2013 State of the Industry Report

Sign and graphics experts are optimistic about the market—and for good reason. Indicators showed growth through the front-half of 2013, which should propel us into the end of 2013 and beyond. SGIA’s first quarter 2013 Industry Pulse Benchmarking Report indicated a return to more positive numbers after a slight dip in the fourth quarter of 2012. More than 55 percent reported sales levels up from one year ago. Production levels also demonstrated positive results, with more than 57 percent of respondents relaying an increase since the same time last year.

Additionally, out-of-home (OOH) advertising revenue rose five percent in the second quarter of 2013 compared to the same period in 2012, accounting for nearly $2.2 billion, according to the Outdoor Advertising Association of America (OAAA). Revenue for the first half of 2013 reached nearly $3.7 billion. The increase in revenue highlights steady positive year-over-year revenue growth since the second quarter of 2010.

So what do experts predict for the rest of 2013 and where are the growth markets? Keep reading to find out.

 

 

 

WFI: How is the sign & graphics industry faring overall and how do you think the remainder of 2013 will play out?

Marco Boer, VP, IT Strategies: The trends year-over-year aren’t surprising. Growth continues—a rarity in markets for print that, in general, are suffering attrition. What is surprising is the slowdown in equipment sales.

These slowing growth numbers are not an indicator of a market in trouble—rather it is a shift to higher utilization and higher productivity. The life of the typical wide-format inkjet printer in the installed base is extending. What once might have been an average four to five year life has now become a seven to eight year life, and in some cases even longer. Print shop owners are delaying equipment purchases and squeezing more volume out of existing devices. Compounding the slowdown in equipment growth issue is the greater productivity offered by the new printers now available on the market. Simply put, with faster printers fewer are needed.

Gene Chambers, VP of Marketing, Vision Graphics: Overall I think we are faring pretty well! We’re an old industry that has progressed with new technologies that have some wonderful and creative capabilities. Even if you’re a small shop without a lot of new equipment there is still work out there. You may have to look a little harder to find it, but it’s out there. I’ve seen a lot of industries that have come and gone because of the new technologies, but the sign industry still alive and kicking.

Neil Felton, Managing Director, Exhibitions & Events, FESPA: Our latest World Wide Survey 4 (WWS4) carried out earlier this year in collaboration with InfoTrends revealed that printers are the most optimistic they have been for five years.

There will be a lot of opportunities for printers over the next five to 10 years and beyond. The industry is ever changing, especially with the shift in emphasis to digital printing, which has taken the sector by storm over the past 10 years or so.

The mission for printers should be to listen to their customers and deliver an effective solution. This is quite often printed in digital these days.

Eric Frank, VP of Marketing, KBA North America: The sign and graphics industry is doing very well. InfoTrends predicts that retail wide-format printing will see a tremendous growth this year and next and expects the retail value of wide-format printing in North America to experience a compound annual growth rate (CAGR) of 7.9 percent, reaching $23.6 billion by 2016.

Kirk Green, Owner, Ferrari Color: The industry seems to be growing again, albeit slowly. Clients have budgets to spend, but they want something new and innovative—not the same standard signs. Early indications show that this year was similar to last, but if the rest of this year is anything like this summer, 2013 will end up very strong.

Tim Greene, Wide Format Service Director, InfoTrends: We believe that the market in 2013 has been fairly stable with small amounts of growth, driven by the retail and restaurant/food service industries which look like some of the fastest growing segments year-on-year.

Ken Hanulec, VPof Marketing, EFI Inkjet Solutions: The sign and graphics industry is building a better platform for the future, which is definitely a good thing. Out-of-home advertising remains a key market and, while electronic signage is a challenge to print, I don’t think the electronic market has developed as quickly as many would have expected, possibly because of the initial cost needed to create those types of installations.

It may be a difficult market for the printing industry as a whole, especially in the analog print space, but the possibilities we’re seeing in the market with UV, LED, and fabric and textile digital printing applications really changes the conversation.

