Cartridge World – Where to Now?

Cartridge World Franchise Information

Where to for Cartridge World?

Cartridge World is one of the big success stories in Australian franchising. Cartridge World specialises in refilling ink and toner cartridges, and from one small store in Adelaide they have grown to 1,000 stores worldwide in 9 years. Can this phenomenal success continue? Unless Cartridge World evolves, the answer is no. There are several reasons for this:

The OEM Manufacturers
The major printer manufacturers have a vested interest in making sure that refillers such as Cartridge World don’t succeed. HP, Canon, Epson and Lexmark make alot of money from printer cartridges, and although refillers have only a slice of the market this represents billions of dollars in lost sales. HP last year let off a warning shot over Cartridge World’s bows by issuing a warning that some franchisees were using inks that infringed HP’s patents. (More on this later in the article). Canon recently successfully sued a company which was refilling it’s cartridges. Epson has been stopping companies from making compatibles of it’s cartridges that infringe it’s patents (Cartridge World has it’s own line of compatible Epson and Canon cartridges).

Manufacturers are making it difficult for refillers in 3 other ways:
1) By placing chips and other proprietary designs on the cartridge to make it more difficult or time-consuming to refill cartridges;
2) By making the cartridges a lot smaller and a lot cheaper thus making it uneconomical to refill – for instance some new HP cartridges cost just $10 – and if you factor in the cost of labour, rent, franchise and advertising fees and utilities (plus the inevitable failures) the average Cartridge World franchisee would be lucky to break even when they refill one of these.
Other Epson and Canon cartridges are time consuming and difficult to refill. The newest Canon cartridges even let the printer know they have been refilled and if a user inserts refilled cartridges into their machine they are prompted with a warning message that says their warranty won’t cover damage by these cartridges, and the printer disables the ‘ink low’ warning which may result in the printheads burning out;
3) Creating vastly superior inks and toners that are difficult to replicate. For instance, toners used to be manufactured by making a ‘porridge’ of toner then drying it out and crushing it to a fine powder. This was very efficient, however this process resulted in toner particles which varied in size by up to 1000%, and particles which looked like chipped pieces of rock under a microscope. These days OEM manufacturers’ toner is made to the finest tolerances, and they have patented processes to make the particles a spherical shape. See an article here about the different processes. Presently replacement toner of such quality is difficult to obtain, resulting in print quality from newer type remanufactured cartridges being noticeably lower quality. Colour inks too are becoming more and more complex and difficult to duplicate. A lot of newer inks are covered by patents so anything close to the original just can’t be used to refill ink cartridges. Even though most ink formulations are covered by patent, at the time of writing Cartridge World stated on their site:

“We use premium inks that have exactly the same chemical and physical properties as the original inks. Our inks are specially formulated for your printer.” (my italics).

If the inks are exactly the same, Cartridge World can expect more warning letters not only from HP but also Canon, Epson and the rest.

The rise of digital photography
The fuel for the latest burst of activity in the printing industry is the huge growth of digital photography. Consumers are printing out literally millions of photos on their home printers and consumers demand photo quality prints. This requires not only quality ink but also quality paper. This market will continue to grow. Unfortunately Cartridge World has positioned itself on price, not on quality. The OEM’s have the upper hand here. HP, Canon and Epson all advertise that best printing results are achieved by using genuine inks and paper, and when people want to print photos they think OEM ink. While refill inks can produce brilliant prints if of a high quality, Cartridge World just doesn’t seem to have entered the digital printing world. None of the Cartridge World corporate websites even mention that printing quality photos is possible with their refilled cartridges. Cartridge World inks have not been tested for permanence by Henry Wilhelm. (09/06/2006 UPDATE: They have now been tested). Cartridge World does not mention that photo prints can be produced at half the price using their refilled cartridges. The corporation psych seems to have ignored the future of printing!

Color laser printing
Another strong growth area is color laser printing. Color laser printers have dropped substantially over the past 2 years and machines can be had for less than $500. However, this poses problems for Cartridge World. As their own website said:

“At present, continual research and development has yet to produce a toner which can be used successfully in the reloading of a colour laser cartridge.”

