Like many American manufacturers, Challenge Machinery has forged strong partnerships with businesses in India, China, and other countries with growing economies. You might be surprised to learn, however, that most of these relationships involve selling to businesses, not buying from them. Over the past few years, Challenge has observed a growing demand for well-made American finishing machinery in many countries traditionally known as equipment exporters. Interestingly, much of this demand has come from small to mid-sized printing companies. And I believe that this new trend will have a direct impact on domestic graphic arts businesses.
Quality, the Universal Language
Our recent success in these markets defies conventional wisdom about international trade. Countries like China and India have well-earned reputations for producing goods extremely cheaply. Certainly, low-priced machinery is readily available in both markets. At Challenge, our goal is to manufacture machinery of supreme quality and durability. We believe our cutting, trimming, and drilling machinery is an excellent value, but it’s rarely the lowest-priced option on the market. If price were the only factor in a machinery buying decision, we could not compete successfully in the Chinese and Indian markets. But it isn’t.
Many Chinese and Indian graphic arts businesses now approach price and quality as American graphic arts businesses do: price matters to them. But they also understand that, in general, price and quality are inversely proportional. Many of these companies are willing to pay a bit more for a machine that’s durable and reliable.
I’m sure you understand the need for this trade-off between price and quality. Take a walk across your production floor. Is every piece of equipment you own the absolute cheapest available? I doubt it. You know that buying a cheap machine is pointless if you end up sinking half the cost again into maintenance and parts replacement.
Similarly, graphic arts businesses in China and India are starting to understand that investing in reliable, sturdy finishing equipment pays dividends. Whether a company prints and finishes in Bangor, ME, or Bangalore, India this principle holds true: You can’t have happy clients without reliable equipment, and you can’t have a successful business without happy clients.
And while this growing trend may have positive outcomes for large manufacturing companies, it may prove inauspicious for the small to mid-sized printing market in the US. Why do I think this is the case? Consider the factors that have contributed to this shift.
First, as a result of standard of living improvements, businesses in Asian countries now have more money to invest in quality—both the graphic arts businesses, in terms of quality machinery, and their customers, who seek quality finished products.
Thirty years ago, more than 40 percent of Indians lived on $1 a day, and about 60 percent lived below the poverty line. Today, these numbers have happily shrunk to around 25 percent and 40 percent, respectively. China has experienced similar standard of living increases since undertaking economic reforms in the 1970s. Over the past 20 years, standards of living have also in risen in countries in the Middle East, eastern Europe, and South America. Not coincidentally, Challenge has had recent success selling into these regions, as well.
Overall economic growth in these countries has also increased the demand for better made equipment. As the Chinese and Indian economies continue to expand, graphic arts businesses in these countries are facing tougher throughput and turnaround demands than in the past. Many of these businesses may be finding that cheaply made domestic equipment can no longer meet their needs effectively. Increasingly, these printers are turning to better quality machinery that will help them make their clients happy.
Globalization has played a role in this demand shift as well. In the past couple of decades, many large US-based print concerns—RR Donnelley, Sir Speedy, and others—have opened international locations, including in China and India. These established companies usually invest in quality production.
Finally, rising labor costs in these countries have made automated finishing equipment a more attractive option. As the costs of living in these countries continue to rise and the workers continue to demand (and deserve) higher wages, graphic arts businesses looking for a way to reduce total labor costs will consider buying automated equipment.
An Example from India
Our experience selling into India’s machinery markets perfectly illustrates how a growing global economy can affect domestic graphic arts businesses and their customers. Until recently, we hadn’t gained much traction in Indian markets because the demand for well-made finishing equipment was weak. At times, we wondered if this market simply was not a fit for what we offer.
Then, at 2012’s drupa show, we forged a new partnership with an Indian dealer, Paper Bind. Anuj Mehta, Paper Bind’s CEO, understands the value of well-made machinery. He soon identified a small but growing group of customers looking to invest in equipment that promised a lot more reliability and quality for a little extra price.
As the Indian economy continues to grow, so will its demand for top-shelf machinery. Through Paper Bind, we have already sold equipment to several Indian businesses, and we see a bright future in this market.
What This Means for You
I know what you may be thinking at this point: what does this shift in Asia’s buying power mean for me? As I mentioned earlier, many foreign-based businesses that we’ve sold high-quality equipment to are quick printers. In general, our on-demand book trimmers have experienced a greater rate of adoption in other parts of the world—most notably Europe, the Middle East, and South America—than in the US, relative to the sizes of these markets.
So, as a US-based quick printer, why should you be concerned about the quality improvements your foreign counterparts are making? As mentioned above, most of these businesses already offer more affordable printing than you do; now, many can match—if not exceed—the production quality you offer. Perhaps some of these businesses intend to eventually compete in the US on-demand market. If so, will you be ready when they make their first moves?
I know this may sound alarmist, but I’m saying this to make a point to my American quick printing partners: You must continue to improve the quality and efficiency you offer if you want to stay a step ahead of your counterparts in developing countries. Now is the time to invest aggressively (and intelligently) in new equipment that offers automated production, consistently excellent quality, and other features that help you exceed customer expectations. Otherwise, one day you may find these customers are being serviced by foreign competitors.
Realistically, it may be years before quick printers overseas pose a legitimate threat to your business. For the foreseeable future, the inconveniences of international shipping will continue to hamper foreign graphic arts businesses looking to sell into the US. But what will international shipping look like in 10 or even 25 years?
Someday, shipping printed materials from China to Michigan may take only a little longer than shipping across the state. This would be good news for your foreign competitors—and, possibly, for you. American quick printers who have kept up with the pace of technological change may find they’re able to secure new customers in China, Brazil, and elsewhere.
Admittedly, we’re decades away from a situation like this. Right now the idea might sound impossible or absurd to you. Of course, 25 years ago many people probably thought the same thing about selling top-line equipment in a country like India.
Globalization and technology’s breakneck pace have a way of transforming today’s “impossible” into tomorrow’s reality.
Larry Ritsema is president of The Challenge Machinery Company, an industry leader in providing innovative solutions for graphic arts companies worldwide. Located in Norton Shores, MI, Challenge offers a wide range of high-quality print finishing equipment, including paper cutters, book trimmers, paper drills, cornering machines, joggers, and more. For more information, please visit www.MyPRINTResource.com/10169438.