Confronting Reality About Margins --Dickeson
But is the balance between being an industry of service or commodity slowly tipping? Each printing company has to look at what its product is and give some thought to this question. Clearly, the balance tipped for personal computers. Personal computers are now a commodity like telephone receivers or calculators.
But where are all the software companies that sprang up in the late '90s that purported to be auction houses—little Ebays—for printing? They depended on printing being a commodity that could be bought and sold by price bid. They're history! That's the reality of the matter.
Where's the paperless revolution that was supposed to follow the computer boom? Hasn't happened, has it? Are there more or less catalogs, books and magazines than there were? Is your Sunday newspaper still a file jacket of preprinted inserts? Is your mailbox less, or more, filled with direct mail printed promotions?
Yes, there's change in commercial printing, but it's at the margins, isn't it? And, that's always been true. Maybe business forms or tax returns are less than they were, but just look back over the past six years, or 12 for that matter. The lower three quarters of the commercial printing industry—according to the PIA Ratios—haven't been doing well enough to attract major new investment.
When we look at 10 years or more of the Ratio Studies we find that the upper 25 percent of the firms reporting have operating margins of 12 percent to 15 percent. Not great, but not too bad. Let's look at the product pricing. Surprise! Surprise! All firms, both upper 25 percent and lower 75 percent, are within fractions of a single point of each other when judged from a value-added point of view. It isn't price that makes the difference. That's reality. What is it, then, that gives the upper 25 percent such a great difference in operating margin?