Challenges Facing Print ...continued
Challenges and Opportunities for the Printing Industry in the next 12 Months
and Beyond.
It's no secret that many firms in the industry have been struggling, and demographic data show a great deal of turmoil that continues relatively unabated. Yet, there remain very successful businesses in the industry. Cultural changes in the way people access media are having profound effects on the demand for print, particularly among advertisers, marketers, and publishers-all of whom are, not coincidentally, printers' biggest customers. How has the explosion of new media affected the print markets? What can the industry do to effective cope with these trends? And what will 2006 bring?
In 2006, digital printing; personalised, customised, variable-data, and other targeted printing applications; "Web-to-print" applications and use; wide-format printing; and interest in and implementation of production workflow solutions are progressing rapidly. But, do not forget business models, which will increase the `bottom-line`!
2005 has seen marketers and advertisers steadily distancing themselves from print, and yet, given the effectiveness of print, they do so at their peril. Regardless, "cursing the darkness" won't help; printers need to develop a cogent strategy for responding to this trend. What the industry needs is an emphasis on seeking out new business models, niches, and applications for print. This is 180 degrees from how the industry tends to operate; but the need to do so has never been greater and will only become more profound in the year(s) ahead. Research and plan ahead, do not put your head in the sand.
The biggest challenges facing those who produce and distribute content are not necessarily production or workflow issues, but rather involve navigating the seas of new and newer media. The key is to `strategise` successfully and understand how each medium-whether it's old media like print, new media like the Internet, or newer media like podcasting and mobile media-fits into a given marketing or advertising campaign. For publishers, the situation is even more crucial, as they need to understand and adapt to changes in the ways that people obtain content.
The past two years have seen a resurgence of business for these markets, and at the same time a veritable explosion of new ways to disseminate content. Cultural changes in the way people access media are having profound effects on traditional advertising and publishing models. Easy-to-use desktop publishing software has made it easy for business and individuals to do their own graphic design work. How have these societal and technological changes affected the creative markets-and what will 2006 and the future bring?
From reports business conditions for design and production firms were strong in 2005, although they were slightly below what they had been a year earlier-although they expect business to continue to be strong through 2006. From worldwide surveys the following information was made available;
In Summer 2005, 37% of publishers said that e-mail promotions and e-newsletters would become more important for them in the next 12 months, while 27% said Web advertising will.
In Summer 2005, 51% of graphic designers cited "customers doing their own desktop publishing work" as a business challenge.
In Summer 2005, 36% of design and production firms expected business in the next 12 months to be "excellent, better than the last 12 months," up from the 33% who said this six months earlier.
In Summer 2005, 64% of publishers cited "printing costs" as a business challenge, the highest this challenge has ever charted in 10 years.
In Summer 2005, 56% of Web design and production firms cited "database development projects" as a sales opportunity, the highest this opportunity has charted in six years.
In Spring 2005, 28% of printers cited "design/creative capabilities" as a sales opportunity; an all-time high and a sign that print customers may be increasingly competing with their printers.
In Summer 2005, 42% of design and production firms said that "jobs designed for colour digital printing" were increasing, while 27% said that "jobs designed for traditional offset printing" were decreasing.
The Printing Industry is a major communications tool and is viewed as a bellwether of trends in the economy as a whole. This as always was the case from writing on stone up to the present day technology. There will always be history, change and the future.
The key issues continue to hamper the Print Manufacturing organisations that do not change in this global trading environment. These organisations need to wake up to the reality of life, listen to experienced/skilled successful people who can help, take on board business models to help them operate more efficiently and manage the management of change. To be successful in this global trading environment you need all these business tools to survive, so they need to take them on board and find success or not survive!
Take on board the benefits from a Non-Executive Director who will add value through independence and experience to raise your `bottom-line`.
The Print Industry is undergoing fundamental changes in every aspect of both Technology and Strategy. Also, the current economic climate and the vast range and speed of new technology development ensure the future will be a challenging time.
The UK Printing Industry for example is the 5th largest of the manufacturing
Industries, but it is among the least well documented. It is an industry,
which serves all sectors of the economy including public authorities, financial
services, publishers, and distribution services and manufacturing industries.
