I’m honored that Wide-Format Imaging has asked me to be a regular contributor to the magazine, requesting I provide thoughts about our industry six times in 2011. I hope to bring value to you with each article.
2010 was an improved year for the large-format industry compared to 2009. In talking with several industry leaders, consultants, and pundits, the consensus is that the wide-format print service provider industry (the collective group of print providers, not equipment manufacturers or suppliers) experienced small incremental growth ranging from three to five percent. Certainly this is an improvement over the declines of the prior year. The industry will likely not return to 2007 sales levels until 2012 or beyond. The sales growth in 2010 is due primarily to the improved economy. Blue Chip Economic Indicators’ consensus view is that real GDP grew 2.8 percent in 2010 and their forecast is that 2011 GDP growth will be above that, at around 3.2 percent. I believe we need to proceed with cautious optimism, remembering the lessons learned in 2009. Industry experts agree the worst is behind us; however, with unemployment forecast to remain around 9.5 percent throughout 2011, continued weakness in the housing sector, the European debt crisis, weak consumer confidence along with the continued tight credit markets, the overall wide-format market recovery remains fragile.
Many challenges remain as we enter 2011. We continue to experience pressure on margins. Our industry is plagued with over capacity. Many of our products face commoditization. Pricing pressure continues. Our customers continue to proceed cautiously, buying shorter run lengths and with tight lead times, putting greater pressure on us. Other advertising mediums, particularly digital signage and the internet, are gaining share of our customers’ marketing spend.
In light of these many challenges, we need to remember the lessons of 2009. We need to continue to focus on the basics of expense control, increasing efficiency and productivity, and managing cash. We need to manage to the Balance Sheet in addition to the Income Statement, strengthening the financial health of our businesses so that when the time is right for us to add new equipment or employees, we will have access to financing and cash.
At the same time, we need to be spending time in front of customers and prospects, asking open-ended questions, understanding their business challenges, and providing more value-added solutions. Our customers face many challenges; getting the cheapest price may not actually be the best solution for them. We need to understand our customer’s “points of pain” and business challenges; then we need to look for ways to solve those challenges with a better solution. It may involve fulfillment or kitting signage and graphics together with other products and services. It may involve creatively looking for new and unusual applications and products. It may involve providing content and design consulting. It may involve bringing more value to their signage and graphics by combining the offline and online/mobile experience using 2d barcodes or SMS messaging. Whether we handle all of these expanded services in-house or partner with firms that help us bring the full-service solution to our customers is immaterial. We need to learn how to solve our customers’ marketing challenges; in doing so, we will develop a closer relationship with them, build increased loyalty, and command non-commodity prices. Of course, none of this is easy.
Some of the best sales opportunities we see for 2011 are in fleet graphics, POP, sports, events, corporate branding, healthcare and retail categories. We see growth opportunities in interactive and digital signage as well as textile printing, including soft signage, custom interior décor and fabric printing. We also see successful companies integrating products and services into single source solutions.