 per cent last year but rising to 7.9 per cent in 2003, he says. Hewlett-Packard’s third-party remanufacture rate is expected to be 13.5 per cent this year.

"Lexmark’s cartridges are the most difficult to fill," says Forrest, "The inkjet design is extremely difficult, if not impossible, to clone because it includes so many patents and integrates the print-head to the ink tank."

"We’re in a dogfight with the OEMs (original equipment manufacturers)," Ansier says.

It is an "absolute fallacy" that consumers might lose a warranty for using anything but an authorised cartridge, he added. "You can use any gas you want in a car."