A lot has been happening at Cartridge World in the six months since Cartridge
World CEO Paul Callow acquired the Master Franchise rights for the UK. James Goulding finds out more about his plans for the business at a time of declining consumer sales
It would be an exaggeration to describe Cartridge World as a sleeping giant, but there is little doubt that in the last few years it has lost impetus.
Think of Cartridge World and, for many, the image that comes to mind is of a small shop situated in secondary-High Street location, serving a declining market of home printer users and microbusinesses, out of touch with developments in printer procurement, from the rise of e-commerce to the growth of contractual arrangements, with an appeal based entirely on driving down costs and undercutting the OEM vendors.
This perception is widespread – and unfair. Even when the brand appeared to be drifting, with regular changes in ownership and a lack of strategic direction, franchisees were building relationships with local businesses and expanding beyond their core consumer market – a point that was brought home to Cartridge World CEO Paul Callow when his team contacted franchisees about a new promotional campaign.
“We emailed the franchisee network and said ‘We want to develop some marketing collateral to pull in more business customers. Could you let us know if there are any major businesses you have dealt with over the last 12 months’. When the stores came back and told us who their customers were, I was amazed. McDonalds, Boots head office, Amazon, universities, several large clinical commissioning groups (CCGs) with a huge amount of surgeries in the Coventry area, 75% of which use Cartridge World. All these and many other major brands are buying from our franchisees.”
For Callow, this revelation confirmed what he already knew – that Cartridge World was doing a very poor job of promoting itself in the UK; that despite
limited support, franchisees were going out and developing close relationships with local businesses; and that the business-to-business (B2B) market had enormous growth potential if it was properly targeted.
So convinced is Callow of this that over the next five years he aims to increase group turnover fourfold, from £12 million in 2015 to £50 million in 2020.
Such an ambitious target is testament to the confidence that Callow has in Cartridge World’s new owners, Suzhou Goldengreen Technologies Ltd (SGT). The Chinese OPC manufacturer acquired the business in the middle of 2015 and since then has invested significant resources and expertise in infrastructure and personnel.
A good example is the creation of a new global procurement centre (GPC) in Shenzhen to replace the distribution and supply agreements that Cartridge World Global used to negotiate at a national level. The GPC opened in November last year and, according to Callow, will strengthen the Cartridge World brand by guaranteeing consistent quality, packaging and branding.
“Now, the European distributors from which our stores buy their products can procure inkjet and laser cartridges from the GPC. This gives us a real advantage over competitors that have to buy product from a number of different sources at the best price they can get. There’s not necessarily anything inferior about the product they sell, but it certainly won’t be as consistently delivered as ours – coming from one central source in China. The fact that our new Chinese owners have developed that for us gives us something really new to offer existing franchisees and to attract new ones,” he said.
A second major change introduced by the new owners is the establishment of a Master Franchise in the UK instead of the head office function that existed previously.
“SGT looked at all the countries in which Cartridge World was performing really well and all those where it wasn’t, which included the UK and France. They said ‘why is it that we have countries like Australia, India, areas of the Middle East and Greece where Cartridge World is still flying, but in UK and France it’s not?’. And they quickly realised that the countries in which it wasn’t performing was where they had a head office function rather than a Master Franchise,” explained Callow.
SGT took the decision to find a Master Franchise for the UK to sit between the global Cartridge World brand and the franchisees.
At about the same time, Callow who was running his own venture management company had approached Cartridge World in relation to another initiative. After learning about his background in the print industry, including sales and marketing roles at Brother and Lexmark, they asked him to put together a proposal outlining how Cartridge World could address key challenges, notably online sales and B2B revenue. So impressed were they with his suggestions that they asked him to be the Master Franchise for the UK.
Negotiations started in October last year; in March contracts were signed; and on April 4, the UK’s new Master Franchise, Cartridge World UK, became operational.
The Master Franchise acquires the rights to a country (or countries) from the brand owner; sells individual territories to franchisees who pay a certain amount of money to gain a global brand and identity; and it negotiates with vendors and distributors on the behalf of franchisees who as a result enjoy much better pricing, promotions and payment terms than they could negotiate on their own.
As a Master Franchise, you don’t represent the head office or the franchisee; you sit in the middle as an independent entity with everyone’s best interests at heart,” explained Callow.
Doing the basics right
n the six months since the beginning of April, Callow has been working hard on maximising the potential of existing franchisees and laying the foundations for future growth.
“There are a lot of basic things that a Master Franchise should do to support its franchisees that haven’t been happening. Things like having a PR agency to get the brand out there and increase awareness; having a promotional plan; having a marketing plan to identify vertical markets; driving more online sales. These weren’t in place before,” he explained.
Cartridge World is also updating its store design, with a new colour scheme and lay-out. “We already have our first store with this new format and it’s a lot more like an Apple store. It’s really clean and uncluttered, with modern lighting, LCD screens, coffee machines and illuminated pods for displaying products.”
Callow believes that getting these basics right will create a solid platform in support of Cartridge World’s ambitious growth plans.
