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 Cartridge reruns

The OEM cartridge manufacturers are a worried lot. The cartridge refilling and remanufacturing industry is growing at a rapid speed, usurping their market share

 By Varun Aggarwal

The economic downturn may have dampened most spirits, but it brought the cartridge refilling and remanufacturing (CRR) industry a reason to cheer. Printing consumables constitute a significant portion of an organizations’ IT operational expenditure. So, over the past two years, lured by the promise of significant cost savings, a large number of SMBs and enterprises switched to remanufactured or refilled printer cartridges.

“India has always been a cost conscious market, but the slowdown really boosted the market share of remanufactured cartridges,” says Vishal Tripathi, Principal Analyst, Gartner. “Over the last two years, the OEM cartridges have lost about 30 to 40 percent of their market share to the remanufactured cartridges. The printer OEMs are now rethinking their product and pricing strategy.”

Ajay Dhir, Group CIO, Jindal Steel agrees, “We have completely moved to remanufactured cartridges across all our group companies. Contrary to what printer companies may want you to believe, remanufactured cartridges provide the same yield and quality as that of OEM products.”

Growth drivers

One of the key reasons for the shift among business customers toward remanufactured cartridges is the entry of several organized players in the market.

“Till recently, the remanufactured cartridges were considered dubious and spurious. But the entry of global brands like Staples and Cartridge World has given the industry a sense of credibility,” says Deepak Jalihal, Managing Director of Bengaluru-based remanufacturer of laser cartridges, Softree. “In addition, several Indian remanufacturers like us have put in place strong processes to ensure product quality and invested in marketing.”

According to him, the growth witnessed by the CRR industry is but the tip of the iceberg. “Earlier it was just the small businesses and home users who bought remanufactured cartridges. But now, after witnessing significant cost benefits, reputed companies in the mid-market and large enterprises are moving toward remanufactured cartridges.”

Bengaluru-based ER3 Solutions, a 3-year old company, took a decision to switch to remanufactured cartridges, as a part of its overall objective to provide green printing solutions. The company invested in a production unit and presently has 17 large enterprise customers who have completely outsourced their printing needs to the company. George Mathew, Director, ER3 Solutions opines, “There is a strong green angle to the remanufactured cartridges. Clubbed with our managed services offerings, this has been effective in convincing customers about the use of remanufactured cartridges.”

Sanjeev Mahajan, VP, Marketing and Exports of Delhi-based Navran Advanced Nanoproducts Development International, offers another reason for the growth in the CRR industry. “Many players have realized the vast global opportunity they can tap into. Today China has a multi-billion CRR industry addressing the global demand. India with its large manpower pool and lower cost matrix can also become a global manufacturing hub for CRR. As a result many Indian companies have become serious about the remanufactured business and have invested in better manufacturing practices. This has inspired customer confidence.”

According to Mahajan, the sales of OEM cartridges will wane further going forward as the CRR industry gets more organized and adopts a global outlook. “Over the next couple of years, the share of OEM cartridges is likely to fall below 50 percent in India.”

Challenges

While the future prospects look good, there are significant challenges that the CRR industry has to overcome. The huge influx of cheap products from China is one of the biggest challenges for the local CRR suppliers. “These remanufactured products are almost 50 percent cheaper than the local ones. To make a quick cost comparison: the original HP LaserJet 12A cartridge costs around Rs 3,400 and a locally remanufactured 12A costs anywhere between Rs 1,500 to Rs 2,200. The Chinese version, however, are available for as low as Rs 750,” informs Mahajan.

Another major issue is the availability of empty cartridges. The import of empty cartridges is considered e-waste and is thus banned in India. So the local manufacturers have to heavily depend on empty cartridges available within the country, which often turns out to be an expensive proposition. Highlighting the challenge, Mahajan adds, “Empty cartridges in excellent conditions are mostly bought by counterfeit players. Additionally, the empties in India are often traded at double the price as compared to the international prices.”

The third big challenge still remains the negative campaigning against the CRR industry by printer OEMs. “OEMs have been running frivolous campaigns claiming that the quality of a remanufactured cartridge is poor and can harm the printer. They threaten the customer that the warranty would be void in case they use such cartridges,” says Mahajan. He further adds, “In US, even though OEMs push original cartridges, they give the customers an option to choose between originals and remanufactured. One can only hope that the OEM manufacturers in India mature and drop this anti-CRR approach.”

Way forward

The perception about remanufactured cartridges is gradually improving, but the industry is hoping for additional government support. “Government should offer a level playing field for the remanufactured cartridge players and recognize them as an industry. The industry can form a part of the government’s green strategy as it reduces the carbon footprint generated by the cartridges by reusing them,” says Jalihal.

According to Mahajan, to promote the industry, government should also consider lifting the ban on the import of empty cartridges. “What we probably need is an SEZ similar to Zhuai in China, which has become the global manufacturing hub for remanufactured cartridges. There are more than 500 remanufacturers in the city, with many facilities producing more than a million units every month.”

Gartner’s Tripathi cautions, “Cartridges and toners are big revenue and profit earners for printer OEMs. Hence, they are likely to push harder to wrest back the market share from CRR. We have already seen OEMs introduce new products, pricing strategy and attractive exchange offers, and invent technology that makes it difficult for the parallel industry to reverse engineer their products.”

The road ahead for CRR industry is tough. The industry has its task cut out. It needs to constantly work towards improving the value proposition on remanufactured cartridges, offer good support and warranty on their products to gain customer mindshare.