Commercial Printing Outlook : Bootstrap Time for PrintersDecember 2013 By Erik Cagle, Senior Editor
From a 2014 standpoint, Davis is a bit more optimistic, projecting 2.5 percent growth for the U.S. economy. He sees more positive sentiment from the business and consumer ends than witnessed in '13 and, as the recession becomes smaller and smaller in the rearview mirror, the confidence should continue to grow.
"One wild card is the issue of the global economy and how it could impact things," Davis says. "The good news—energy development is a positive for the U.S. economy, and that's certainly pushing the numbers up."
While Davis cautions that the United States is in what he calls a mature economic recovery, he believes the stabilized recovery should help yield about 1 percent growth for the printing industry, adding $1.5 billion in terms of nominal printing sales. The printing industry is like the car at the very end of a long traffic jam; although the economy has been plodding along slowly for the past few years, movement for the printing industry comes much later.
"The $1.5 billion in nominal print doesn't mean gravy time for printers because it's going to remain very competitive," Davis points out. "They're still going to fight for sales and market share, with new business models focused on integrated print. With continued restructuring in terms of the decline in the number of printing establishments, we'll still see some drop (in total companies).
"We have seen printers' profits improving the past few years since we bottomed out in the recession. I look for printers' margins to improve marginally. About 25 percent of printers make solid profits, and 75 percent operate basically on a break-even basis."
Davis sees the most profitable of segments being what he calls print logistics—labels, wrappers, packaging—reaping a 3 percent increase for 2014. Marketing print and promotional printing (direct marketing, direct mail and catalogs) project a 1 percent rise, while communication printing—books, magazines and newspapers—could fall between 2 percent and 3 percent.
Growth for GDP
Andy Paparozzi, vice president and chief economist of the National Association for Printing Leadership (NAPL), notes that the 2013 Blue Chip Economic Indicators consensus (through Oct. 10) expects GDP to grow 1.6 percent in 2013. The NAPL forecasts total commercial printing sales—all sources, not just printing—to grow slightly, at 0.5 percent to 1 percent for 2013, in the same neighborhood as 2012's 0.6 percent rise. Paparozzi says that level is still far shy (20 percent behind) of the pre-Great Recession level of 2007, as well as the all-time high of 22 percent in the year 2000.
Moving forward, the Blue Chip consensus expects GDP to reach 2.6 percent in 2014, which is still below the economy's average annual growth of 3.2 percent for the 10 years prior to the recession. Overall, Paparozzi doesn't expect the economy to provide any more help in 2014 than it did this year.
"Pressure on prices and margins will continue because, despite record consolidation, our industry is getting more competitive, not less competitive, as the Internet and digitization let everyone into everyone else's business," he says. "The single most important factor for everyone in our industry is not what the economy or industry at large is going to do, but rather what are you going to do to create your own recovery? What are you doing to become more competitive? More efficient? More valuable to your best clients?"
While Paparozzi sees the U.S. economy healing at a maddeningly lethargic and inconsistent pace, he does anticipate it continuing down the recovery path in 2014. One positive aspect revealed in the "NAPL State of the Industry" reports is that printers are taking an assertive stance at the ownership level to ensure they are making every effort to evolve and prosper.
"During periods of uncertainty the tendency is to wait for clarity," he contends. "The opportunity is to create our own clarity."
In creating their own clarity, Paparozzi notes that printers have undertaken a number of initiatives to maximize their own value, as well as the relationships with their clients. Some steps include:
- Establishing themselves as experts. In a world of shrinking margins for error, clients and prospects look for the expert who can get it right the first time.
- Documenting their contributions to the customer's success. It isn't enough just to understand the client's problem and solve the problem. Printers also have to document their contribution to that client's success—i.e., how much money have they saved the customer? How much time? How much has the printer increased traffic to the client's Website or the return on their direct mail campaign?
- Identifying the most valuable customers, so that printers can spend more time with them and less with marginal clients.
- Defining competitive advantage precisely and in terms that are most meaningful to the target market. For example, competitive advantage isn't "great customer service," it's having 80 percent of clients recommending your company to a colleague and 40 percent of your business coming from customer referrals.
Remember, ask what you can do for your company. PI