Production Inkjet: Marco Boer of IT Strategies Discusses the Rapid Acceleration of Inkjet Technology
These are good days for the production inkjet printing business, for both users of the technology, as well as its related equipment and supplies manufacturers. Everyone is growing, everyone seems to be making money and promises of technology advancement are being delivered upon. If there is any complaint from users of the equipment, it seems to be that the technology is evolving too rapidly, causing challenges in keeping up and leaving them in fear of being left behind. Here’s a status report on the production inkjet market in advance of the Inkjet Summit.
Last year was a good year for production inkjet, with initial 2014 year-end data showing new engine sales up 22 percent globally and page volume growth up more than 35 percent. There are very few other print markets that offer this type of growth, regardless of state of their life cycle. But yet, eight years after the introduction of the first production inkjet printer, only about 800 sites worldwide have adopted production inkjet printing systems. More vivid in contrast, less than 1 percent of the pages printed worldwide last year were on production inkjet presses. What this means is that we are still early in the life and development cycle of inkjet technology and, correspondingly, are able to retain better profit margins than output from other printing technologies.
Further investments in future production inkjet development are contingent upon optimism and faith in continuing to move ever more pages onto this inkjet technology platform. IT Strategies—which, as part of its research business, continually interviews owners of production inkjet printers—believes that based upon production inkjet owners’ input that indeed this strong growth will continue for the foreseeable future. In fact, the owners of plants with multiple production inkjet presses often accuse IT Strategies of being too conservative in our page volume growth projections.
To gain a better understanding of where the pages will originate from, we looked back at the sources of inkjet page volumes in 2013 and then projected forward to 2018. In 2013, a little more than half of inkjet pages could be attributed to the replacement of mostly monochrome continuous-feed, toner printed pages. The installed base of continuous-feed toner printers is aging, and few resources are being invested in taking the technology forward as it has reached its zenith in productivity and economics.
Inkjet offers greater throughput productivity than toner, which directly corresponds to economies of scale savings for those that have the volumes to fill the machines. Because the data that is being printed exists for transaction and direct mail applications, the transition from toner to inkjet has been relatively seamless.
About one-third of pages resulted from a direct replacement of offset, mainly in book printing applications, with the remainder of page volume stemming from applications that could not or would not have been printed before. Examples of this are combination personalized medical benefit and local doctor listing directories, personalized lifestyle magazines that act as a combination magazine and direct mail piece, and colorful financial statements offering personalized performance analysis and investment suggestions for mass-market customers rather than the top wealthiest clients.
The ability of production inkjet technology to offer variable printing, at productivity rates three times to 10 times faster than toner—with little cost penalty for color—is what IT Strategies believes will drive the growth of these new pages that could not be printed previously without production inkjet technology. Further growth is expected to come from the recent technology advancement that enables inkjet systems to print directly onto coated and uncoated offset stock.
While no one is forecasting a wholesale replacement of other printing technologies, many are betting that inkjet will be the technology of choice, including printing equipment manufacturers. Since 2008, over $10 billion has cumulatively been invested in inkjet R&D. In 2014 alone, more than $1 billion was invested into non-consumer inkjet applications. Currently, IT Strategies tracks 200+ inkjet system equipment integrators investing in inkjet development—not all for production inkjet—but also including the printing of textiles, ceramics, wide-format signage, and even 3D objects. Many more internal-only-use inkjet printing development projects are invisible and untraceable.
Applications produced on continuous-feed inkjet printers can be clustered into four core groups: transaction, direct mail, books and other (other includes any page not easily classifiable elsewhere, such as many of these new pages described earlier).
Book Manufacturing Model Getting Totally Reinvented
Quad/Graphics’ acquisition plans in both equipment and competitors have set the stage for a business model conversion in the book manufacturing industry. It has made a bet on the future norm of book manufacturing becoming a world of small orders and high order frequencies. Its plans signal the beginning of the end of future web offset press sales for book printing applications—as evidenced by Timsons’ bankruptcy.
It may also signal the end of gaining efficiencies through centralized scale. In a social media world where trends change by the hour, next-day or same-day delivery is becoming a requirement to compete and survive. Large centralized book manufacturing plants built around standardization of everything may well become victims of their own efficiency success.
The balance of lowest cost per book vs. the amount of inventory waste tolerated is shifting. Quad—and by proxy the book manufacturing industry—is betting that the end-to-end profit of getting a book in the hands of a consumer within 24 hours is destined to be far greater than printing a book at the lowest cost, at the delayed expense of inventory waste.
Highly automated and decentralized inkjet (and toner) digital printing systems could drive publishers back into the printing business, or more likely create hub-and-spoke chains of book manufacturing near major logistical hubs. It is up to the publishers to seize this opportunity, and to drive the change now enabled by digital printing on a grand scale.
This new business model could be the tool needed to compete against the power of Amazon.com. Saving incremental pennies on book printing is no longer compelling; re-taking control of the supply chain and measuring net profit per transaction is the requirement to thrive in the future.
