Teaching Experiences -- China ConnectionOctober 2008 By Regis Delmontagne
While I taught such familiar topics as the history of printing, size of the worldwide industry, terminology, etc., we also spent a considerable amount of time discussing standards for printing machinery and why they are important. Sustainability is a topic relatively new in this country, but one growing in importance due to all of their environmental problems. These are topics that have very recently been added to the curriculum.
We also spent a fair amount of time discussing the role of Chinese printers and their forays into the world of foreign business. For a long time, the Chinese felt comfortable knowing that their labor rates made them remarkably successful in taking business away from global competitors. They easily underbid other printers and, operating with state-of-the-art equipment and systems, carved out a profitable niche for themselves.
However, their successes also led many new Chinese entrepreneurs to enter the printing business, eager to get their share, plus more, by successfully undercutting the traditional suppliers. Competition is fierce among Chinese printers, with many of them complaining about their competitors doing the same thing they previously did--undersell the competition. Several Chinese printers relayed to me that print is becoming a commodity, quality is a given, and they can't make money if they just put ink on paper. Sound familiar?
We discussed what successful U.S. printers are doing to get out of the "commodity" business, such as setting up a fulfillment center, diversifying into package printing, maintaining databases, etc. An executive from a large U.S. printer I met at Drupa told me that he is talking to some Chinese printers that currently print some jobs for him, but now they want to take the final step and actually send the finished products to the ultimate customers, rather than to a middleman. While those new business models appear attractive to Chinese printers, their time is well off into the future.
Competition from India
For the near future, package printing appears to be their best opportunity to generate the kind of profits necessary to stave off competition from new entrants into the printing world, such as India, Vietnam and Indonesia. What advantages and disadvantages do printers in these countries have?
For starters, India has lower labor rates than China and, most importantly, they are used to communicating in English and have a rule of law concept firmly established. However, the tariff and non-tariff barriers in existence in India preclude--except for the very wealthy printers and newspapers--purchases of the latest machinery and systems. Therefore, a lot of used equipment still finds its way to India. Vietnam is a rising star in the printing industry, still relying mainly on used equipment, but with labor rates even lower than those found in India.
The message for Chinese printers is not to bask in possessing low labor rates, but how to compete with their neighbors for offshore customers.
Education is one of the keys China is using to make sure that people running the industry today, and those that will run it in the future, are aware of these challenges. That's why they have people like myself with printing knowledge and educators from universities such as Wuppertal teaching short courses. That's also why many of their graduates enroll in post-graduate programs at foreign universities. It's why many faculty members from Chinese printing schools go abroad for extended stays to improve their knowledge base. I also met several educators in Wuhan who worked in the United States for a number of years, then decided to return to China to teach the latest technologies to eager students.
Effect on U.S. Printers
What does this all mean for U.S. printers? First, offshore competition is not weakening, and I believe it is gathering strength. In the past, most U.S. printers faced competition from Hong Kong, Japan and Italy, among other countries, mainly for calendars, "coffee table" books, fine art, etc. But today, there are more than enough competitors in China, India and, moving up quickly, Vietnam. And they are looking to print anything without a restrictive deadline.
U.S. printers will continue to survive, though the number of printers closing up shop may indicate a different story. The survivors will be those that continually update their equipment and systems, train their employees on the newest technologies, and expand beyond their traditional offerings. The days of buying a used press and printing business cards and stationery died a long time ago.
Yet, in China and the other developing countries, there are plenty of entrepreneurs who start their printing business just like their American counterparts did several generations ago. These upstarts are throwing the marketplace in China into a free-wheeling "get the job, regardless of what it will cost us."
Western European printers are grappling with a similar set of equations as former Soviet bloc countries now offer printing at rock-bottom prices, thus changing the way print is bought in the EU. How will printers based in Germany, Italy and France, for example, not only survive but thrive? By diversifying beyond just putting ink on paper.
As the famous bank robber Willie Sutton used to say when asked why he robbed banks: "Because that's where the money is."
Smart printers know where the money is: mailing and fulfillment, wide-format printing, database management and the like.
Competition is what keeps all businesses on their toes. Chinese printers realize this and must adapt to changing market conditions. Some will and others won't. I will see for myself next spring, when I return to Wuhan University and experience what another year has brought. PI
About the Author
Regis Delmontagne retired as president of NPES in 2005 following an almost 30-year career heading the U.S. trade association of suppliers to the printing industry. He also served as president of GASC, the producer of the Graph Expo and PRINT exhibitions. Delmontagne expanded NPES into an internationally recognized organization with offices in five major markets in the world. He currently serves as a consultant to several foreign firms, as well as to U.S. manufacturers and printers. He can be reached by e-mail at email@example.com.