Its customers range from major institutions to the smallest business. The
Main land European Print Industry organisations follow similar trends.
Its
structure reflects the diversity of its products and very fragmented nature
of its market with less than 20 printing companies employing more than
500 people and only around 550 employing between 50 and 499 people. These
companies tend to specialise in a narrow range of products in national
and international markets. There is a vast army of small firms, which usually
are general printers catering for a local market. The number of organisations
in the sector has declined `rapidly` in the past few years. According to
VAT registration data there are currently almost 17,500 print businesses,
a fall of over 6% from 2002. Nevertheless, this still represents more than
a tenth of all manufacturing organisations, reflecting the fact that most
printing organisations are very small businesses. Also, it means there
are many more print businesses that are under the VAT thresh hold and many
who do not class themselves as `print businesses`, but do print! The number
of print businesses could be as many as 30,000 plus in the UK! In the whole
of Europe there could be 150,000 companies that can be classed as Printers!
When
we look at the rest of the world regarding the number of Print businesses
these could be divided into, America - 90,000, China -150,000+, the rest
of Asia - 30,000 who really has the correct information!
The five largest
countries in Europe (UK, Germany, France, Spain and Italy) account for
more than 77% of all print in Europe. When collecting statistical data,
it becomes evident that Europe is not a single country, but an amalgamation
of national industries that can serve a common market. The European Print
Industry consists mainly of small enterprises, as 85% of them employ fewer
than 20 persons.
In many of the statistical sources, printing is not classified
as a separate industry, so that information about it is scattered among
sources often related to industries of which it forms only a part. The
reason to try and `hide` information on the printing industry is due to
`very low` profit margins, many loss making organisations and `life-style`
firms! , high capital expenditure, deterioration in general state of trade
and high impact of technology from non-print manufacturers, which now form
a part of supplying customer needs.
It is difficult to measure the size
of the printing industry with great accuracy, largely because of the overlap
with publishing, packaging and Print Management Service providers. Also,
the change of industrial classification by some printers to move into other
classified areas so they do not register as `print` organisations. The
printing industry contributes only 1% of the UK`s total GDP and represents
around 3% of manufacturing turnover. Printing provides employment for about
180,000 people in a market that has annual sales of around £14 billion.
Despite
moves towards consolidation during the 1990`s, printing is still one of
the most highly fragmented manufacturing activities. Over 60% of printing
businesses report an annual turnover of less than £250,000
(compared to 55% for manufacturing as a whole), and four fifths of printing
organisations employ fewer than ten people. Many printing organisations
are single-outlet enterprises operating from workshop units or, to a lesser
extent, high street print shops (there are thousands of these operations).
A fifth of printers, moreover, achieve annual sales of less than £50,000.
On
the other hand, large organisations dominate the sector for the printing
of newspapers, magazines and security products. Among the major organisations
are, De La Rue (loss making), Chesapeake UK Holdings, Clondalkin Group,
St. Ives and Polestar Group (heavy losses of millions of £`s each
year, with 2005 recording losses of £126 million, yes, another year
of excess losses) putting pressure on other printing organisations who
try to compete.
In contrast to other manufacturing industries, printing
organisations are geographically spread right across the country. There
is little or no training for succession planning in the people arena, therefore
the rapid change is to Digital printing with keyboard skills against craft
skills. The traditional printing industry is killing itself by no training/use
of business models and therefore can only cast blame on the lack of management
strategy to see the future. The needs are continuous training programmes
for all employees and effective business models plus the passion to be
successful.
Key Issues;
Overall market conditions continue to be tough. The corporate
market in particular has suffered from the decline in company profitability,
lower levels of merger and acquisition activity and from the continuing
downturn in manufacturing within Europe.
Customers are continuing
to be ever more demanding in terms of customer service and printers who
follow a pure` manufacturing` business model will struggle to sustain adequate
profitability. In most cases increased losses are at a level, which will
not be accepted by lenders/stakeholders. Prospects are brighter for those
organisations, which see themselves as a `wider communications chain` and
can offer customers an enhanced range of value-added services. The offerings
by `Print Management Service` organisations are very appealing to large/medium/
and even SME`s due to a total package of customer service driven activities.
