COMMERCIAL PRINTING -- Running Lean and Mean
Paparozzi's research and experience leads him to believe the industry can expect to see a return to some degree of pricing power by the middle of 2004. Laws against collusion make pricing a touchy subject, but NAPL is able to track some industry trends in this area.
For example, members of the NAPL Printing Business Panel were asked how their pricing through the first three quarters of 2003 compared to the same time period in 2002. According to Paparozzi, 21.3 percent of survey respondents said their prices were down 10 percent or more, and another 20.8 percent reported price declines in the 5 to 8 percent range. Only 10.4 percent said their prices were above year-earlier levels.
Further, one of the survey questions for the "2003-2004 NAPL State-of-the-Industry Report" asked respondents to identify and rank the factors most responsible for the extreme price competition. Everyone cited either the recession or excess capacity, which is effectively a byproduct of the recession, as a leading cause. "What is most important, though, is what else they said," he contends.
Respondents were asked to rank sources of competition (as many as applied) for their companies on a scale of one to five, with five indicating the greatest contribution. The following is a breakdown of the percentage of people giving each source a ranking of five or four:
* electronic alternatives to print—33.5 percent;
* client consolidation—25.2 percent;
* domestic competition from outside our area—22.2 percent;
* reverse auctions—12.2 percent;
* international competition—10.2 percent; and
* Internet auctions—8.3 percent.
Analyzing the numbers another way, Paparozzi points out that 75 percent of respondents cited at least one of these "structural" factors as contributing significantly to pricing pressure. "It shows that both the nature and source of competition in our industry is changing," he asserts. "Digitization and the Internet are transforming our industry from a local, regional industry into a national/international industry. At the same time, printers are facing new, outside sources of competition."