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Retailers now offering cheaper printer ink refills

Even as computer prices have steadily dropped, the cost of one high-tech necessity has remained stubbornly high. Printer cartridges are so costly that printer giant Hewlett-Packard Co. has long made more than two-thirds of its profit from selling them.

Now, in a move that could save consumers hundreds of dollars in replacement costs, several major retailers are starting to offer speedy refill services that replace the ink rather than the entire cartridge.

Last month, drugstore chain Walgreen Co. plans to announce an ink-refill service - at less than half the cost of buying new cartridges - in 1,500 of its stores, with the rollout starting in mid March. With an eye toward launching a national service, office-supply chain OfficeMax Inc. is pilot-testing an ink-refill service in 40 stores in the Chicago area. And Office Depot Inc. is testing an ink-refill service in 15 stores in Minnesota and North Carolina. In addition, smaller ink-refill services are planning to open more storefronts in malls and hotels.

The new services allow consumers to get their cartridges refilled quickly while they shop, rather than having to fill the cartridges themselves as the do-it-yourself kits on the market require.

The cost of ink has long been a source of frustration for computer users. The price of ink per milliliter from big printer manufacturers has been rising about 1 percent a year, according to market watcher Lyra Research. Many of the big printermakers also are getting stingier with the amount of ink in a cartridge. For example, while a popular older H-P black-ink cartridge, the 45A, cost $29.99 and had 42 milliliters of ink, its newer counterpart, the H-P 96, costs the same but has only 21 milliliters of ink.

The new services strike a blow at a major profit center for companies such as Lexmark International Inc. and H-P, which rely heavily on ink for recurring revenue and profits. Indeed, H-P actually loses money on its printers - money that it recoups through new ink and toner sales. H-P won't say what its margin on cartridges is, but analysts estimate the margin to be at least 60 percent on both ink and toner cartridges.

Each year, about 1.3-billion ink cartridges are sold worldwide, according to Lyra. Such sales generated $30.1-billion in revenue in 2005. But the market share of refilled and re-engineered ink cartridges is now projected to hit nearly 29 percent in North America by 2009, up from 23 percent in 2005, according to Lyra.

Tuan Tran, an H-P vice president of ink and toner supplies, says the Palo Alto, Calif., technology giant is "closely monitoring" the new retail refill services. Tran says consumers should be wary of refills, however.

Since H-P designs its printers and its ink cartridges to work together as one seamless system, a refilled cartridge may not be as reliable and can cause streaking on printouts, he says. With a refilled cartridge, "there's a big sacrifice in terms of quality," Tran says.

Walgreen is offering a 100 percent satisfaction guarantee for its ink-refill service.

At Walgreens stores, consumers can drop off their empty cartridge while they shop and get a refill within 15 minutes, says John Sugrue, Walgreen's general manager of photofinishing. The stores will charge $12.99 to $14.99 for a black-ink refill, about 60 percent less than the price of some black-ink cartridges from H-P, Canon Inc. and others.

OfficeMax is charging a flat $14.99 for a black-ink refill and $21.99 for a color-ink refill. An Office Depot spokesman declined to be specific about what it charges.

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