I gave a warning to a group of cartridge remanufacturers and manufacturers of non-infringing new compatibles in a 2017 speech at the RT Media Summit in Zhuhai China. The toner wars facing cartridge suppliers are a more significant threat to both of their business models than the threats from each other. That threat would be from the OEMs as they would naturally attempt to get back their annuity business in a declining market. I suggested the OEMs would compete like never before.
The market is consolidating and most definitely there is a reduction in customer demand. The remanufacturing and the new build compatible industry has never been a majority of the overall cartridge business. Some experts say they have around 20-25% of the market and much less with color cartridges.
Over the last couple of decades, Clover has bought most of the significant independent remanufacturers and along the way cornered the market on the collection of empty cores. Clover will soon, if not already, be collecting more empty cartridges than they reuse. When this happens, their business model is broken. I believe it has already happened. Clover’s broken model and their debt troubles will be significant benefits to the OEM’s. HP has already been putting pressure on Clover by applying substantial price reductions to shut them out of key accounts.
The good news for HP is that Clover is only one competitor, and the fight will be much easier than fighting individually the hundreds of independent remanufactures, Clover gathered up. Now the OEM’s will strike with a vengeance. It does seem that a failing Clover will turn out to be a win for the OEM’s. HP with the world’s largest base of customers will see the quickest gains if Clover fails.
HP’s recent news of their agreement with Xerox will cost the remanufacturing industry tens if not hundreds of millions. Xerox was likely the largest buyer of NON-OEM HP toner in the world. This new agreement will now mean Xerox will use HP OEM supplies in the millions of HP printers that Xerox has on Managed Print Service Contracts. It is safe to say that the day of that announcement was not a happy day for our friends at Clover.
The OEMs will focus on beating down the largest remanufacturer then they will focus on the nonpatient infringement new build manufactures. I think that some of the OEM’s will, in fact, partner with or acquire these new build manufactures allowing them to lower their supply cost. The OEM’s are not going to lay low in a declining market and will fight viciously for their aftermarket business.
The silver lining in this competitive landscape. Is that the smaller regional remanufactures might have a play and will not concern the OEM’s as they will focus on finishing off Clover and watching for those new build manufactures who violate patents.
Read a related article about HP and Xerox by Ray Stasieczko at https://www.rtmworld.com/features/when-will-dion-write-the-check-to-carl/
Editor: The toner wars between cartridge suppliers is only one issue facing the industry. Ray Stasieczko will be a speaker at this year’s Summit in Zhuhai on October 16 predicting what will happen next in the world’s largest printer and consumables market.