2010 State of the Industry: Part One

"Competition on pricing and lead-times can be challenging and requires you to be more innovative and creative when quoting," said Melissa Thompson, flexible magnetic products sales manager, Master Magnetics, Inc. "More and more companies are getting into this industry because it’s growing and the initial capital expenditure isn’t that great for the ROI, plus there are some excellent business support programs in the printing franchises."

"Commoditization of print services and the price pressure that has resulted from this in a market with excess capacity continue to present a significant challenge for print service providers the world over. There is a need for printers to become more rounded ‘solutions providers’ to their clients, to be more focused on creative problem solving and less on process and production efficiency," said FESPA's Chesterman. "Digital technology, in most cases blended with conventional processes, can undoubtedly help printers to become more efficient. But its real potential is in its ability to help printers respond more comprehensively to clients’ marketing challenges, to expand the range of products and services they can deliver. That is the first step towards deeper customer loyalty, better margins and more sustainable business for printers."

Used Equipment, Slow Sales of New Equipment

According to Marco Boer, vice president, IT Strategies, 90% of the challenges in the wide-format market stem from the economic recession. Issues with financing and capital have slowed the sale of new equipment and forced some PSPs to hang onto older equipment longer than they originally intended. According to Boer, in some cases, print service providers that are unable to survive financially could spill a flood of gently used wide-format printers on the market, further slowing sales of new equipment as the demand recovers.

Capacity Issues, Low Demand

Managing capacity, according to Rick Moore, director of marketing, MACtac Graphic Products, is one of the biggest challenges the industry is facing. "All of the industry reports I have seen indicate that it will be years before the industry volume returns to what it was in 2008, so there is a smaller pie to divvy up. This affects capacity at every level, from the manufacturer to the print service provider. Managing capacity, and the decisions that come out of that regarding service, output, margin, overhead, etc., will mean the world to those who can navigate those waters."

"Print production demand continues to be the largest challenge to the industry as we continue through 2010," said KIP America's Rich Gigl, vice president of marketing. "End-user print demand continues to be low as the AEC industry continues to struggle with the current economic position related to over population of real estate in both the commercial and residential sectors."

"When you combine leaps in output capability with an expanding installed base of devices, the result is an almost exponential increase in output capacity," said Point Imaging's Huseman. "Combine the increased capacity with reduction in demand due to the current recession and margins come under significant pressure."

Marketing

Even though most PSPs are involved in various marketing campaigns for their customers, marketing their own businesses can be a roadblock. "No matter what the state of the economy, I think the biggest challenge facing print shops is their ability to market their product line offerings to their target customer base," said Mark Radogna, group product manager, Professional Imaging, Epson America. "Even if a company acquires ground-breaking printing technology, it will have a hard time growing business if it does not properly build awareness of the products that now exist within its portfolio."

Time to Transform

According to Seiko's Ryan, its change or die for most participants in the market. The recession has truly changed the industry landscape in all market segments.

"The market conditions are having a profound impact on printer manufacturers on several fronts. Initially, the dramatic drop in sales forced manufacturers to redesign their businesses towards much greater efficiency. Those manufacturers without strong financial backing are now in financial jeopardy as the economic malaise drags on. Their long-term prospects don’t look good, and I expect some consolidation over the next 12 to 18 months as fringe manufacturers exit the marketplace," said Ryan. "The same process is happening to sign companies, and sign suppliers. Everyone is forced to retool for efficiency. And everyone is forced to redesign their products and services for a more cost-conscious, value-orientated market."