Optimism was in short supply as 2011 drew to a close, and it is pretty easy to see why. According to the most recent NAPL Trends Report on the quick and small commercial industry segment, sales are down on average, costs continue to rise, owners’ compensation is down, and uncertainty abounds—hardly a pretty picture.
However, the situation is not entirely bleak, especially for the progressive industry leaders. Somewhat hidden in the industry averages are some promising signs. Companies that grew (57.7 percent) during the study period outnumbered those that declined (42.3 percent). Top companies reported sales growth of nine percent and some 40 percent of companies expected at least some growth in 2011.
All of these findings are worse than they were at the first of the year, but they still are not as dismal as some might have expected.
What’s behind this sluggish performance? The economy certainly plays a role, but there’s more to it than that. The fact is that the industry is undergoing a fundamental change that pundits are calling “the new normal.” Of course, the industry has always been changing. I recall when the digital revolution was creating the last “new normal.” Back then the pundits called it a “paradigm shift.”
Much has been made of the accelerating decline in the number of shops, but shops have been going out of business steadily during the past 20 years. For example, in 1991 there were 5,454 franchise print shops, today there are 2,656. That said, average sales per shop grew from $370,000 to $617,000 in the same period. I believe that reflects the industry as a whole during those two decades.
What has changed is that the failed enterprises are no longer being replaced by new startups. In other words, the churning at the bottom of the industry is no longer taking place—hence, the increasing decline in shop numbers.
Printing companies are not the only entities that have experienced attrition and/or consolidation. Printing industry vendors also have been consolidating. Kodak has folded in a number of other companies such as ENCAD, NexPress Solutions, Creo, etc. Presstek acquired AB Dick, which itself had acquired Itek and AM Multi earlier in this 20 year survey period. Ricoh acquired IKON Office Solutions and InfoPrint. Canon now is consolidated with Océ. There also has been consolidation among associations and attrition in industry trade shows, largely due to economic considerations in a changing industry.
However, consolidation and attrition are not the only factors at work. The very nature of what printers produce has changed dramatically and will change even more dramatically in the future.
In my presentation at Graph Expo 2011, I noted that: “The transition to digital, coupled with the increase of non-print products and services, has shifted the profit center landscape for quick and small commercial printers.” Here again, history speaks for itself.
It might be amusing for old timers and instructive for newcomers to see where sales were coming from for the Top 100 companies 20 years ago. Back then, one-color offset accounted for 19.9 percent of sales and multi-color offset brought in another 15.4 percent, for a total of 35.3 percent. High-speed copying (all analog back then) and color copying made up 28.4 percent and 2.9 percent of sales, respectively. Bindery accounted for 7.5 percent of sales and brokering for 6.1 percent. The remainder of sales was broken out as coming from art/layout, camera room/prep, convenience copying, typesetting, etc.
Today, offset accounts for 29.78 percent of sales, with only 5.81 percent being one-color offset. Digital output, which wasn’t even a category 20 years ago, makes up 35.5 percent, with 17 percent of that being color digital. Prepress brings in 7.27 percent and finishing accounts for another 9.64 percent. Mailing and brokering/other make up the remaining 17.34 percent.
Let’s look at the franchise segment again.