Jenny Kigin, Marketing Operations Manager, 3M Commercial Graphics: Overall the industry is thriving. The economy is more stable, which has a stabilizing effect on the graphics market. Because of the improving economy, customers have a greater comfort level in rebranding. Younger companies are considering new or expanded branding. And the personalization trend continues to be vibrant. Most of our graphics manufacturer customers indicate they are very busy and expect to stay that way for at least the rest of the year. So overall, 2013 has been a good year with most graphics manufacturers expecting modest growth through the end of the year.

Rick Moore, Sr. Director of Marketing - Distribution Products, MACtac: The industry is very resilient considering a downgraded economic forecast and sluggish global advertising demand are both weighing heavily on the industry. I believe we have enough positive momentum heading into the back half of the year that 2013 will be solid.

Catherine Monson, CEO, FASTSIGNS: From talking with our friends in the industry—other franchisors, competitors, association leaders, and vendors—we understand that the industry is experiencing growth. We believe that the industry will end the year with sound growth in the seven to nine percent range overall.

Kevin Murphy, President & CEO, Onyx Graphics, Inc.: The North American market is showing signs of an upswing. PSPs now have a greater appreciation of margins and cost structure of the full printing enterprise, which can help them positively impact profitability. Businesses have learned to be profitable under very unique circumstances.

The year will end better than expected. Customers are investing in printing hardware and print workflow software products to improve the efficiency of their printing process. With the expectation that employee costs will increase, they are simplifying and automating their printing process.

Ray Palmer, President – Alliance Franchise Brands, Sign & Graphics Division (Signs Now, Signs By Tomorrow, and Image360): The market place has been in flux for several years, and I don’t think that is any different now. But we don’t look at these changes as a bad thing. I believe our industry is faring well, as there are opportunities for growth in very different places, compared to a few years ago. Although the market place is settling down and we are seeing positive numbers, there is still increasing pressure on margins, and we need to remain watchful.

As the economy continues to improve, we can expect sales to rise modestly, ending on an up note for the year.

Joan Perez Pericot, Marketing Director, Large-Format Sign and Display Division, HP: The sign and display market continues to face several challenges, such as the shift of marketing dollars to social and Web campaigns, the growth of digital screens, or the European economic crisis that is also impacting China. However, if we look beyond signage to complementary markets, there are many segments showing strong growth potential. These markets include textiles, wall décor, and corrugated displays, just to name a few. We also see a very strong growth opportunity for sign and display in the Americas, driven both by the market recovery in North America and the booming economies in Latin America.

In general, I would say the industry is moving from being about “sign” to a focus on “graphics”, as many traditional graphic industries are looking to large-format inkjet as a true alternative. Overall we expect the sign and graphics market to continue growing, but with a different mix of segments.

Brian Phipps, General Manager, Mutoh America Inc.: The numbers we have seen on our hardware and ink sales have been very positive this year. Also, based on what I see and hear from partners and peers in the industry, the equipment business overall has picked up and people are buying again.

Mark Radogna, Group Product Manager, Professional Imaging, Epson America Inc.: Over the past two years, we’ve seen consistent growth in the sign and graphics industry. As the economy gets stronger, there are clear signs that segments like advertising are picking up, as advertisers turn increasingly to wide-format signage to get the word out about products and services. More print service providers are recognizing and offering options for wide-format printed work in the growing indoor/outdoor signage and display business.

Michael Robertson, President, SGIA: The sign and graphics industry is doing very well. The retail sector is the strongest market served by the SGIA community. Brick and mortar retailers have stepped up their game in what’s become a very competitive consumer market place. In-store graphics are playing a huge role in their success. We anticipate retailers using big data and other consumer insight strategies to increase customization of their store environments and also increase their redesign frequency.

Based on what we’ve seen so far, 2013 will be a positive year for the sign and graphics market. The larger graphic producers are doing particularly well. I expect a larger portion of the available work will migrate to the larger companies. Mid-size and smaller graphic producers are specializing and expanding into new markets.

Rick Scrimger, President, Roland DGA Corp.: From our perspective, we see several indicators that the industry has moved beyond recovery and is growing again. Our Roland Academy training events are selling out. Show attendance is up at the many events we attend. Capital equipment investment is on the rise as well, and consumables usage is up. We see these as signs that the industry is healthy.

