Ink-refill companies aim to take a chunk out of printer giant
But lately Barnes has been taking his empty tanks to a Cartridge World shop near his office, where he buys cartridges that have been refilled with new ink.
"I'm spending about $400 a month now," Barnes said. "I like doing other things with my cash."
Customers like Barnes represent a small but growing segment of printer owners who are buying private-label cartridges from refill stores and office-supply chains and plugging them into their Hewlett-Packard, Lexmark and Epson machines. They account for less than a quarter of U.S. printer ink sales, according to Lyra Research, which tracks the industry. But analysts say the number is certain to go much higher.
That poses a growing threat to the big manufacturers, who make more money from replacement cartridges than from selling printers.
Take Hewlett-Packard Co. In its most recent fiscal year, HP earned more than half of its $6 billion operating profit from its imaging and printing group. And some analysts believe that number understates the importance of ink and toner to HP because the imaging group includes printers, which HP sells at little or no profit.
HP doesn't break out results for individual items, but ink and toner "are both nicely profitable," says Pradeep Jotwani, the company's senior vice president of imaging and printing.
Name-brand ink cartridges can run $30 to $50, even more for some color versions. Toner cartridges can top $100. After a few trips to the store, consumers who bought inkjet printers and businesses that bought laser printers will usually have spent more on replacement cartridges than on the machine itself.
"You sell inkjets (printers) to sell them ink," said Cindy Shaw, an analyst with Moors & Cabot. "It's very much the razor-and-blade business model."
The printer manufacturers say their ink is better, and they point to independent researchers who have reached the same conclusion.
But Burt Yarkin thought the high price of name-brand cartridges left room for upstarts. A few years ago, he left a children's clothing chain to lead the U.S. division of Cartridge World Inc.
"The price of cartridges has not moved down at all over the years," Yarkin said. "If they give us their empty ink cartridges, we sell them a refilled one, and the savings are 30 to 50 percent." The price break on toner cartridges, which are more difficult to refill, is closer to 15 percent to 20 percent.
Privately held Cartridge World, which was founded in Australia in 1997, has nearly 1,300 stores, including 440 in the United States, and says it will have 600 U.S. stores by year end.
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