Cartridge World might not be the first brand that comes to mind when you think specialty retail, but if the explosive growth curve the company is on continues, it soon might be. The retailer, which has carved out a commanding market lead in a retail service niche, refills empty ink cartridges for inkjet and laser printers and toner cartridges for fax and photocopy machines. It's recently surpassed 1,500 worldwide stores. More than 600 of its stores are in the United States, and it continues to open one store every business day somewhere in the world. The brand owns more than half the market share in its niche, and is credited as the catalyst for major retailers, including Staples and Walgreens, to offer printer ink refill services. At one point in 2006, it was establishing an average of one new franchise each day in the U.S. market alone. This from a company that was born in Australia in 1999 and only opened its first U.S. store in July of 2003.
Franchises Create Tech Deployment Challenge
For long-standing franchise retail operations, the thought of a comprehensive POS upgrade is daunting. Coordinating the standardization of store-level technology across a franchised enterprise requires the buy-in of franchisees, which can be easier said than achieved.
But while market opportunity is the catalyst for the success of this ultra-specialty retailer — annual ink and toner sales top $80 billion, printer sales are about half that — the very franchise model that makes a comprehensive POS deployment difficult is also a key to the retailer's growth. Cartridge World's business growth earned it a ranking of 13th fastest growing in Entrepreneur magazine's 28th annual Franchise 500. Indeed, franchisees are central to Cartridge World's growth plans, so the company dedicates a significant amount of effort to recruiting franchisees and helping them build their franchises.
As it relates to the POS rollout problem, Cartridge World has an advantage as a result of its place on the growth curve — the majority of its new POS rollouts are to brand-new stores. The retailer has made the selection of a standard POS configuration a near no-brainer for its new franchisees by offering the complete package in turnkey fashion. The approach benefits the company by enabling a standard platform on which to operate and gather store-level data, and it benefits franchisees by removing the labor, time, and potential guesswork that go along with choosing a POS package.
To choose the package on which it would standardize, Cartridge World consulted with Ralph Duncan of Duncan & Associates, a reseller of POS systems, who helped the retailer develop a strategic approach to its POS systems selection. Duncan worked with Shawn Lynam, VP of franchise operations with the retailer, to create a comprehensive list of criteria specific to Cartridge World's needs. At the top of the list, says Lynam, were the need for an architecture that would enable a complex and unique retail business model, infrastructure scalability, and ease of training. These criteria led Duncan to suggest RetailPro store systems software deployed on the NCR RealPOS 70 touch screen POS terminal, equipped with the Intel Pentium 4 processor and NCR RealScan 37 handheld bar code scanner.
Unique Business Model Calls For 'Custom' POS Architecture
While Cartridge World has found success rolling the new POS system out to its new franchises, some of its preexisting franchisees had already chosen other platforms on which to run their stores. While gaining new franchisee buy-in is bolstered by a turnkey POS package, the retailer has had to work a little to convert preexisting franchisees to a standard store systems platform, and it needed to be prepared for those that weren't ready or willing to make the switch. That played into the decision to attempt forward-looking standardization on a system that was built on an open architecture, one that was proven able to integrate with other store systems. It was also imperative for the retailer to choose a solution that facilitated Cartridge World's corporate data requirements.
Another key point of integration at Cartridge World is its unique inventory management system. "Our retail stores are, to some extent, also remanufacturing facilities. In order to remanufacture or recycle printer cartridges, our stores must stock raw materials, such as printer ink." In this regard, the retailer's inventory mix includes both packaged retail SKUs and raw materials, creating the need for a store-level inventory management system that's a bit more complex than your average specialty retailer's. RetailPro software, which was honed in the changing-SKU- intensive world of specialty apparel retail, fit the bill. Printer ink, by the way, happens to be one of the most expensive liquid propositions a consumer faces. For comparison's sake, an ounce of Chanel No. 5 perfume averages $44.11. An ounce of color printer ink can cost you more than $60.
Fast Growth Necessitates Rapid IT Scalability
Deployment of technology for new franchises is handled by Duncan & Associates and Big Hairy Dog Information Systems (BHD). The systems are virtually plug and play — the integrators can have a new location up and running in a day.
The scalability of this standard platform provides Cartridge World corporate some important benefits. For one, it has a better, more consistent view of KPIs (key performance indicators) by store and region. This knowledge not only helps the retailer's sales and inventory forecasting, it empowers Lynam, who oversees franchise operations, with market data to monitor store performance analytics. Lynam also says forward-looking plans lent to the decision to choose its new platform. "We're planning to add new lines of products to bolster consumer choice, and we're also looking to add some BI (business intelligence) functionality in terms of data warehousing to enable more granular analysis of our business. The platform we chose to standardize our store systems on will support both of these initiatives."
Retail Turnover, Growth Require Training Ease
As Cartridge World has grown, it has found training to be a key component of its franchisee development. So important, in fact, is training, that the company mandates a two-week training course for franchisees in a training lab at its Emeryville, CA headquarters. The comprehensive training course includes a hands-on section on retail information systems, conducted in the 20-station lab's mock-store environment. Stores that have preexisting POS systems can opt to take advantage of an incentive program to upgrade to the NCR/RetailPro system. "We [corporate] offer to pay a very substantial amount of the overall upgrade cost, because we strongly believe in the benefit to both the franchisee and our visibility into the extended enterprise," says Lynam. "We also acknowledge that this is not a light investment. We consciously chose to select a quality POS system rather than skimp simply to keep costs down for our stores. That would have been a mistake, but the cost of the system does sometimes cause objection challenges that we must overcome by illustrating the value of the upgrade." For those stores that choose to upgrade, POS system training is included. "We prep our upgrade stores on what to expect when the installation happens. Once the installation is complete, our VAR partners conduct training for store-level managers and associates." Cartridge World also invests in a Web-based continuing education initiative for its franchisees.
Cartridge World's explosive success is a direct result of matching a cost-sensitive product with a strong market demand. The company sells new ink and laser cartridges, and in about 15 minutes, consumers can have their ink cartridges refilled for, in many cases, half the cost of buying new. That value proposition will continue to attract customers. Standardization and automation of its store systems infrastructure will ensure the retailer can serve them.