We believe this will ultimately be a very good year for the industry, exceeding the peak performance we all enjoyed during the 2007-2008 timeframe. External factors and fundamentals are still in play, though. So, while we are optimistic going forward, we are also taking a conservative approach to our business. Overall, we see this year as a time to capitalize and focus on the growth trend, and we believe this is the case for our customers as well.

Sal Sheikh, Vice President, Marketing Large Format Solutions, Canon Solutions America: The market is relatively stable, with opportunity for growth depending on continued improvement in the economy. The levels of growth forecast for the industry a few years ago have slowed due to a cautious approach to capital investments of printing equipment, end print customers continuing to spend more on digital campaigns, and an overall continued tight control on marketing budgets.

WFI: What market segments do you think will have the biggest growth in 2014 and why?

Terry Amerine, Business Development Manager, Wide-Format Inks and Media, Fujifilm North America Corporation, Graphic Systems Division: Traditional POP and retail did very well in 2012 and continue to grow this year. Due to speed advances, longer print runs are now produced digitally at the expense of traditional screen print. Customization also drives this technology shift in the POP arena. Customization should also help growth in the digitally printed packaging segment.

Chambers: We’re seeing the specialty applications—wallpaper and interior décor—as being the most active right now.

Beatrice Drury, Director of Marketing & Communications, Zund America, Inc.: We have seen the strongest growth in fabrics applications as well as rigid plastics and biodegradable honeycomb (i.e.: Falconboard).

Felton: There’s a breadth of applications and developments developing. Interior graphics are very hot at the moment and a really interesting sector of the market. Digital print for vehicle wrapping is also growing substantially, as well as vehicle wrapping for more nice sectors such as aviation and boats.

I think one of main opportunities for printers is the marketing spend for brand owners and agencies. The evolution will be to buy print with a stronger focus on price and sustainability ROM/ROI. Printers as marketing service providers is also an area that will continue to grow. Printers need to listen to their customers to deliver effective solutions to strengthen their offering. The WWS4 results show that 49 percent of respondents said their customers are looking for more integration with other media and 42 percent citing demand for cross media devices to connect print with online media. The printing community should regard this trend as a real opportunity.

Personalization is also a growth market and I think we will see this grow even more in 2014. Just look at the success of Coca-Cola’s “Share a Coke” campaign, this is definitely an area for printers to keep an eye on and offer effective solutions for customers.

Scott Fisher, President, Fisher Textiles: Apparel and signage for retail are two of the segments I think will have the biggest growth. Sports apparel for club teams like soccer or lacrosse have found that they can get custom uniforms for their clubs. Retailers are competing for customers more and more and need to advertise both in-store and out to get those customers. Graphic budgets for these items are growing as a result.

Green: There is no question that retail expansion provides growth opportunities for our industry. We see brick and mortar stores reinventing themselves to compete with the online offerings. It is an exciting time to be supporting our clients as they try to find new ways to communicate with their customers.

Greene: What happens in the retail business has a huge impact on what happens in the wide-format business and I think retail is, in some important ways, undergoing considerable change in itself. More and more retailers want to drive higher level engagement with customers, they want more information about those customers, and they want to present advertising and brand messaging to customers in the most accurate, actionable, and appropriate times. I think many PSPs in the wide-format sector that serve retailers are seeing what these changes are doing to the retail supply chain, which includes signage and graphics.

Hanulec: Right now, there is very little digital printing happening in the industrial market for thermoformed products, so that may be one of the biggest areas of growth because it is coming from such a small base. There are so many products that can benefit from this—like vending machine and gaming panels; auto, boating, and aircraft body parts; and consumer products. We will only be scratching the surface in 2014.

We’ll also see the LED market continue to grow. When you give customers the ability to print more types of products, running media that could never be used with UV or other inkjet processes, you give them much more freedom to grow their business. I think there is valid and legitimate interest in the industry regarding LED because it is a segment that should continue to outpace the industry in 2014.

Jerry Hill, Vice President of Business Development, Drytac Corporation: Window graphics will continue to grow because of the visual impact and the successful messaging that has taken place so far. Wall décor, which includes digital custom wallpaper, canvas art, and face-mounting will continue to grow, partly because of changing trends, but also because digital makes custom personalized artwork possible.

