Our interest is the office products industry, with an emphasis on office supplies such as the ink and toner cartridges which, because of the high profits earned on the sale of replacement cartridges, underpin the entire $150-200 billion office products and equipment industry.
1. This is a mature industry with market distortions and barriers combining to ensure the original equipment brands (OEMs) maintain an 80%+ ($20 billion out of $25 billion) share of the retail spend on ink and toner in the United States.
2. The aftermarket is reported to have a 20% share and the overall market to be declining at 2-4% per year as the total number of pages printed decrease.
3. The spend on aftermarket replacement cartridges is decreasing faster than the overall market due to price, product mix (color) trends, and aggressive OEM market development strategies.
4. No one knows for sure, but it's estimated there are still as many as 5,000 independent resellers in the United States.
5. Many of these resellers were the pioneers of early aftermarket alternatives, recovering and remanufacturing toner and ink cartridges to make them part of their value proposition back in the early 1990s.
6. The quality of aftermarket alternative cartridges has improved significantly since the early days, although most local remanufacturing has closed down due to the high cost, the technical, and the quality barriers.
7. The majority of office products and supply items sold by transactional resellers have been commoditized. It is almost impossible for a reseller to grow its top-line and increase market share selling more paper, pens, paperclips, or even OEM brand ink and toner. There is no other category within the industry that can be leveraged to win market share besides aftermarket ink and toner.
8. The profits that can be earned on aftermarket replacement cartridges, versus OEM brand, are many times greater, while they also save the reseller's customers' money.
9. The independent resellers work hard, they know the business, the quality of aftermarket alternatives has improved significantly, and there's a compelling value proposition selling aftermarket alternatives versus high-priced OEM cartridges.
We look at these market conditions and see a growth opportunity, despite the overall market shrink. $25 billion in annual retail sales in the U.S. market constitutes a large market and, with the aftermarket share estimated at 20% or so, it means there's a $20 billion opportunity for resellers that embrace aftermarket replacement cartridge conversion strategies.
However, there are barriers that serve to obstruct most resellers from converting this opportunity into reality. These barriers, whether they are fully understood or not, mean relatively few resellers will currently agree with our view that cartridge conversion strategies really do underpin a significant growth opportunity, at least not in the "black and white" way it has initially been introduced here.
We'll go on to explain what these barriers are in our continuing series of related publications but, for now, let's summarize the general outline as follows.
Firstly, an aftermarket replacement cartridge conversion strategy is indisputably a viable value proposition. Similar approaches have worked in many industries including automotive parts, prescription drugs, groceries, etc.
Secondly, this is not an all or nothing approach. The strategy must revolve around educating customers and prospects about the availability of viable alternatives. Ultimately, the goal is for a customer to make an informed purchasing decision about what works best for them.
Thirdly, it is imperative resellers believe in this as a viable strategy. The key is for them to provide their customers with the best fit for their requirements while also working to optimize their own profits.
Fourthly, unless effective tactics are deployed to spread the word with compelling, educational approaches that support cartridge conversion strategies designed to improve the profits of a dealership and to save their customers' money, then nothing will change.
So, within this framework, how can a large group of business owners be educated and motivated to embrace cartridge conversion strategies for the purposes of improving their own profits, and for winning new customers?
Unfortunately, as we'll learn in the remainder of this series, it's not just about educating and motivating resellers to consider alternatives. There are some very real, and very challenging technical barriers that must be overcome before it becomes possible for aftermarket replacement cartridges to become part of a resellers mainstream value proposition.
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Alternatively, please click the following link for immediate access to the complete eight-part series, "Crafting and Promoting the Resellers Business Strategy" or, to learn more about the full scope of this material, and to access in a downloadable e-Book format, please click the cover image below.