The reasons are here on a story about color laser cartridge refilling.

This will only cut into the “pool” of cartridges that can be refilled, reducing Cartridge World’s market further.

Competition
Cartridge World have been fortunate in that there is no real large scale competitors to their business. That will change of course. Caboodle Cartridge, although comparitavely small with 44 stores, is set to expand because consumers don’t even have to wait for their cartridge to be refilled, they have ones on hand (edit: now closed down). And there are the big chains: Walgreens – opening ink refill stations at 1,500 of their stores; OfficeMax , installing 900+ ink refill stations across America; and Office Depot is trialling a similar ink refill service in 15 stores in Chicago.

Can the refill market grow to absorb these new competitors? While awareness can increase the refill market, the OEM’s will not tolerate losing market share – every 1% increase in refill sales hurts their sales by $3 billion. This is the real competition for Cartridge World – a squeeze on one side from new entrants to the refill market, and a squeeze on the other side from the big manufacturers (through upscaled marketing, deep discounting or legal action).

What to do?

Cartridge World will need to add value to avoid the squeeze.

  • As mentioned, digital photo printing is huge and marketing efforts, quality control and staff training can help Cartridge World become “digital printing experts”, offering a total print solution. A range of quality photo papers and displays of printed samples would make this an easy proposition to sell.
  • This one may be controversial as it may ruffle some feathers. Team up with a printer niche player such as Sharp, Xerox or Olivetti to offer a range of Cartridge World brand printers (with easy to refill inks and toners of course). With a large enough installed base this could be the product that ensures Cartridge World’s continued growth and survival. And what better salespeople are there than the ones already giving advice to customers about which printer to buy, and ink and toners?
  • Misc: Keep being innovative and staying ahead of the pack – use whatever means possible to differentiate itself from the competition. Build the technical skills of Cartridge World operators with training on a regular basis (not just 2 weeks at the start). Ensure standards are set out and stores are following those standards. Find out why the best franchisees are successful and apply that wherever possible to other franchisees. Encourage forward thinking at head office, who should be thinking about the state of the industry in 3-5 years time.

It’s been fun…
…dissecting Cartridge World. There is a comments box below, use it! I would especially love to hear from Cartridge World people. Do you think this assessment is accurate? Have I made any factual errors you would like to see corrected? I will approve all comments (except frivolous, repetitive or abusive posts). Cheers!

 

Update: In a March 2014 article, Chairman Rod Young laid out Cartridge World’s new direction. In effect, refilling has gone out the window and they have become a retailer selling home brand printer cartridges.

Whilst still touting their green credentials, it’s hard to see how their recycling process will work. There is no mention of where the recycled cartridges they collect will end up now that they aren’t refilling.

Is this enough differentiation to succeed in the market?  The competition in the printer cartridge market is fierce, with a low cost of entry and an efficient worldwide distribution system for both genuine and compatible cartridges. The market is fragmented with many small to medium players operating both locally and nationally. Cartridge World has never been able to compete on price on OEM products due to the 9 point charge to franchisees on gross sales revenue, now they may be facing the same difficulty with their own brand cartridges.

What could compound a drop in profitability is if, as the pictures on the linked page imply, franchisees need to open stores in high traffic areas with corresponding high rent and the need for floor staff and slow moving inventory. They will need to be nimble and fast acting to tackle the flexible online players. Whilst they have their own online offering, their website can only cannibalize sales from franchisees who don’t see the full profit from online purchases in their territory.

In their new model Cartridge World will need to focus on training their franchisees in sales and marketing to overcome the lack of added value they are providing  Рa daunting task.

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25 thoughts on “Cartridge World – Where to Now?

  1. You asked for a response from a CW person, here it is…

    While I cannot speak for the company as a whole because I am employed within one of the franchised stores, I can address some of the “facts” you state in your article.

    Firstly… digital photo printing. I use cartridges which are refilled here in the store for all of the digital photo printing I do at home (a lot). I also use the photo paper we sell here (I’ve done comparisons with most major photo paper manufacturers and found little to no difference.) While it’s true I have a very nice photo printer, there is no difference between the quality of the OEM ink photo prints and the ones with refill inks. To show this to customers, I did two prints, one with refills and one with OEM’s and placed them in frames, next to each other on the front counter.

