Posted on Sun, Mar. 12, 2006

New way to think of ink
Retailers begin to offer a cheaper way to refill your printer

The Wall Street Journal

Even as computer prices have steadily dropped, the cost of one high-tech necessity has remained stubbornly high. Printer cartridges are so costly that printer giant Hewlett-Packard Co. has long made more than two-thirds of its profit from selling them.

Now, in a move that could save consumers hundreds of dollars in replacement costs, several major retailers are starting to offer speedy refill services that replace the ink rather than the entire cartridge.

Drugstore chain Walgreen Co. plans to roll out an ink refill service — at less than half the cost of buying new cartridges — in 1,500 of its stores.

Tiffani Bruce, a spokesman for Deerfield, Ill.-based Walgreen, said it was not yet certain when the company’s 46 Kansas City area stores would begin offering the service. She said that information would not be released until all store schedules for the rollout were reviewed.

With an eye toward launching a national service, office supply chain OfficeMax Inc. is pilot-testing an ink refill service in 40 stores in the Chicago area. And Office Depot Inc. is also testing an ink refill service in 15 stores in Minnesota and North Carolina. In addition, smaller ink refill services are planning to open more storefronts in malls and hotels.

The new services allow consumers to get their cartridges refilled quickly while they shop, rather than having to fill the cartridges themselves as the do-it-yourself kits on the market require.

Matt Davidson, a pharmaceutical salesman in Norwalk, Iowa, said he has been going to a Walgreens store that has pilot-tested ink refills for the past six months. The drugstore, which is a mile from Davidson’s home, refilled his black-ink HP cartridge within minutes at “half the price it would normally cost me for a new cartridge,” he said. “It was easy.” Davidson said he has returned for four other ink refills and has stopped buying new HP cartridges.

The cost of ink has long been a source of frustration for computer users. The price of ink per milliliter from big printer manufacturers has been rising at about 1 percent a year, according to market watcher Lyra Research. Many of the big printer makers are also getting stingier with the amount of ink in a cartridge. For example, while a popular older HP black-ink cartridge, the 45A, cost $29.99 and had 42 milliliters of ink, its newer counterpart, the HP 96, costs the same but has only 21 milliliters of ink.

The new services strike a blow at a major profit center for companies such as Lexmark International Inc. and HP, which rely heavily on ink for recurring revenue and profits. Indeed, HP actually loses money on its printers — money that it recoups through new ink and toner sales. HP won’t say what its margin on cartridges is, but analysts estimate the margin to be at least 60 percent on both ink and toner cartridges.

Each year, about 1.3 billion ink cartridges are sold worldwide, according to Lyra. Such sales generated $30.1 billion in revenue in 2005.

But the market share of refilled and re-engineered ink cartridges is now projected to hit nearly 29 percent in North America by 2009, up from 23 percent in 2005, according to Lyra.

Tuan Tran, an HP vice president of ink and toner supplies, said the Palo Alto, Calif., technology giant is “closely monitoring” the new retail refill services. Tran said consumers should be wary of refills, however.

Since HP designs its printers and its ink cartridges to work together as one seamless system, a refilled cartridge may not be as reliable and can cause streaking on printouts, he said. With a refilled cartridge, “there’s a big sacrifice in terms of quality,” Tran said.

Consumer Reports magazine, for one, has said that consumers should “be wary of off-brands” and has “found brand-name cartridges to have better print quality overall.” A 2003 study by research firm QualityLogic Inc. found that 54 percent of the remanufactured cartridges it tested had problems, compared with just 1 percent of HP color-ink cartridges and 6 percent of HP black-ink cartridges.

Walgreen is offering a 100 percent satisfaction guarantee for its ink refill service.

At its stores, consumers can drop off their empty cartridge while they shop and get a refill within 15 minutes, said John Sugrue, Walgreen general manager of photofinishing. The stores will charge $12.99 to $14.99 for a black-ink refill, around 60 percent less than the price of some black-ink cartridges from HP, Canon Inc. and others.

OfficeMax is charging a flat $14.99 for a black-ink refill, and $21.99 for a color-ink refill. An Office Depot spokesman declined to be specific about what it charges, but one of its stores in Minneapolis said pricing for an ink refill ranges from $9 to $18.

The savings could add up. If a consumer who uses the HP 96 black-ink cartridge buys five new cartridges over the course of the year, he will spend $149.95, excluding tax. But a consumer who refills his HP 96 black-ink cartridge five times at an OfficeMax, which is charging a flat $14.99 for a black-ink refill, will only spend $74.95, excluding tax, in the same period. The savings over five years will approach $400, more than enough to pay for a new color inkjet printer at current prices.

Over the past few years, other cheap options have emerged. These include used cartridges that have been refurbished to work as if they are new by companies such as Lenexa-based Laser Cycle Inc., specialty franchise stores such as Cartridge World and Island Ink-Jet that refill used cartridges on the spot, and do-it-yourself refill kits.

Some smaller firms are also planning to put refill services in mainstream retail locations. Save On Inks, a Boston-based ink cartridge provider, said it will put ink refill machines in hotels and strip malls around Boston and in Florida later this year. And makers of ink refill equipment, such as TonerHead Inc., SME Inc. and InkTec Zone America Corp., say other deals with retailers are in the works.

Other retailers haven’t yet committed to wider rollouts. An OfficeMax spokesman said the retailer is “very optimistic” about launching a national ink refill service, but declined to be more specific. An Office Depot spokesman declined to comment on whether it will convert its ink refill pilot into a national service.

No red ink here

■ Each year, about 1.3 billion ink cartridges are sold worldwide.

■ Sales generated revenue of $30.1 billion in 2005.

A sample of prices

Walgreens: $12.99 to $14.99 for a black-ink refill

Office Max: $14.99 for a black-ink refill

Office Depot: $9 to $18

Source: The Wall Street Journal

The Star’s Victoria Sizemore Long contributed to this report.

2006 Kansas City Star and wire service sources. All Rights Reserved.