The outlook remains very mixed, with the prospect of no growth
in the manufacturing recovery together with growing pressure on household
spending. The impact on household spending totally affects the Print and
Communication Industry together with shorter print runs and a rapid move
to Digital operations and Print Management Service companies.
For
a high value-added business the print industry exhibits relatively very
low profit margins and in many cases heavy losses. This largely reflects
intense global competition in a very highly fragmented industry, which
restricts the ability of organisations to raise prices. Therefore, print
organisations should look very closely at improvements in operational processes.
There are experienced/skilled people available with vast knowledge of managing
successful organisations, who have developed business models especially
for the print/communications industry. Use them and you will be successful
in this global trading environment. Visit the knowledge bank at www.cavendish-mr.org
Mergers and acquisitions have occurred among large organisations
(Equipment Manufacturers /Print Manufacturers /Print Management Service
Organisations) with only a few SME`s being acquired by other businesses
to try and stay profitable. Pressure on margins and the need for constant
investment in new equipment and R & D will drive further consolidation
within the industry.
The growth of electronic media represents
a threat to print products, but some sectors are more at risk than others
are.
THE DYNAMICS OF THE INDUSTRY
The printing industry encompasses a `wide` range of activities and products.
It includes printers who receive most of their work in the form of individual
jobs (job shop mentality) to produce printed matter.
The Customers
By far the largest single market is the production of `advertising literature`
(including brochures, direct mail and commercial catalogues) which at present
accounts for 50% + total sales (but this sector is in decline except for
direct mail).
Digital Display Printing is a major growth area in the future to traditional
media printed products, whether home produced or imported.
Output of Printed Products
The direct mail market has been among the most
successful sectors in recent years, having grown by more than 150% over
the past 12 years. But, lower company profitability and confidence has
hit spending on advertising and promotions, the largest single source of
printing industry revenue. Also, there as been a rapid rise in Digital
Display Printing in POP/POS and large personal wrap’s on buildings.
Official
statistics from the Office for National Statistics in Europe show that
sales of advertising literature fell in 2001, the first time in six year
and continues to fall year-on-year from 2001 up to 2005, and will continue
to fall.
Spending on books, newspapers, magazines and stationery
has been one of the `weakest` areas of household expenditure in recent
years and will continue to decline. Within this, the strongest subsection
has been books, although the pattern of growth tends to be somewhat erratic.
Newspapers and periodicals have generally exhibited slower growth and indeed
spending in this segment has declined in each of the past four years and
is still predicted to decline further.
In addition, to no growth of consumer
spending, printers in the magazine sector have had to contend with the
effects of a complete slump in advertising. Advertising expenditure in
business magazines, for instance, was down by 8%. This has often resulted
in a reduction in the number of pages printed. Meanwhile leading publishers
have sought to rationalise the number of print manufacturers that they
work with! This will mean, cost cutting - which will push print manufacturers
further into decline? This of course is a great opening for foreign print
organisations from China and others to step in with even more economical
prices! There will be more acquisitions to try and keep the margin up,
but the trend is still `over capacity` with `ridiculous` prices!
Possible Prospects for the Print Industry
In an industry plagued by over
capacity and chronically thin margins and in most cases heavy losses, it
is inevitable that some printers will continue to struggle. Print organisations
should look close to home at their operation processes to cut costs, by
using business models to help them raise the `bottom-line`. Plus, take
on board experienced/skilled people in `management of change` to introduce
best practise.
Consolidation will continue to take place among SME`s as
it has become clear that a certain critical mass is sometimes necessary
for survival. But only if the SME`s wake up to the `true` value of their
organisations. The consolidation of the large corporations will also
continue on a global scale.
Pressure on margins, the need for capital investment
and the desire to build market share will continue to drive further acquisition
activity. Continuing rationalisation either though mergers or plant closures,
while painful to some in the short-term, may provide a firmer financial
footing for the industry if some `below-cost` organisations are squeezed
out!
There is no doubt that the growth of electronic media, including the
Internet, is the single most important threat to the printing industry.
Some parts of the print industry are less immediately threatened by these
developments. Direct Mail of a specialist nature and Transactional Billing
for example, are expected to see further growth over the next few years,
while most manufactured products will still require packaging.
