Convergence as Investment Driver Highlighted at Annual NAPCO Research & PRINTING United Alliance Breakfast

At yesterday’s annual NAPCO Research/PRINTING United Alliance breakfast on key trends and insights, Nathan Safran, NAPCO director of research, said, “the focus of today’s presentation is to explain to you what’s driving investment today, whether it’s in equipment, software, substrates, or infrastructure.”

Andrew Paparozzi, The Alliance chief economist, presented preliminary results of the “2022-2023 State of the Industry Report,” based on 181 responses received through September and reflecting print providers with annual sales that range from less than $250,000 to more than $500 million, located across North America. The complete results will be available to The Alliance members in December.

“On the surface, everything looks great,” said Paparozzi. “On average for the first three-quarters of 2022, sales increased by 13.9% for an extraordinary 79.7% of our research group. Three-fifths of that group experienced at least a 10% sales increase, and over one-third experienced at least 20% growth. However, these gains are grossly inflated by cost inflation. Operating costs increased an average of 12.1.% for September — not because production increased, but because of inflation.”

Adjusting for inflation, Paparozzi noted sales are up 2.1% through September.

Print providers across segments are encountering costs rising — in labor, substrates, transportation, materials, and energy — and labor shortages. Convergence is reshaping the printing industry, said Lisa Cross, NAPCO Research principal analyst, with print providers moving into new market segments that historically were outside of their purview. “The lines have been blurring, but today they are pretty much obliterated,” she said. “Digital technologies have lowered entry barriers and allowed more providers to move into adjacent markets. Also, markets or print volume have disappeared — digital media knocked out a lot of print applications, and providers found themselves having to reinvent themselves to make up for that lost revenue.”

Labor shortages are a steadfast challenge across the industry, as are protecting margins and pricing challenges. “There is this drive to invest in automation and tools that squeeze out costs from the manufacturing process,” said Cross.

Safran wrapped up the presentation with a roadmap for vendors to help customers. One of the most important is to be a partner, not a vendor. “Lead with empathy, earn their loyalty, help your customers diversify and grow their business, and build trust,” said Safran. “Show them a path to profitability.”