Rising Postage Costs Drive Direct Mail That’s Targeted, Personalized
Direct mail accounts for about one-fourth of all advertising spending in the United States, below television advertising, but ahead of Internet search engine advertisement expenditures. Direct mail is big business. After a decline in direct mail volume as part of the overall decline in advertising communication expenditures during the economic recession, direct mail volumes are now relatively stable. Volumes are stable because direct mail is one of the few advertising modalities that is highly predictive in terms of return-on-investment.
While the response rates to static direct mail are relatively low, they are still predictable. Send out 100,000 pieces and you’ll get at least 2,000 responses. E-mail response rates tend to hover around the 0.10 percent response rate, and are declining as the cat and mouse game of spam filters continues to accelerate.
The one unpredictable concern about direct mail is postage cost increases. Exigent increases will likely result in declining direct pieces mailed. Ironically, that will likely accelerate the move to digital printing of direct mail. Higher postage costs will mean fewer, but higher value, direct mail pieces. Those pieces will need to be more relevant; they will need to contain more personalized and more actionable offers. With the growing availability of “Big Data” and the increasing prevalence of production inkjet printing systems, the ability to create these highly relevant offers is now rapidly becoming in reach.
Prized Real Estate on Transaction Pages
Transaction pages include any page that is personalized and typically requires a response. Examples include credit card and billing statements, but also pages that provide a record of transactions such as retirement fund statements. This application is growing for inkjet print as volumes are being consolidated among fewer, but stronger, service providers. The rate of transition to electronic statement alternatives is expected to continue, but the “easy to transition” customers have mostly now done so.
The more forward-thinking statement providers are now looking upon personalized color paper statements as a unique, inescapable means to be in front of their customers once of month. This has made the real estate available on those pages among some of the most valuable advertising space available to those providers and their partners. It may reach a stage where affinity partner advertising payments can cover the entire cost of printing and mailing in the future, akin to supermarkets generating profits from shelf slotting payments.
Newspapers Present Special Challenge
The newspaper publishing industry has been the recipient of greater business model destruction than any other printing industry segment. To their detriment, much of the transition of content distribution from print to electronic alternatives was poorly understood and managed by newspaper publishers. The output volume and delivery time pressures are such that even digital production inkjet has been challenged to meet those needs, outside of a few international newspaper printer editions.
However, current generation habits still sustain a very significant amount of demand for printed newspapers. Since the addresses of newspaper subscribers are known, the ability to print relevant offers based upon micro-zoning is becoming more appealing to publishers and advertisers alike. Several inkjet system manufacturers are enjoying significant success in Europe with variable, dynamic content advertising in European newspapers.
Answering Inkjet Technology Wish Lists
There is never a shortage of wishes for technology improvement, but in the inkjet printing industry the list of wishes from existing production inkjet users and prospects are being fulfilled. Number One on the list was the ability to print on coated and uncoated offset stock with continuous-feed inkjet printers. Canon, HP, Kodak and Ricoh have all demonstrated solutions that are finding their way into the market in 2015, and we expect announcements from other vendors in the near future.
A second wish from users is to preserve their initial investment through the ability to upgrade their existing installations at a reasonable cost. Seamless upgrade paths are a standard feature for nearly all production printers on the market.
A third wish is for the availability of more compact, lower acquisition-cost hardware. This is being addressed through smaller continuous-feed systems (whose cost and throughput performance—but not output quality—is lowered by reducing the number of print heads), as well as through the introduction of cut-sheet inkjet printers.
Cut-sheet inkjet printing, with transaction print quality at affordable system pricing, made an entrance in Q1 2015, with the introduction of the Canon/Océ VarioPrint i300 (formerly called Niagara technology) and the Xerox Rialto 900 in a roll-to-sheet format. Others are likely to follow by drupa 2016.
While it is early in the market development of these new cut-sheet printers, IT Strategies believes the core positioning of these first-generation devices is aimed at:
- replacing mono-toner imprinting on pre-printed shells
- printing color at near monochrome toner cost
- replacing some offset print
- replacing some production color toner cut-sheet
- opening up high-volume production color with frequent paper changes
The Bottom Line for Print Providers
There is no other document printing market segment that is performing as well as production inkjet technology. The level of investment, innovation and confidence in the future is second to none. Perhaps the most appealing aspect of production inkjet technology is its proven track record to help printers grow in what has otherwise been anemic and often declining demand for print.
We may well be nearing an inflection point where it will not be possible to remain profitable as a professional printer unless one has production inkjet technology. It is not always a path of roses, but those who have adopted production inkjet technology have invested in a learning curve that will be steeper to overcome economically as time goes forward. PI
About the Author
Marco Boer is a consultant to the digital printing industry and also serves as chairman of the 2015 Inkjet Summit Conference. He has a reputation for being able to put complex information and concepts into a context that is easily understood by his audience. With more than 25 years of experience in advising and guiding senior executives of Fortune 1000 and smaller innovative companies to develop next-generation inkjet technology, Boer has developed a deep understanding of inkjet printing technology and its applications. IT Strategies has been delivering intelligent data, analysis, strategy and implementation practices to vendors in the digital printing industry around the world since 1992.