One of the hassles about putting together a “state-of-the-industry” report for the printing industry is defining just what comprises the industry. After all, all kinds of companies print. So let’s tackle that issue first.
The National Association for Printing Leadership (NAPL) breaks the industry down into four categories: commercial printers, quick printers, digital printers, and other groups included in the NAICS code 32311 “Printing”. “The code does not include publishers, converters, in-plants, trade shops, or any others for whom printing for a non-captive market is not a primary business,” according to NAPL. It’s also instructive to note that they no longer make a distinction between small commercial and quick printers “because there is no longer a meaningful distinction” between the two.
So, how many “printing” establishments are there? Using Economic Census data, NAPL estimates the four categories mentioned above account for a little more than 31,000 establishments. Adding copy shops and trade shops brings the total to around 40,000. Throw in periodical publishers, book publishers, and newspaper publishers and you get 58,000 establishments with $230 billion in revenue and 1.32 million employees. The association adds that including in-plants, converters, and “everyone else
who operates a printing press or digital printing/copying system would surely at least double those totals.”
Taking only the four the NAPL printing establishment categories, we find that the vast majority are smaller operations, with a little over 82 percent having 20 or fewer employees, and almost 70 percent having 10 or fewer employees. On the other hand, only four percent have 100 or more employees. However, those companies with 100 or more employees account for nearly half of all industry sales.
Back in the “good old days”, printers printed with ink. Then they added toner to the printing mix. Then they moved into digital printing. Until then, printers pretty much made a living by putting marks on paper. Times are changing. According to a recently released PRIMIR study, print (marks on paper) accounts for 86.6 percent of total print industry revenue, while non-print revenue accounts for 13.5 percent.
What is this non-print revenue? The study identifies fulfillment and warehouse services (29 percent), mailing services (27 percent), and design services (25 percent) as the largest of the non-print revenue sources. Other sources include marketing services (six percent), data management services (six percent), Web/Internet services (four percent), CD/DVD/USB replication services (two percent), and photography and video services (one percent).
NAPL data supports this sea change. In 2004 “lithography” accounted for 76.7 percent of revenues, with digital printing/value added accounting for 18.2 percent. Just six years later, lithography accounted for 54.6 percent of revenue while digital printing and value added accounted for 37.8 percent. NAPL survey respondents pointed to digital printing, Web-to-print, one-to-one cross-media marketing, mailing, wide-format, art/design/creative, four-color lithography, database management, and fulfillment as areas most likely to grow the fastest in the near future.
Printing Industries of America’s latest forecast mentioned such things as mailing/fulfillment, database management, workflow solutions, VDP/personalization, QR codes, PURLs, search engine marketing, social media, design services, and Web services as potential non-traditional growth areas.
The trend toward diversification from marks on paper can also be seen in the annual Quick Printing Franchise Review (All percentages rounded off):
CATEGORY % OF SALES
1C Offset 3.0%
Multi-Color Offset 13.8%
4C Offset 4.6%
TOTAL OFFSET 21.4%
B/W Digital 10.7%
Color Digital 26.7%
TOTAL DIGITAL 41.8%
Mailing Services 6.0%
TOTAL NON-PRINT 36.2%
Here, offset printing accounted for 21.4 percent of sales, total digital printing accounted for 41.8 percent, and profit centers not directly involved with putting marks on paper accounted for 36.2 percent.
The same trends can be seen in the annual Quick Printing Top 100:
CATEGORY % OF SALES
1C Offset 5.93%
Multi-Color Offset 9.43%
4C Process 11.37%
TOTAL OFFSET 26.7%
B/W Digital 12.33%
Color Digital 20.49%
TOTAL DIGITAL 36.6%
Mailing Services 4.04%
TOTAL NON-PRINT 34.66%
Here we see that nearly 35 percent of sales come from activities not directly involved in putting marks on paper, while sales from digital again top sales from offset.
There are a couple of things we can extrapolate from this data. First, printers are already offering some of the non-print revenue sources (mailing, fulfillment, wide-format, art/design, etc.). Second, digital printing continues to supplant offset lithography. Third, many printers recognize the services mentioned as potential sources of non-traditional revenue, but not very many are taking full advantage of the opportunities they offer.
I’m writing this during the pre-holiday sales push and just for the heck of it I grabbed a stack of 40 Christmas catalogs. We have done business with most of the companies and most, but not all, prominently displayed their website addresses for online ordering. Only three companies had QR codes to let us shop with smartphones.
In talking to printers, the impression I get is that while most understand the basic concepts of many of the rapidly developing opportunities for alternate offerings, they are unsure of how to market them, sell them, price them, and implement them. For instance, while the ROI on a properly structured, one-to-one VDP program is pretty clear in the abstract, it is something else again to convince customers that the extra expense is worth it.
Of course, occasionally, even the basic concepts may not be so clear to a print provider. One consultant told me a few weeks ago about a printer who wanted to become a marketing services provider. His question to the consultant was: “How do I let people know that I’m offering marketing services?”
Dollars and Sense
Some printers always make money. Some make more money than others. Some don’t make much money at all. For instance, total sales for the Top 100 companies as a group grew eight percent in the latest study. One aberration was a company with sales growth of more than 600 percent—solely through acquisition. Other companies which grew in more traditional ways saw increases ranging from 26 percent to 191 percent. Many companies saw growth in the single digits and some saw flat sales. A handful saw double digit sales declines.
The top 10 companies in Sales per Employee all had SPE well in excess of $200,000 while 17 companies had SPE of less than $125,000. Three had SPE of less than $90,000. Keeping in mind that the list cutoff was $2.25 million in sales, it’s pretty obvious that gross sales are not necessarily the best indicator of profitability. They never were.
It has become a given that the printing industry is stratified into three basic layers: Top Performers (25 percent), Average Performers (50 percent), and Poor Performers (25 percent). The top performers are the ones who always make money. They and the average performers make more money than the poor performers, who don’t make much money, if they make any at all. Guess where most of the slow and steady industry attrition is coming from.
Harry Truman once said he would prefer one-armed economists so he wouldn’t always be hearing “But on the other hand” from his economic advisors. There are many clear indications that our economic recovery is continuing slowly. Studies show that no matter how bad the economy is, people still buy lipstick, fast food, Halloween costumes, and alcohol.
In any case, what do we think we know about what is coming in 2013? We will have to deal with the Affordable Care Act, postal reform, the situation in the Middle East, the European economic crisis, and many other things that can affect our economy and our business climate. As of this writing, the hard core political ideologues have yet to push us over the fiscal cliff. By the time you read this, who knows?
In his presentation at the NAQP Owners Conference prior to Graph Expo 2012, NAPL chief economist Andy Paparozzi told attendees that waiting for the economy to turn up or the competition to shake out is not an option because the economy alone will not solve anyone’s problems. Nevertheless he noted: “Many companies are excelling because they recognize that there’s still plenty of opportunity in our industry—just not in the same old places or by doing the same old things.”