    Because I would be misrepresenting us if I was incorrect in this assertation, I did comparison prints on at least one photo-rated printer from every major manufacturer, all are almost if not exactly the same quality. (It should also be noted that we have these printers in the store to test cartridges we refill, and we compare the test pages with test pages printed from the OEM cartridges).

    Secondly… color laser cartridges? I remanufactured one today for a Dell color laser printer… while it’s true we cannot do EVERY SINGLE laser color cartridge on the market right now, we have the means to do quite a few of them.

    Thirdly… in regards to your statement that one of our “problems” being created by the OEM’s is them making smaller, cheaper cartridges… well, that’s up for the consumer to decide. If they want to drop $50 on a throw-away printer that has tiny cartridges which only hold 4-6ml of ink and need to be purchased every month or so (btw, don’t even try to imagine printing photos on these printers), then that’s fine…

    But mainly we hear from customers that they buy these cheap printers, then when they go to buy OEM ink, they find out that it’s more expensive than the printer was, so they just buy a new printer for the starter cartridges. Thank you to the OEM’s for producing more waste for the landfills that takes an average of 400 years to decompose/disintegrate (based on plastics used in printers/cartridges).

    At any rate, I am at work now so I must go… if anyone has any questions, feel free to e-mail me: rb@cartridgeworldpgh.com

    Cheers.

  2. You don’t really have the full grasp on the ink debate do you but go ahead and emplore people who can’t afford to place 8 x OEM Epson cartridges at ¬£11.95 each into their printer.

  3. I have used Cartridge World and was not really happy with the results. The truth is Cartridge World is going to fail. Why? Beccause why would I want to sit around in Cartridge World and wait for my cartridge to get filled when I can walk around Walgreens and do my personal shopping.

    Anyone know how much would someone lose if their Cartridge World goes under?

    thanks

    Rob

  4. Thanks for this article. As an employee of Cartridge World, I noticed some questionable details; but Chrysm covered many of them for me.

    As far as the “reset” chips the cartridge companies put on the cartridges to make them more difficult to reset; they’ve showed little or no problem for us. They are easily reset or replaced and really only inconvenience the consumer by adding to the original price of the cartridge because the resetting of a chip barely effects our price, if at all.

    While some say “why wait on a cartridge when I can just buy a new one now?” a lot of the time, we have cartridges we’ve refilled in stock so we can simply trade them out; only charging the same refilling price.

    While you might be able to do your shopping at Walgreens while getting a cartridge filled by them, Cartridge World’s are usually always located in dense shopping areas (i.e. my location is practically in the parking lot of the Wal-Mart Supercenter). Also, from what I’ve heard, Walgreen’s inks and refill prices are the same regardless of the cartridge manufacturer or ink capacity. Cartridge World has an array of ink styles; each specifically designed for each individual cartridge model and model hue. I wish I were an ink tech for Walgreens cause that would make my job about 200x easier; but then again, I like being able to guarentee my products.

    I’ve never recieved any complaints about having to wait 5-20 minutes for refills because that little ammount of time saves them on average of 40-50% of the price. If I got paid the ammount people save in comparison to the time waited, my college tuition payments wouldn’t seem so bad.

    Basically, I guess the proof is in whether or not the employees use them, too. Yes, I do and I can’t imagine not using them. I use them over and over, with each refilled cartridge being able to be refilled on an average of 3-5 times if not more. In many cases, I’ve had reports of our cartridges actually lasting longer than they originally; which I speculate could be because we fill cartridges to there full capacity; which is more than I can say for a could cartridge manufacturers.

    If the cartridge companies are freaking out over us being able to sell and refill quality product for half as much as they do (and they do sell many remanufactured cartridges as brand-new ones), that’s only because people have been freaking out over the price of new cartridges. Most of what they’re paying for is a name.

  5. As an answer to your question Frank, we cannot as of yet reset those chips, however there are instructions on how to “trick” your printer into thinking the “refilled” cartridges are brand new. We just need to know what type of printer you have, ie. the printer model. If you have any more questions feel free to ask.

