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.
We expect innovation in inks and substrates to improve adhesion on UV printers and offer us a wider range of products we can produce while being kinder to the environment. We believe there will be a resurgence in the US in the interest in sustainability. Longer term, we look forward to increased efficiency with end-to-end workflow solutions combining JDF and PDF workflows and improved color management.
What will it take to thrive in this environment? We believe it will be a combination of operational excellence—running the business efficiently with a focus on improving both margins and customer service—while finding new and better solutions to help our customers grow their businesses.
I remain confident about our industry and its long-term prospects. The key is ensuring that we manage our businesses well in order to be in a position to take advantage of the continued growth and opportunity I believe exists for us.
At FASTSIGNS, the team is focused on achieving our four key strategic objectives: increasing our franchise partners’ profitability; increasing our franchise partners’ profitable sales volume; increasing the value of the FASTSIGNS brand; and further improving our franchise partners’ satisfaction with us. We have developed a robust outside sales and sales management support program; sophisticated multi-channel, multi-touch integrated marketing campaigns with measurability; and we have launched a mobile-enabled website. We are about to launch an integrated point-of sale, e-commerce and management information system that we believe will revolutionize our centers. Our franchise partners benefit from our technical team which provides end-to-end tech support on hardware, software, workflow and color management as well as unbiased, detailed equipment, ink and substrate testing and evaluations. We have created an extensive library of custom actions and scripts—to increase efficiency and speed up workflow—and answers to frequently asked questions to reduce the time spent on troubleshooting, problem solving, and training staff. We are working hard to bring even more savings to our franchise partners, negotiating with vendors on equipment, substrates, supplies and services using our buying power as leverage. We are providing tools and training to help our franchisees sell higher margin products and services.
We are focused on growing the number of FASTSIGNS locations though selling new centers as well as conversions. We signed 10 conversions in 2010 and expect to more than double that in 2011.