Consolidation--The Ties That Bind?
"If it doesn't work, it's not a bet-the-company kind of proposition that we're stuck with for seven years while we make the payments," Davis notes.
One company trying to model itself after Consolidated Graphics is Nationwide Graphics. Formed in 1998, Chairman and CEO Carl Norton says his company seeks to purchase printers in the $5 million to $30 million range.
Both Norton and Jerry Hyde, vice chairman and executive vice president of the company, forecast a significant decrease in the number of smaller printers, but still believe there will always be a place for the most efficient producer.
"We speculate that sometime around five years from now, 50 percent of the graphic arts business will be controlled by five to seven major companies," Norton says.
Norton and Hyde see three valued reasons for joining a consolidator: 1) An exit for print shop owners ready to retire; 2) An avenue to grow as a printer, acquire some of the net worth and not assume the financial risk of investing in new equipment or technology; and 3) Become a one-stop shop, backed by the network of sister companies. Companies can broaden service offerings for graphics work, web printing, fulfillment, inventory management, to name a few, with the help of more resources.
"If you're a die-in-the-wool printer looking to expand into fulfillment, inventory management and database management, it's fairly intimidating and costly [to an independent]," Norton contends.
"The typical model of a printer is now changing to more of a company that handles the ultimate communications between a potential customer and a person who's making a pitch, as opposed to just doing one facet of it."
The Little Guys
For those who remain independent, Hyde believes smaller printers will need to find niches. As long as there are customers who value personalized service, there will be a need for smaller independents.