Another key short-term goal is to increase sales of printers and OEM supplies by offering more choice and holding more machines in stock so that a customer can go into a store and walk out with a new printer, rather than having to wait for next-day delivery.
In 2015 hardware sales made up 10% of turnover and Callow would like to raise this to 20%. He would also like to increase sales of OEM supplies, so that in future years the ratio of OEM to Cartridge World-branded supplies is 50:50 compared to 40:60 today.
“We can do a really good job for major vendors,” he said. “We’ve got 75 stores completely focused on print, unlike Staples or PC World, which sell lots of other stuff. And because stores are independent franchisees they have the freedom and ability to negotiate with any customer. If someone walks into a store and says ’I print 300 pages a month and if you give me that machine for free, I will buy all of my ink from you’, a franchisee could say ‘Yes, no problem; I’ll just draw up the papers for you to sign’. That is a huge benefit when you are talking to small businesses and professional home users. Staples can’t do that.”
Since taking over, Callow has been working hard to strengthen relationships with key vendors, including Canon, Samsung, UTAX and HP (via one of its partners). They have responded by offering increased support, better pricing and better margins, which Callow says is already having a positive impact on sales of printers and OEM supplies.
As an example, he cites Cartridge World’s relationship with Canon. “Canon has given us fantastic support. They have given display stands to the stores, advantageous pricing on the hardware through distribution, and they’ve put incentives in place for the franchisees, like a box bonus. Out of our own marketing budget, we have funded end user cash-back promotions. In July and August, which are traditionally quiet months, our average sales of Canon printers went up from 120 units a month to just over 400 units per month. A 300% increase in sales to just short of 900 machines, just from having cash-back and having products available in-store for a customer to buy.
“And the best thing is that because everyone claimed cash back, we know who every customer is, what device they bought, when they bought it and we have their contact details, so all the stores are now following up and saying ‘Would you like to buy some Canon cartridges?’. We’ve given customers a discount code for online sales and stores are giving them 20% off if they go back to the store. It’s brilliant for the customer, brilliant for Canon and brilliant for the stores because of the annuity revenue.”
Focus on B2B
This level of vendor engagement supports Callow’s long-term goal for Cartridge World, which is to increase business-to-business sales.
To this end, in January he is launching a B2B-only franchise model designed to be run from an office, with online and telesales and shipments direct from distribution.
We will grant rights to use the Cartridge World Business brand; deliver a website that we can update and manage centrally; and deliver a marketing plan. Someone could acquire the franchise for a particular area and expand the B2B business there. We’ve negotiated some fantastic prices with people like Beta Distribution and Exertis, so payment terms and the prices the franchisee gets for OEM product, hardware and consumables are way beyond what they would be able to negotiate on their own. And they’ve got Cartridge World-branded supplies from GPC if they want to sell them as well.”
A number of parties have already expressed interest in this new model and Callow thinks there is the potential to set up as many as 80 B2B franchises in the next three years.
Managed Print Services
n the meantime, Cartridge World is continuing to develop its B2B expertise. It has launched a B2B partnership programme for its top franchisees featuring vendor training on products and services and additional direct marketing to business customers. Fifteen franchisees joined at the beginning of July, with another 6 or 7 due to sign up at the beginning of October.
Managed print services (MPS) is a particular focus. In July Cartridge World rolled out HP’s Partner MPS to franchisees on its B2B programme and the first deals from that are being closed now. Stores also have ability to create and price their own MPS using their choice of printer and OEM or Cartridge World supplies.
In addition, Cartridge World is partnering with UTAX to provide MPS for copiers. “Our franchisees sell a lot of desktop printers and consumables and are in and out of businesses all day long,” explained Callow. “In these businesses, they see copiers but can’t capitalise on the opportunity because they may not have the experience to put together a complicated MPS contract. We had a choice; do we try to train up franchisees in how to sell copier contracts or do we find a partner to work with closely. Now, we pass on these opportunities to UTAX. Half a dozen deals have been completed on this basis in the last three months and there are many more in the pipeline.”
With so many opportunities in B2B sales, Callow doesn’t expect to see any increase in the number of Cartridge World stores in he short-term. In fact, there may even be a decline.
“I think that as we launch more B2B initiatives and franchisees do more and more B2B business, some are going to ask ‘Why have we got this store? We have to have two staff in there and we’ve got to hold all this stock. Yet the part of the business that’s growing we could run from an office’. So I think that 10 or 15 of the existing stores will move to the office-based model, and most of the new franchisees we recruit will join as B2B franchisees only. We are not actively trying to decrease the number of stores, but I think it might go down naturally as people transition out of those stores and into offices. I don’t think having lots of retails stores reflects how customers want to shop.”
In his first six months as the Master Franchise, Paul Callow has already achieved an enormous amount, helping to revitalise the Cartridge World brand in the UK and meet the changing needs of consumers and business customers. And this is just the start. Early next year, Cartridge World will be unveiling a new initiative, a new model, offering even more benefits to business customers.
n recent years, Cartridge World has maintained a very low profile. With Paul Callow at the helm, there’s no risk of that in the future.