  6. My two cents…

    As a Cartridge World franchisee with a store that went under, I feel that I’m in a position to give a very accurate opinion on the organisation (UK at least).

    CW is not a bad franchise per se, it’s just that the business model was inaccurately marketed to potential franchisees. Claims of 2000% profit margins and the like were not only unrealistic but verging on the downright fraudulent. The fact is that once overheads such as rent, rates, wages, utilities, etc are taken into consideration, the average CW store is marginally profitable and the franchisee makes a subsistence living. Granted, a few do very well, but these are the exception, not the norm.

    From my personal perspective, I was offered zero assistance when I went cap in hand to the master organization and told them that I was on the verge of going bust. I was basically thrown to the dogs. This is not how it was marketed to me, I was under the impression that no CW franchisee had ever went under and assistance would be provided should such a situation arise (lesson learnt!).

    I still have a store, which like most of them is marginally profitable. I’m now back in a full time job with a proper salary so the money generated by the store is a nice side income, but that’s all it is.

    On the quality side, refills do work if the job is done properly. We have flushing equipment which thoroughly cleanses printhead cartidges before they are vacuum filled. Our reject rate is about 1% which is exceptionally low for refills. The problem is that there’s still a lot of hand fillers out there and people who simply don’t have a clue what they’re doing.

    My advice to anyone reading this….if you’re thinking of becoming a CW franchisee…..CAVEAT EMPTOR, and for customers give it a go and if it doesn’t work demand your money back. Otherwise if you’ve never had any problems then it’s a store owned by people who know what they’re doing.

  7. The latest news on Cartidge World is that they have sold out. The following is an article that appeared in the Advertiser Adelaide.
    Cartridge World sells 80% to Wolseley
    From: The Advertiser
    August 01, 2007
    ONE of the world’s fastest growing franchise businesses Cartridge World has sold 80 per cent of its business to Sydney private equity group Wolseley for an undisclosed sum.
    Wolsely managing director Peter Hasko said the money would allow Cartridge World management to grow the business from 1500 stores in 45 countries to up to 4000 stores.
    Revenues were forecast to double from $400 million to $800 million in the next three years with an eventual public listing in Australia or the US, Mr Hasko said.
    ———————————————-

    With the recent release of new printing technologies such as HP Edgeline, Silverbrooks Memjet and ZINK paper it may be time to quit while your ahead. Cartidge refilling may become obsolete.

  8. My real name has been taken in vain. I am not guilty! Although my name is “Cartridge” refilling with red wine is not obsolete and I resent the slur upon my name. You can refill me any time you like with a good quality Cab Sav!
    I come from a long line of Cartridges. My grandfather, Canon Cartridge had severe prostate problems and was prone to “firing blanks”, resulting in a diminished lineage. Maybe this rose to perceived Canon problems. My Aunty Dorothy, ran off with a randy french sailor by the name of Pierre Matrix. Dot Matrix, as she was known had a very short life, some 25 years, but she was reliable and very cheap, as every sailor knows. Now I dont want to sound pessimistic, but I think that the cartridge refilling business is a good idea. I like being refilled, it is as simple as that, and the cheaper the better. Cahateau cardboard is good enough for me!
    But seriously, if you have a problem, then come up with a viable alternative. technology is advancing so quickly and the days of thermos sensitive paper, dot matrix and impact printers are over. Industry and consumers need to make intelligent decisions when they purchase technology. Why buy a photo quality printer to produce text when a dot matrix would do? Why not have two printers, one for utility and one for quality? Why not choose a system that is economically sustainable? I have a Brother laser printer, now 10 years old and still on its original drum and the refills cost me $50 a year. I am a teacher and it gets a real hammering too. And…do you really need to print out so many photos to give aunty Norah? Only print the necessary ones.
    Think before you print…..and yes…my family name is really and fortunately “Cartridge”.

  9. Hello fro Greece!! I own a small store that sells compatible and refilled cartridges! I dont refill them myself for quality reasons!!!

    CW entered the Greek market late 2004 and then came along some other brands!! I have been in the market for a year or so but still I know that there are vaccuum machines to refill a number of cartridges. The cost of the machines range from 1500 eurow to 10000 euros!!

