Brokering Watermelons and Margins – Caution
Brokering work seems to be growing, as more and more “printers” make the move to total solution providers. It brings to mind a story that goes like this: Two good old boys in Georgia bought a truck and filled it with a load of melons for 50 cents each. They drove to Atlanta and immediately sold out, selling them for 50 cents each. “Wow!” one said to the other. “We gotta get a bigger truck.”
I’m reminded of this when I hear a similar logic about brokering print jobs: “So what if we sell brokered work at low margins? We can make it up on volume.” Brokering or outsourcing has become more prevalent, especially for smaller firms that do not have the resources to keep up with rapidly increasing technology advancements. Also in recent years, “trade printers” have become more prevalent for certain types of work at very good prices—allowing markups anywhere from 25 percent to 100 percent, depending on the type and size of the job. However, if the company brokering the work is not adding value to the job from other services performed, they are really in a potentially low-margin, commodity market as more and more printers compete for this work and are often sourcing from the same supplier.
So how do we avoid the “melon trap” mentioned in the earlier story? I like to refer to adding value as “trouble on the front end and trouble on the back end.” I mean trouble in a good sense of the word. Providing valuable services like strategic marketing planning, graphic design, data mining or file correction all provide value on the front end.
On the back end, finishing, mailing, fulfillment and marketing campaign analytics are all good value that the customer usually needs. Of course, helping our customers enter digital marketing channels, including social media, is also becoming commonplace to add value to what in the past have been just commodity print jobs.
Let’s not fall into the trap of only looking for the “bigger truck.” We need a better “vehicle” to add value to the commodity work that we broker. If we do that, brokering can be a valuable service for our customers and offer a great profit opportunity to add more services at higher margins.
Carl and his wife, Judy, owned and operated their own successful Allegra franchise for nearly 20 years before selling the $2.3 million operation in 2003. He is a PrintImage International/NAQP Honorary Lifetime Member and was inducted into NAPL’s prestigious Soderstrom Society in 2010 in recognition of his contribution to the industry.