Elsewhere,
however, publishers will be looking to use other media, as well as print,
to distribute their content. Likewise, major organisations are seeking
to communicate with shareholders and the public by electronic means. Printing
of newspapers, magazines, and business communications will therefore be
more vulnerable to the threat posed by new media. Plus, shorter runs and
Digital processes will dominate.
It is not all doom and gloom. Printing
is just one part of a complex communications process and print organisations
may be able to undertake other activities and capture some of the value
associated with other parts of the process. The development of variable
data printing, where print jobs are linked to information held on databases,
may afford opportunities for printers to become involved in managing data
on behalf of customers. This is potentially highly profitable work, although
it requires frequent contact with clients to keep the content up-to-date.
It also requires in-house staff with appropriate database management expertise.
Customers
are becoming even more demanding in terms of customer service. The traditional
`two-week` turnaround is largely a thing of the past and speed of response,
from initial estimates to final delivery, is essential. Success in such
a market requires more than just the latest equipment - also demands a
`skilled and flexible` workforce.
Conclusion
Print along with spoken language and electronic media is one
of the key historical shifts in communication.
The Internet and interactive
multimedia are providing ways of employing the printed word that add
new possibilities to prints role in culture. The printed word is now
used for real-time social interaction and for individualised navigation
through interactive documents. It is difficult to gauge the social and
cultural impact of new media without historical distance but these innovations
will most likely prove to signal major transformation in the use, influence
and character of human communication.
We live in a world of `High Technology`,
a world that places great emphasis on `effective management`; a world where
communication is one of the most talked about business subjects.
What's Changed? The speed of change!
The last 20 years have seen more
significant changes in the development of print processes than ever before.
The
World is Digital, The pace of Change is Quicker.
Globalisation of Digital
printing is hard to ignore, and will certainly take a larger proportion
of the world printing work currently led by offset litho, flexography and
screen printing. Digital printing is fast becoming a popular choice for
convenience, speed and cost. Also, linked to convenience, speed and cost
is the change to short-run, on-demand digital colour printing, which is
going at a fierce pace. The market valuation is always hard to prove. The
speed of change depends on cost, speed and convenience.
The Business Outlook-Take Advantage of Technology
Today's technology opens new doors to increased productivity and
effectiveness in producing digital print. The latest software and document
production technologies can dramatically increase the functionality and value
of digitally printed documents.
High-level platform integration lets organisations
merge data from multiple sources and create communications with increased
value.
Automated process controls systems, featuring the latest logic and
coding technologies, ensure data and document integrity for each communication.
Automatic process checks and balances at every stage of production can
help eliminate communication error made by humans.
Digital colour document
readability and eye appeal. As new colour and digital technologies become
easier and more economical to integrate into the high-volume communication
manufacturing and distribution environment, they will be key to the communication
process.
The future is variable-data imaging, which is the unique capability
of digital printers. The growth of database-driven marketing and in particular
database-driven web sites is leading to precise targeting of the marketing
message to individuals.
As time goes by the e-commerce and email explosion
will effect printing, but by how much and in what time frame, depends on
technology, cost and human acceptance. But the investment priorities are
in both categories as company's gamble with their future. `Think before you
leap`.
Acquisitions and mergers will be gathering momentum in the future,
not just printing companies, but industry in general on a global scale.
Organic growth is very difficult, the way to survive and hold up the profit
margin is to acquire companies and companies with synergies as well as
partnerships (alliances) with other companies to offer the `total solution`.
The Print Management Service - A global communications solution for printing
and distribution of information.
The Print Management Service has been described
as resembling the relationship between conductor and orchestra, both sides
working together for a common goal, with the supplier delivering the product
in perfect harmony. For today's most successful companies, these principles
underpin their whole corporate philosophy.
Today's users need to create
printed documents faster and change them more often, multi-purpose usage
has made many documents more complex. Quality linked with flexibility and
customisation has become important factors.
The Bottom line-Bringing value
to the Customer
The biggest factor in winning or losing the business is
the customer's perception of the value you provide. This requires analysis,
education for the customer and communication of the benefits of digital
`on demand` printing solution. You need to show the customer that you have
the best, total solution and provide the level of support required achieving
cost savings and improving operational efficiency.
