Differentiation: Your Blueprint for Success

By Luke Goldberg, Senior Vice President, MSE

It has become a common rite to bemoan the death of the remanufacturing industry. There are constant grumblings about the future of print, and adding to this gloom-fest was the recent closure of Recharger magazine.

I really don’t know why we are so intent on negativity, with words like these being heard on the street:

• “Clones are killing us!”
• “The market is dying!”
• “OEMs will not allow us to compete!”

However, I just read some figures from Photizo showing that toner cartridge shipments grew by nearly 8% 2013 and will surpass $60 billion in sales by 2015! It doesn’t sound to me like print is dead. Indeed, borrowing from the words of Mark Twain, “The reports of print’s death are highly exaggerated!”

What’s the Secret?

I just don’t see it. People ask me, “How was your year?” The answer is that MSE had another record year, which means, by extension, our customers are succeeding.

Okay, so what’s the secret? Let’s just look at MSE for a minute as an instructive model for emulation regardless what your business is. MSE began operations with certain philosophical underpinnings that we have used as guiding principles:

• Offer a true OEM-alternative that engenders consumer choice
• Commit to continuous improvement by reinvesting into technology, engineering and innovation
• Commit resources to building a brand through marketing and consultative sales

These founding principals were defined and honed in MSE’s formative years and serve as a rubric for success to this day.

For any business to thrive—especially in a market wrought with challenges—a set of core values must be defined, refined, and maintained. This is not to say that a business cannot change as a market evolves. These guidelines are not preventing you from selling new things, marketing in new ways or, in short, from changing. Rather, they serve to allow change to take place without altering the fundamental fabric of who we are.

We Seek to Differ

The problem we have had in our market—as maturity sets in and consolidation accelerates—is that too many businesses seem to be aimlessly meandering through the market with little or nothing to differentiate themselves from thousands of competitors. Every company selling cartridges offers the best quality, the best price, the best service, etc. How often do you see something from an advertiser in this or any other industry magazine that actually shows some innovation and spirit of creativity?

That perhaps is the crux of why the World Expo, Recharger magazine, and trade shows in general that are focused on the aftermarket imaging supplies business are withering. Innovation and differentiation are the sunlight creating growth for any industry. Would anyone go to the CES (Consumer Electronics Show) if companies like Samsung or Apple simply rested on their laurels and ceased to innovate?

Clearly, being a “me too” can no longer serve as a strategy for success in our space—not for an industry that has survived 30 years of growth. We need better products, better sales, better marketing tools, and a better story that we can deliver with confidence. We also need a true belief that anyone listening to it can expand their own business.

A Race to the Bottom

I have seen so many remanufacturers in the USA go out of business or sell for pennies on the dollar because they had no clearly-defined value proposition. Now we see the same thing in China. Nearly every day I get offers for $5.00 HP clones, and the race to the bottom seems to have no end. How long can this be sustainable without widespread factory closures?

I am often asked, “How pernicious is the effect of these products and prices on your business?” I always respond, “Other than the ancillary effect of damaging the credibility of our industry, it doesn’t matter to us at all.”

“How can that be?” they say.

“Well, since Day One, MSE has endeavored to compete fairly with the OEM by offering a high quality, differentiated product. Since OEM prices never come down (they only go up), and this is our benchmark, it doesn’t matter how low these products are priced.”

The customers we want are quality OEM customers, not those buying $5.00 clones. Neither are the major OEM Tier One distributors seeking these bottom feeders, nor the OEMs who use remans as part of their multi-vendor MPS strategy, nor the contract stationers, nor the Big Box retailers.

That is the bottom line here.

Valid Models

Clearly, there are other companies thriving in our market with models that are not just centered on price. In some instances, remanufacturers use services as a value add by offering turnkey programs for MPS. Some have extensive product offerings that include printer parts, ink cartridges, copier supplies, etc. Others offer e-waste solutions in addition to toner and ink consumables. Still others specialize in niche areas that aren’t as competitive, such as, non-Canon-based color.

We have also seen certain major remanufacturers endeavor to vertically integrate their operations to control all production of critical raw materials under one roof. While MSE’s patent portfolio is exclusively centered on the repair of original toner cores, others have extensive patent portfolios on new mold products, representing various printer OEMs.

All of these models are valid and all allow these companies to set themselves apart from the competition. It is innovation like this that is propelling the industry forward by avoiding the pitfalls of commoditization.

In 2013 Photizo reported that 480 million toner cartridges were sold—with nearly half of them color. As all of us know, the aftermarket has less than a 10% share of the color cartridges sold.  This is a HUGE opportunity that should not just sustain the remanufacturing industry—it should allow it to flourish. Thus, offering quality color cartridges may prove the ultimate form of differentiation, for the margins they provide.

But this can only happen if—and only if—we provide value to global consumers seeking a green, cost-savings alternative to high-cost OEM supplies.

The macro trends are favorable; the clouds of doom are of our own making. These clouds will only dissipate with a collective effort to bring value to our customers with commitment, integrity and a real difference.