Idealliance's Andrew Paparozzi on 2018 Commercial Printing Industry Outlook and How It's Being Redefined
Idealliance expects commercial printing industry sales (all sources) to grow 1.5% to 3.0% in 2018, after growing approximately 1.0% in 2017. Where in that range the industry finishes will depend largely on the strength of the American economy which, in turn, will depend on the size and efficiency of the stimulus Washington delivers.
A weak package will mean a finish toward the bottom of the range, and a strong package a finish toward the top. If Washington really comes through, we may have to do something we haven’t done in years: revise a forecast up. Print enters 2018 with sales of approximately $84.0 billion, 9.1% above the 2011 low, but still 14.6% below the 2007 pre-Great Recession level.
Diversification continues. Participants in the Idealliance “State of the Industry, 15th Edition” report expect, on average, something other than printing (mailing, fulfillment, database management, marketing services, Web service, etc.) to provide 31.6% of their revenue in 2018, up from just 13.3% in 2012. That means many commercial printers are pursuing opportunities to get involved in their clients’ work earlier, stay involved longer and satisfy a broader range of their communication needs - print or otherwise. It does not mean diversify or die.
Traits of Successful Commercial Printing Firms
Some of the most consistently successful companies in our research continue to derive 75.0%+ of their revenue from print. We’ve learned that every successful company - diversified or not - has its own story. All, however, follow a process that begins with these steps: decide what you want to be; decide what really is an opportunity given your vision, resources and capabilities; and hire experts who will help you realize that vision, because technology alone is not going to get it done.
We’ve also learned that fewer printing companies - nearly 7,200 (or 22.9%) fewer since 2007 by our count - does not mean less competition. Despite record consolidation, commercial printing is getting more competitive as the internet and digitization let everyone into everyone else’s business.
Moreover, the companies entering the industry - between 2000 and 2013 commercial printing’s establishment birth rate averaged 5.6% pear year, about three-fifths of the 9.1% death rate - are an agile, tough new breed of competitor unencumbered by legacy equipment, systems and mindsets. It means printing companies now either get better or get left behind. There is no longer a third option.
Getting better requires prudent capital investment. The Idealliance “Capital Investment Report, Fall 2017” investigates the investment practices, history, plans and objective of commercial printing companies. Among the key results:
- Digital infrastructure (workstations, servers, networks, etc.), toner-based, cut-sheet digital presses and workflow software top the list of investments during the past three years.
- More than 38% of participants plan to increase their capital investment rate during the next three years, while just 6.7% plan to reduce their CAPEX rate.
- Workflow software, bindery/finishing systems and digital infrastructure top the list of investments planned for the next three years.
- A more efficient workflow, reduced labor costs/increased automation, and reduced steps, touches and turn times, are the top capital investment objectives over the next three years.
The changing nature of communication is also a defining issue for commercial printers. The consensus among our research panel is that personalized, integrated communication is the future: Personalized because “customized content delivers unique value,” and “the more you connect with them [through personalization], the more the resistance drops,” and integrated because “helping clients find and keep new or current customers using all applicable media is within our grasp and we should exploit it.”
One Form of Communication
Many we survey emphasize the importance of viewing “print as a form of distributing communication ... as one source among many options,” rather than as a standalone defined by how it is manufactured. A representative comment: “We’ve moved from the equipment model to more of a communications model. No matter what method the client wants to communicate, we will look for solutions that fit that, even if it means not buying equipment, but investing in talent.”
Idealliance adds two points. First, the future is also about complementing, not abandoning print, because communication is mutually reinforcing, not mutually exclusive - i.e., we communicate this way and that way, not this way or that way. Second, the movement toward personalized, integrated communication does not mean mass, undifferentiated printing is going away. It does, however, mean despite the ongoing shakeout of the inefficient, those markets will get increasingly competitive.
Concerning threats to the commercial printing industry, none is greater than an inability to recruit and retain essential skills. Significant percentages of Idealliance “State of the Industry” participants are having difficulty attracting capable, young employees (37.6%), developing the next generation of company leaders (35.3%) and recruiting entry-level personnel (26.3%).
Finally, everything about the commercial printing industry - from its clients and competition to its technology and labor force - is being redefined by one of history’s great economic revolutions. Call it the digital revolution, communications revolution, information revolution or anything else you want.
It is not affecting everyone in the same way and at the same time. But it will eventually catch up to everyone. During an economic revolution, competitive advantage is fleeting unless regularly replenished with superior knowledge of:
- What clients and prospects value most and your superior ability to consistently deliver that value.
- How clients’ communications needs, options and preferences are changing.
- Not just what works today or worked yesterday, but what will work tomorrow.
- Where the next wave of competition will come from, because it can be anywhere.
Every company, no matter how big, successful or well-established, would do well to remember that.
There is a lot more to the commercial printing industry’s story. The details are in the Idealliance “State of the Industry Report, 15th Edition,” which was generously sponsored by Canon. The report also includes “must-dos,” such as reading weak signals, the opportunity evaluation matrix, building a consistently superior customer experience and asking the right questions.
After all, the issue is not simply what’s ahead, but what we can do right now to make what’s ahead an opportunity rather than a threat.
Andrew Paparozzi serves as chief economist at Idealliance. He is the author of the recently completed Idealliance "State of the Industry Report, 14th Edition," which was sponsored by Canon U.S.A.