Why Compatibles, Why Now? The financial crisis that struck us in 2008 has left deep marks in both our economy and society. The distrust that exists among financial institutions has resulted in a shortage of financial means. As a consequence of this low economic activity there are little or no investments and is it harder than ever to extend credit. At the beginning of 2010 we have noticed the first signs of recovery and probably within 2 or 3 years the situation will be as before. One seems to have gotten away unscathed and have even experienced a growth: Compatible Supplies. By the end of 2009 the American research bureau IDC published a report in which it discussed the market of printer consumables. IDC noticed that for the first half of 2009 the OEM manufacturers lost a considerable market share to alternative suppliers. While in laser cartridges the OEM still possesses 63% of the market, in ink they merely have around 50% of the market share left. For an outsider a market share of over 50% in both segments seems acceptable but things are seldom what they seem. Two years earlier their shares were still at approximately 70%. Razor and Blades model What has happened? In nearly all industries alternative suppliers of components or consumables are omnipresent. Think about the automotive or aviation industry where non original spare parts are very common. An example even closer to home is the wide offer of alternative pads for coffee machines. Unfortunately we still find some exceptions to the rule one of them being the printer industry. The main reason for this is the so-called ‘razor and blades’ model which manufacturers apply.
It was a certain Mr Gillette who introduced this model. By the end of the nineteenth century he was looking for a way to boost the sales of his razors when he came up with the brilliant idea to give away the razor itself for free and to sell the blades, it worked! By 1910 the company Gillette was market leader and Mr Gillette had become a multimillionaire. It goes without saying this model has been copied several times, Adobe with its PDF format and Sun with its Java platform. Both have given away their basic software for free but made millions of dollars on other applications or licences to use their technology. Even in the music business we can find an example. In July 2007, Prince distributed 2.8 million copies of his latest album together with the British newspaper ‘The Mail on Sunday’. The newspaper paid 36 cents per CD for the licence which resulted in a profit of 1 million dollars for Prince. Because of this action he was able to perform 21 sold-out concerts in London, for which he caught another 23 million dollars. Different obstacles to clear The first obstacle which alternative manufacturers of compatible cartridges have to clear away are the large number of patents that the original manufacturers have taken out on their products and technology. By doing that they make it impossible for their competitors to offer an alternative without their permission. If you decide to introduce a product without such a permit, you risk a large fine.
The second obstacle is the wide range of products. By introducing again and again new consumables for new series of printers, the manufacturers make things difficult for alternative suppliers. The third obstacle to clear is the chip technology within the cartridge. These chips which are hard to counterfeit communicate with the printer in order to inform the user on how much ink is left. Finally, with sly marketing the end user is advised to take no risk and use only the best quality (read: OEM). The last few years however, we have experienced a shift. Particularly the introduction of printers below 50 euros has made consumers think. Consumables are often more expensive than the printers themselves. This has also drawn the attention of different consumer organizations and as a result more and more consumers have been looking for ways to reduce their printing costs.
At the beginning it was limited to some amateurishly ways of refilling ink but because of the increasing demand, alternative suppliers did rapidly invest in solutions to improve on this. From a simple ‘drill ‘n fill’ it has evolved towards a complete disassembly and cleaning of a cartridge including replacing worn-out components and careful reassembly of the cartridge creating actually a new product. One of the latest phenomena is the rise of alternative manufacturers which by-pass the registered patents of the original manufacturers and as a consequence do not infringe their intellectual properties. Such efforts can only be realized by R&D departments which demand considerable financial resources, something only big industrial manufacturers such as Ninestar can afford. Finally this rise of the non original printer consumables could have been predicted. The situation created by the OEM manufacturers was hard to maintain in the long run just as all monopolies are. The financial crisis has just sped up this process substantially and has, probably, changed the market in an irreversible way.