Kigin: The vehicle wrap market is expected to continue to grow. It is continually being infused with new materials in a variety of design options, as well as newer printer/ink technologies that enable more difficult applications to be completed more efficiently and with improved durability.

Within the wrap market, solid color wrap films in a growing spectrum of colors and textures are helping expand business at wrap shops.

Moreover, wrap films are not just for trucks, buses, and automobiles any more. Adjacent, growing opportunities include rough walls, buildings, boats, and any number of other applications that, in the past, may have been considered to be too challenging or risky in terms of application or durability requirements.

Monson: Digital signage will experience significant growth. Customers observe the increased usage of digital billboards and understand the value of being able to update messaging quickly. The service provider that demonstrates they can provide a turnkey solution to the customer will generate considerable digital signage business. Dimensional or 3D signage will continue to grow as customers look for ways to differentiate themselves with interesting and sophisticated signage and displays. Textile printing will grow due to its greener, more sustainable benefits as well as its upgraded appearance. Point-of-purchase signage and visual graphics will experience growth as retailers and other sellers look for ways to drive sales of their products. Corporate branding and fleet graphics will continue to be strong segments because companies understand the importance of brand and effectively communicating their brand to customers, prospects, and stakeholders.

Murphy: In my opinion, construction and advertising should increase in 2014. In construction, we are transitioning out of the housing crisis and the excessive availability of commercial space, interest rates are still low, and there is increased demand from the market. In the advertising space, online is still a growing trend. However, with an improving economy, advertisers could look to traditional print and POS to gain greater marketing reach.

Palmer: Although I believe we will see growth in environment graphics and segments that support the real estate rebound, we also see digital signage continuing to grow. According to a new report by IMS Research, growth in the worldwide digital signage market will exceed 40 percent in 2013, totaling $7 billion. Even if that proves to be an overly optimistic projection, there’s no doubt the digital segment is poised for major growth. Interactivity, dynamic content and the ability to update content instantly in real-time makes this signage very attractive to many businesses. We’re already starting to see major fast food chains such as Dunkin’ Donuts switching over to electronic menu boards, and many retail chains are following suit. As the cost of hardware and software come down due to economies of manufacturing, we’ll see increasing numbers of smaller chains and independent businesses adopting digital signage in one form or another.

Michael Pender, President, Supply55, Inc.: Wide-format dye sublimation is ripe for growth. The dye sublimation market in North America continues to lag behind Europe and Asia in overall volume, but recent product announcements from Roland, Mutoh, Epson, and Mimaki should serve to fuel growth in this market segment in 2014.

Pericot: We see growth potential in many long-standing industrial graphics segments that are now looking to large-format inkjet as an alternative to traditional production methods. The fabric segment will very likely continue growing, driven both by increased demand for soft signage and digitally printed textiles. Furthermore, the decoration industry is now beginning to look at digital technologies to fulfill requests for custom décor, starting with wallcoverings and canvas wall art. We see a big growth opportunity for our customers in this decoration segment, where printers can be used for both traditional sign and graphics output as well as interior décor. There is also strong momentum in shifting packaging manufacturers and corrugators to digital for displays and short run productions.

Phipps: I continue to see the textile and dye-sublimation market as a key area for growth in the years to come. More viable printing solutions and technology that is affordable for the market to grow are important components that will drive printer manufacturers to capture the growth in this space.

Radogna: Fine art canvas, vehicle graphics, and backlight imaging could see strong growth in 2014. There is also promise for movement forward in textiles and fabrics, wide-format color-accurate commercial or flexographic proofing, and packaging. Growth is mainly due to new wide-format printing technologies now available to make it easier to produce these types of print products.

Robertson: Point-of-purchase in retail is the largest market. In addition, the SGIA community predicts environmental graphics such as wall graphics, to be a major growth market next year. Window displays are also on the fast track for growth.

Scrimger: On the print side, we expect to see significant growth in the use of textiles. We are also actively developing a digital signage solution which will open up new market opportunities for our customers. This market is very exciting as we are truly in the process of creating a whole new product segment to help our customers find incremental business. Any growth in this arena is very positive for the entire industry.

