Ink again: Start-up to sell recycled print cartridges

FORT COLLINS – Consumers and businesses spend about $22 billion a year worldwide on ink cartridges for printers.

Understandably, it’s an arena that’s populated by corporate giants such as Hewlett-Packard Co., Lexmark International, Canon and Epson.

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Still, Nigel Ferrey sees space for smaller players.

Ferrey, former CEO of DakoCytomation Inc. in Fort Collins, has laid out plans for a franchise retail operation focused on the sale of recycled printer cartridges. Ferrey is CEO for printONE, which opened its first store earlier this month at 1538 E. Harmony Road, and expects to grow quickly this year into other markets in Colorado, California and Texas.

Recycled – or remanufactured – ink cartridges currently represent about 20 percent of the cartridge market, according to Lyra Research. And Lyra expects that share to grow to nearly 28 percent by 2009.

The reason is two-fold: Price – recycled cartridges sell for 25 to 50 percent less than new cartridges – and environmental consciousness. According to Recharger Magazine, 700 million print cartridges are thrown away each year in the United States.

But the current means of access to the recycled cartridges leaves an opportunity for printOne, Ferrey contended.

“There’s a really interesting void in the market,” Ferrey said.

For instance, “big box” office supply stores such as Office Depot and Staples recycle and sell cartridges as a slice of their overall operation. The Internet is also full of discounted cartridges that have been refilled.

But consumer advocates claim that the performance of recycled cartridges, whatever the source, can be spotty.

Ferrey believes a focused, brand-name operation that guarantees the recycled product can spread quickly in the marketplace.

“There’s no brand leader in the remanufactured segment,” he said. “There’s no NAPA Auto Parts.”

A key component of the printONE plan is to carefully manage the remanufacturing process.

While some operations will fill cartridges while customers wait, Ferrey said the process needs to be handled more delicately. Returned cartridges must be assessed for quality – does it have the integrity to be used again? – then cleaned, filled, tested and repackaged.

As planned, printONE would stock a deep inventory of cartridges for sale so customers can pick up what they need off the shelf. The customer returning a cartridge would also get a credit toward a future purchase.

The retail model for printONE is based on a hub-and-spoke system, Ferrey explained.

A “banner” store in a given market would provide the remanufacturing service and technical staff in the region, as well as retail sales. Up to five “satellite” stores would offer smaller retail operations, and would be restocked from the “banner” store.

“That would allow us to be closer to our customers,” Ferrey said.

Fort Collins, where Ferrey and his partners will maintain corporate headquarters, will be the first market to fill out. Negotiations with potential franchisees are under way in Dallas and Denver.

“We’re looking at five franchises by the end of this year,” Ferrey said. “Interest is very high.”

The company is still finalizing franchise fees, which would likely fall between $100,000 and $200,000.

“It is a turnkey deal with a reasonable return on investment,” Ferrey said. “But we’re not going to be actively franchising until the fall.”

The ideal franchisee for printONE is “a displaced technology executive,” Ferrey said, a description that fits himself. Ferrey left DakoCytomation late in 2003 after 12 years with the company, which makes high-end medical laboratory equipment.

Green company

Environmental sensitivity promises to be a key selling point for printONE, which even employs the recycling arrows in its corporate logo, and the color green in its print materials.

The environmental connection was the motivating factor for Eric Eidsness of Fort Collins to become a partner with Ferrey in printONE. Eidsness, served in the Environmental Protection Agency in the Reagan administration, as well as a one-time senior executive with engineering giant CH2M Hill.

“It takes three quarts of oil to manufacture one new laser cartridge,” Eidsness said. “This is hugely important from a natural resource protection and preservation point of view. We’re a green business and I’m proud of that.”

Still, printONE’s environmental spirit stands to face a fierce challenge in the retail marketplace.

Rival chains such as Cartridge World and Island Ink-Jet are rolling out new stores at a rapid rate. According to a June 14 Wall Street Journal story, Cartridge World has opened 200 stores since launching in 2003, and Island Ink-Jet has 75 stores.

Do-it-yourself refill kits are also available.

Ferrey is aware of the competition, but he’s banking on printONE’s ability to differentiate itself.

“The first thing a customer wants is a good value; he likes to approach a business that’s really focused,” he said. “And they want good service. This is about much more than being a price leader.”