    It is my understanding that at least in Greece Cw shops dont have refilling machines and they refill the cartridges manually! Is that what CW is doing in US and UK also??

    I believe that the recycling business haw a potential! Unfortunately thiw has to be done on a large scale business.

    Refilling on site is obsolete since the consumer can do the same think himeslf!!

    refilling can be done on a larger scale with machines and R&D.

    Toner refilling is another thing!!! A new drum must be placed and “melt and pour” is a thing of the past.

    HP toners are dismandled and then filled with powder!!!

    @Martin I didnt it did you close the CW shop or are you still working outside the franchise??

  10. Refilling the cartridge is economical save, maybe also the environment safe as well (It depends how the store did and the equipments they have).
    Having the refillable printer is the best solutions for the costumers.
    I think as a big brand of cartridge re filler and having more than 1,500 stores worldwide, CW must think about their own innovative refillable printers.
    Does Anyone selling the refillable Printers now ???

  11. What I wonder, and my dad pointed this out, can you really make enough to be profitable selling ink cartridges? I mean, how often do people do they get coming in each day? Moreover, alot of them are in small strip shopping centers that can so easily be ignored, and why would you go so far for an ink cartridge that you could just get at a nearby CVS or Office Depot? There’s not just pricing involved there, but convinience as well. It’s one of those concepts that sounds interesting, but it doesn’t work in reality.

  12. Yes I believe that Cartridge World now has a huge amount of competition and as stated if they dont move with the times and Lower their prices and quality of their goods then their future is grim. Unfortunately the ink cartridge industry is becoming very competitive and many companies both internet based and physical stores have appeared making Cartridge Worlds share of the market more competitive.

  13. I am a ordinary consumer with modest demands from my ink jet printers, which does not include many photos. I have been refilling the (large) design cartridges in my 2002 model HP printer for the past 6 years with excellent results. The HP 17 and HP 15 hold mass quantities of ink, are easy to refill, and the results are satisfactory. EVERY ink jet printer owner should be capable of refilling a black cartridge.

    I decided to test Walgreens refill service when they had a $5 special recently and was not impressed. One of the color units I took in had cross contamination from improper storage and their system obviously could not properly flush the tanks prior to refilling. The brain dead store manager was under the impression the store could keep MY cartridge when I returned for a refund. The second color unit they refilled also malfunctioned. I was not impressed by the inadequate test procedure they utilize after refilling color units.

  14. What they do not tell you is that their inks are not for photos! It will fade and run at the first sign of moisture. Working at their Corporate offices has been interesting and the Franchisee’s don’t have a clue! For photos I stick with the OEM’S.

  15. i work for 2 cw (transfer back and forth when i go to college and come back). I have been filling ink and toner for over 3 years and throughout those years i have showed many customers comparisons in print and ink quality. To be honest, NO ONE can tell the difference between an genuine OEM hp cartridge compared to one of our refills. As for photo’s, your supposed to put 1ML of gloss into the cartridge after you fill it which when it prints mixes with the ink giving it the protection from water and other chemicals. Think of it like clearcoat if you were to paint a car.

    hope this helps!!

  16. Cartridge world i am not happy with. I paid $18.29 for a hp 28 refill. 8 pages of print later , out of ink. They would not give me another or even 50% off the next refill. I am done with dummies who do not know what they are doing and costing me money. Just be fore warned.

  17. All i can say is that CW has lost my business for good. They have a new chip in their cartridges that don’t want to work in my HP Officejet. I wasted two hours today going to the store, trying to make it work, going back to the store and that didn’t work either. The old one works fine, it’s just almost out of ink. So it’s back to the HP store and free home delivery. What good is saving money when the dang product is worthless. The guy (both he and the manager were very helpful-no problems there) at the store even said they’ve been having a lot of problems with the new chip.

  18. In the market most of the non employment person tring to start cartridge refilling business so the market rates are going down. I feel future of this business is very down.
    Original Cartridge price of HP 12A is Rs.3800/- so the refilling cost can sustain by the customer up to 700 to 800/- but due to competition the rate is around 250/- to 300/- margin is very low. Please replay and inform us for the future of this business.

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