In a poll conducted recently by ENX Magazine, 67% of our readers indicated the ban against imported Ninestar products either somewhat (37%) or considerably (30%) impacted their businesses. While admittedly a small sample size of respondents, the results nonetheless indicate the June 9 action taken by the Department of Homeland Security was having a tangible effect on industry resellers in addition to Lexmark and Static Control, U.S. entities that Ninestar has majority ownership stakes in.
While Lexmark and Static Control have repudiated the practices Ninestar has been alleged to commit and have stated they will both be sourcing components, toner, chips and cartridges from other sources, the future of Ninestar remains clouded. For perspective on the impact to these companies and the world of supplies at large, we turned to the industry’s foremost authority, Charles Brewer, the president of Actionable Intelligence. His company is the preeminent digital imaging market research firm, and Brewer is without peer when it comes to all matters of a consumables nature (although his industry expertise spans from bow to stern).
In this edition of Two-Minute Drill, Brewer addresses Ninestar, the fallout for Lexmark and Static Control, and paints a short- and long-term picture of the consumables landscape and Ninestar’s role in it.
This is a PR nightmare for companies like Lexmark and Static Control, which are owned by Ninestar. Aside from denouncing the practice of employing forced labor, what more can they do to maintain confidence among their customers and resellers?
Brewer: This is a tough one for me. I’m not a PR guy. My gut read is they have to distance themselves just as far as possible from the parent company and its other subsidiaries. This will not be easy because both firms depend on some—or all—of the banned Chinese companies for finished goods as well as key components. There needs to be transparency across the supply chain. To the extent they can, they need to source locally.
All this is pretty self-evident and elementary. I’m sure the savvy folks at Lexmark and SCC are way ahead of me in terms of damage control.
Both Static Control and Lexmark said they will be relying on alternative sources for toners, chips, cartridges and components. Should the DHS order against Ninestar stand indefinitely, is it going to cause issues for both firms?
Brewer: It depends. If they are masters of their own domains, they shouldn’t have much trouble switching suppliers. One of the biggest issues that hardware manufacturers and third-party supplies vendors have wrestled with for years has been excess capacity.
For more than a decade, overcapacity has been a huge problem for the third-party supplies industry. And it’s been a huge problem across the value chain. Prices have been slashed on everything from bulk toner and ink to new-build compatible cartridges. None of these products offer the beefy margins they once did.
While the problem has not been as acute for hardware manufacturers, it has been an issue. More than one OEM has played with cutting prices on finished products to drive sales in part because they’ve had spare capacity.
If the parent company allows its two U.S.-based subsidiaries to source from outside Ninestar, the embargo should not be a big problem in the long term. Of course, securing new suppliers won’t happen overnight—COVID showed us all just how long it can take to straighten out a snarled supply chain—but Lexmark and SCC should be able to find vendors that can keep them supplied with all the products they need.
What do you think will be the overall impact on the consumables market in the short and long term?
Brewer: Short term, we haven’t really seen many problems. I’m sure for Lexmark and SCC it’s been a “nightmare” (your word!) but for most other firms it appears to be business as usual. I say that with the understanding that the industry is like a duck on a pond—the duck is moving because of all the activity going on underwater and out of sight. I’m sure key vendors like Sharp, Toshiba, Xerox and others are very busy making sure that they have alternative products for the goods they are sourcing from the embargoed Ninestar companies. And if they continue to source from Ninestar subsidiaries that are not banned, I’m sure they are inspecting everything closely to make sure none of the goods in the products are from embargoed companies.
Looking at the market, Actionable Intelligence has not seen much of an impact. Ninestar markets a slew of brands like myCartidge and Lemero and lots more directly to end-users on Amazon. We have seen no difference on that platform. Likewise, Ninestar sells cartridges and Pantum hardware on Walmart.com. Pantum is one of Ninestar’s embargoed subsidiaries and when I last checked, Walmart.com indicated that 1,000+ Pantum SKUs were available. And there were 1,000+ G&G-branded cartridges available. G&G is Ninestar’s flagship brand.
For dealers, I’ve been talking with wholesalers and they tell me inventory of Ninestar products is not an issue. I must say, however, that they get a little sheepish when asked if they’re still receiving orders. Maybe inventory levels will drop?
Earlier this year, you reported (citing a MicroNet report) that Ninestar-sourced chips had been used in counterfeit cartridges in China and Europe. Is the company’s image beyond repair?
Brewer: Again, I’m no damage-control expert so I can’t speak to whether or not a firm or its brand(s) have suffered irreparable harm. As a market analyst, I can say this—folks have been aware of chip issues with Ninestar products for a long time. This is true worldwide—in Europe, the U.S. and beyond. And, yet, despite any concerns about chips, there is no lack of Ninestar product. The firm is the number-one third-party supplies vendor in the world in terms of both revenue and unit shipments.
So, if the overall health of Ninestar’s thriving business is any indication, MicroNet’s discovery of Apex chip on counterfeits has harmed the firm not a jot. Any damage has been unperceivable. Don’t believe it? Just go on Amazon or Walmart.com. Here are two of the largest channels for Ninestar in the U.S. and they have continued to do brisk business in the Chinese firm’s goods despite all of the negative press Ninestar has endured over the past year or so.
