The cartridge divide

Increasing customer awareness and the entry of organized players has led to the growth in the demand for remanufactured and refilled cartridges

Over 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.