Custom print/cut wall graphics are perhaps the fastest growing market segment in wide-format printing. We expect to see a lot more demand for the GREENGUARD-certified products.

Sheikh: Growth will continue to come from the segments that are expanding into digital large-format graphics either to augment what they do now (such as packaging); or to generate entirely new revenues by offering additional products and services (like commercial printers). Although the transition from analog to digital printing is not new, analog still has the biggest share of the print volumes; with continued change in customer requirements of shorter and shorter print run lengths and variable data, digitally produced print output will continue to grow.

There are also manufacturers that are seeing the benefit of incorporating digitally produced products/decoration into their manufacturing workflow that traditionally used, for example, screen printing processes.

 

WFI: What is the biggest issue facing the sign & graphics industry right now and how do you think it should be addressed?

Amerine: Cost reduction appears to be the biggest driver in the market. There is plenty of competition driving prices down while at the same time there is customer demand to produce shorter runs with faster turnaround. Many printers are looking for the best way to reduce cost in this environment in order to remain profitable. Printers need to look at their entire process from a cost standpoint.

Boer: Many print-for-pay providers would tell you the biggest challenge facing them is the cost of the inks. We disagree, as clearly the value of output that those inks enable is many multiples the value that offset or screen inks are able to create. The average retail selling price across all wide-format inkjet technologies ranges from $2.75 for UV-curable printed output to $4.40 for aqueous ink printed output per square foot. The profit margin (the balance left after paying for HW, ink, substrates) ranges anywhere between 2.7X to 6.0X for wide-format output. There are very few offset document (or even digital document) applications where this type of margin is still enabled.

Worldwide the retail value of output created by all wide-format printers exceeded $39 billion in 2012. While a small portion of the $600+ billion generated from other graphics/document print applications, its profits may well be as large, if not larger than, all the profits of other production print applications. Now that’s worth continuing to invest in.

Kigin: We see the big issue as managing change. The successful sign and graphics business must stay aware of and decide quickly how to respond to the evolution of technology, competition, applications, and business climate. 3M has served the large-format graphics industry since 1952, and we remain committed to helping the industry grow. One of the ways we can achieve that is by listening to our customers and responding to the challenges and needs they identify with new and/or improved technology, more versatile products, and innovative solutions.

Felton: The future is going digital and I think this is an issue that people in the industry are concerned about. However, there is most definitely still a place for traditional printing. Depending on the customer’s requirements, an application can be created using a blend of both digital and analog processes.

Print offers a powerful, eye-catching, and vibrant way to speak to an audience, while digital enables flexible content, which can incorporate other elements such as audio.

As highlighted by InfoTrends’ Tim Greene at FESPA’s Global Summit, their recent ‘who buys wide-format’ research asked 300 print buyers if they’ve ever used an interactive element in their signage and graphics campaigns. Twenty percent of respondents said they have used interactive elements, with 92 percent (61 buyers) commenting that they would use it again. These figures illustrate that it’s still only a small majority of printers that are currently using interactive elements. However, for printers to be in a position to benefit, they need to start thinking like a marketer. They have the opportunity to position their printed products (that integrate with new technology) to their customers as a complete package, providing solutions to clients before they even know that they need them.

Fisher: The sign and graphics industry needs to become more sustainable. Printers need to offer more sustainable products to their customers and educate them on the benefits of using these products. Buyers in these markets want to be sustainable, but often assume they cannot purchase an item that is sustainable or think that the price of that item would become too expensive. Often, the price for the sustainable substrate is not much more than the alternative, so awareness and education about these products is needed.

Green: We are finding that buyers are being cautious with their budgets. They want true value for the dollars they spend and they want more involvement in the upfront planning. More than ever, we have to understand our clients and more importantly, their customers.

Greene: The biggest question for a market like this that straddles the border between commodity and customization is the maintenance of balance between volume and margin. Every business wrestles with the conflicting desire to drive more sales and the need to maintain margins, but this business is perhaps particularly challenged because for many PSPs it is not a commodity business so the production and services required to fulfill wide-format digital printing shouldn’t be positioned as such, yet they often are. Addressing the issue is really a matter of the leadership of these companies deciding, not in coordination, but as a matter of their own survival, to not position their businesses as price oriented suppliers, but as service oriented strategic partners.

