We have been in the ink and toner space in our newsagency for over four years and in each of those four years, generic product has accounted for between 10% and 15% of all sales. While the margin on generic product is exceptional, there is clearly a preference among our customers for brand name ink and toner.
It makes sense that customers prefer the Epson, HP, Canon, Brother and Lexmark branded product. These companies spend millions building brand awareness and trust. While some generic brands advertise, their spend does not match that of the brands and their pitch is not as compelling – no I am cheaper pitch can, except for a very specific demographic.
A third of our four metres of ink and toner was allocated to generic product. We have actively supported two generic brands – but at different times. We switched from one brand to another earlier this year. The brand switch did not lead to an increase in sales of the generic product.
For the last few months we have taken more notice of what our customers are looking for and how they approach their buying decision. Branded product sells easily whereas generic product involves more of our time. Branded product is rarely returned whereas generic product comes back more often.
After a review of return on investment, return on floor-space and return on labour for the generic versus branded ink and toner product we decided to quit the generic space. The most immediate impact can be seen in our product display – losing the generic product means our ink and toner wall is now 100% owned by brands our customers know whereas in the past there was this other unknown or lesser known brand which, to some, gave off a confusing message.
We are building a marketing campaign around the brand commitment. This is likely to include selling some hardware directly associated with the top selling brands.
Our decision to only carry brand name ink and toner is reflective of a broader commitment to branded product in the Stationery department. Our view is that newsagencies are not capable of supporting generic product in the same way you would find at Coles, Safeway or another national retailer. What we started with Ink and Toner will travel through the rest of our business.
I’d note that our online ink and toner business, Inkfast, will continue to sell generic product. This reflects the difference in online customers versus those who shop in a newsagency. Inkfast sells between eight and ten times the ink and toner we sell in store.
I’ve noticed a big resistance to generic cartridges from computer users. Their worry is the generic product is inferior and it might damage their printer.
I’m not sure how true this is.
What are the reasons for ink returns, Mark?
Paul returns can be for anything. Generic is returned more often because there is less trust in the brand.