Money Talk: Competing with the Majors

In today’s highly competitive printing market, many small to mid-sized printers feel themselves pitted against industry powerhouses like Consolidated Graphics (CGX), RR Donnelly (RRD), Cenveo (CV), and Quad/Graphics (QUAD). Realistically, a small to medium-sized printer can’t compete head-to-head with the big guys. To do this, let’s first look at an overview of the marketing strategies and current statistics for these four major printers:

A Comparison of Major Print Companies (as of May 2011)

Note several points of interest:

There is a similar focus on acquisition by all the majors, which has supported increased quarterly sales figures.

All these majors have a clearly defined vision and market focus.

Operating incomes for CGX and Donnelly are similar, and growth rates for CGX and Cenveo are fairly close.

All are trading at an Enterprise Value well above average due to a combination of their size, their strong management strategies, and other factors.

The majors benefit from economies of scale, particularly when it comes to obtaining capital and purchasing power. A major with a three percent EBITDA ratio (Earnings Before Interest Tax Depreciation and Amortization) can still get a loan, and their greater purchasing power provides the additional edge of a profit margin as much as three percnet over the average printing company.

So is there hope for a smaller printer to compete with the majors? Absolutely!

Don’t compete with the majors on price. That’s a war we simply cannot win.

Do make necessary large investments, but only when it is the right decision and timing for your company, and not simply to keep up with the majors.

Do realize that we can play where they don’t play. Look for markets where they are not concentrated, like medium-sized companies. VistaPrint has done a great job of this. They are growing at 20 percent quarter-over-quarter by concentrating on those small to medium-sized customers.

Do be flexible. If a customer comes in with an unusual demand, a large company can take months to work through its decision making process. As an independent owner, you can make a decision the next day. That kind of customer responsiveness and customization is a real plus in client relationships.

Do respond quickly to technological innovations. Their size, again, hampers the majors, as any technology change must be considered in terms of multiple locations. We can use our smaller size and flexibility to bring out new products much more quickly than they can.

Do consider partnering with other independents (or even sometimes with a major) when services are needed that are beyond our capabilities. The majors buy services every day, sometimes at a lower price than you can make them. You can do the same thing with another independent.

Do stay focused on our customer relationships, providing the work they need in a timely manner. Strong customer relationships are the best defense against a major (or a competitor) trying to break through.

Remember—it’s not about competing with the majors so much as co-existing successfully with them. PN