I’d also add that for supplier manufacturers and printer OEMs there is a very important supply chain issue that is extremely important right now—how do you get dealers to “sell” your premium branded product as opposed to making the “easy” sale of the less expensive private label product? This must get sorted out because the sale of those premium products is what allows innovation on the ink and media side, which in turn drives development of new applications.

Hanulec: Printing companies recognize that they need to be part of a trend where their work continues to offer increased relevance. Just about every print product faces some sort of online or social media competition, and many print-based businesses have become experts at vertical integration to establish strong, multi-media offerings. In signage, I think we see some of that integration with mobile QR code and augmented reality applications.

Staying relevant is also about offering the right medium to get a message across. Printers know that standard billboards that were the mainstay of the industry don’t work in every situation as a marketing vehicle, so they continue to innovate and explore with new ideas for wraps, in-store displays, and other types of installations. And that means really opening up the market for what printers can print on. We need to make digital print work with as many different media as possible. That type of versatility made screen printing an important part of the signage market, and it shows what those of us in the digital space are going after.

Bill Hartman, VP Business Development Digital Finishing, Esko: PSPs need to create value before and after print and differentiate themselves from their competition.

Monson: The lethargic growth of the economy caused by increased government regulation, taxes, and rising health care costs is faced by all industries. To address this, each business owner needs to remember the lessons of 2009: manage cash and expenses, proactively build sales, and maintain a healthy quick ratio. Specific to the sign and graphics industry, increased competition is significant. To address it, the business owners need to differentiate themselves in the market and provide greater value and service to the customer while increasing efficiency and managing expenses.

Moore: The economy, as it impacts marketers’ advertising spend, is the single biggest issue facing our industry at a macro level. It relates to many human capital issues, as well as other business decisions.

Palmer: With increased pressure on the traditional core markets, sign business owners need to differentiate themselves from the masses. The need to stay ahead of the technology curve as new processes and equipment for producing signage come online is one aspect of this issue. The other is the need to stay ahead of the social curve in communicating with and marketing to our clients. Clients expect rapid and convenient interaction in more than one medium, and they now have more options than ever to express their pleasure or dissatisfaction publicly.

Education is the solution to both sides of this issue. Effective business managers will make sure that their team stays current through a well planned and scheduled process of education.

Phipps: I think, with the introduction of new technology from manufacturers, the biggest issue facing the sign and graphics shops is sorting through the fluff and really understanding what it is they need out of their equipment to satisfy their market focus best. Ink technology, printer performance, new machines, and soft signage opportunities are all being pushed to this market by some big OEMs. Some of this information is being marketed in a way that may not provide the best solution to many shops. It is important that the users do their homework so they fully understand what they need to accomplish as most critical to the success of their business today and in the near future, and then to ensure the equipment they bring in is truly the best fit to accomplish it.

Radogna: The key is to avoid falling behind and to stand ready to meet the industry’s demand with the right products. Continuing to use outdated imaging technologies will put companies at a disadvantage, especially as the economy improves. The companies that regularly take stock of imaging workflows for better productivity, reliability, and print quality will be more competitive in the long run.

Robertson: Providing overall value to the customer is the key to success. The print process is becoming commoditized to the point that it’s hard to compete on imaging alone. The challenge is finding a unique value proposition that fits your company and fits your customer base.

Scrimger: Looking at this question from a broader standpoint, the issue is whether we’re really in the sign and graphics business or something larger. The term “visual communications” may actually better define what most print providers produce today. As applications and technologies continue to evolve, we, as a manufacturer, are enlarging our view of the market as well. This shift in thinking will benefit us all, leading to new opportunities for growth and prosperity.

Sheikh: One of the biggest issues is driving a continued, growing demand in a time when print runs are typically getting shorter. Embracing this instead with a digital solution and offering more “value” through new products and services (such as Web-based offerings—Web hosting, design, e-commerce, SEO, etc.) rather than dropping print prices is an important element in survival and growth. Many traditional print providers are changing their businesses to embrace the model of an integrated marketing service company to meet their clients’ full service needs from marketing campaign concept to fulfillment (both print and digital) to hosting and campaign reporting.

Loading