In most cases you will
not be the lowest price per unit alternative, but will need to demonstrate
that you provide the `greatest value` for the customer price pound/Euro/etc.
In
today's business world, it is not about selling products; it is providing
the customer with solutions.
This is the way to develop long-term relationships
and retain customers for life - this is why the `Print Management Service`
is the way forward. Also, over the past thirty-five years the Print Management
Service organisations have gained about 50% of the print available in the
UK and now look at the rest of Europe for growth.
Future Directions
Digital printing systems vendors will continue to push speed and
increase resolutions of their machines as well as introduce new colour systems.
Paper
documents will become more `intelligent` through the creation of efficient
coding systems.
The ability to view, archive, search. retrieve, distribute
electronically in any format, and print any document, at any time, and from
any platform will be key in the future.
Organisations will be successful,
if they have the `right` people with the passion, experience/skills together
with the business models to forge the way ahead in the world of change. Take
on board business guides and business models to achieve an increase in sales,
gross and net margins and the retention of people. Training is the most important
tool to success!
Over- capacity
As a result of the fragmented nature of the printing sector
in Europe and the world, the industry has been affected by surplus capacity.
This excess capacity has increased year-on-year, despite continued retrenchment
of employment, closures and failures among small, medium and large sized
companies in the UK, Europe and the USA. Also, the starting up of new print
manufacturers in China, the Middle East and the `new` European countries.
The investments in the `new print manufacturers` are exceptional high,
due to low `overheads` and a higher return in a global trading environment.
Training
is the most important tool that foreign countries have invested into
with unique guides; business models and taking on board experienced/skilled
people that Europe have abandoned!
It is currently believed that over capacity
in the Europe printing industry runs at approximately 40% +, affecting
every sector. The effect of this over capacity has been substantial pressure
on margins, forcing companies to look for alternative ways to increase
profits, through moving into different or niche sectors or looking for
these new sectors by mergers with other synergy companies.
Again, this has
led printers to strive for efficiency through cutting costs, resulting
in redundancies and cuts in other business activities. But, utilisation
of both expensive equipment and people are the major criteria.
Economy
The economy is an extremely important factor for the printing industry
in a number of ways.
Economic conditions have a significant impact on investment.
Affects not only expenditure on advertising but on all printed material.
Levels of disposable income have impact on commercial printing.
Small changes in the economy have a significant effect.
Rising costs erode margins.
Strength of Sterling and other European Currencies
Weak Euro
Rising Costs
Rising raw material costs.
Paper mills facing `untenable pressure`.
Increased customer requirements.
A move from paper to printing on synthetic substrates.
plus
Rapid rises in energy costs.
New Technology
The development of new technology is one of the most important
issues impacting on the printing industry. Indeed, this is a world-wide
issue.
New developments in improving productivity and efficiency as well
as enabling printers to create new products for the customer have enabled
many companies to forge ahead of their competitors.
Digital printing
is the most important development since Litho. Digital presses have been
available since 1995, so the technology is no longer in its infancy. The
Digital market is expanding rapidly as more companies are seeing the advantages
of Digital in terms of increased productivity and lower costs. Digital
is taking market share from conventional printing by cost savings being
a major key factor.
The development of waterless printing has also
been important, but not as important as Digital in terms of reducing cost.
Another impact on saving costs is single fluid ink.
Other developments designed to increase productivity and cost effectiveness include the creation of new types of paper such as mico-flute. 30% lighter than litho-laminated.
The development of print portals has enabled printers to bid for jobs on-line and allowed print buyers to deal direct via their web-sites world-wide. This has increased productivity and efficiency in terms of time management.
The Environment
Key factors to impact on the printing industry.
Legislation-European Directive on Packaging Waste/Waste Strategy.
The Climate Charge Levy-energy tax on business.
Energy and fuel costs will increase by more than 20%+ annually.
ISO 14001 certification benefits-lower costs by using less energy
and economic incentives such as taxes, charges and trade permits.
The future
is about offering `solutions` to customers by operating a Print and Workflow
Solutions Programme and methodically looking at how you manage your business
with the `right` people. Also, keeping a close eye on the speed of change,
that will effect your business. Training, business models, business guides,
and experienced/skilled people that are available to help your business challenge
the global impact are the most important investment for your success.
Be positive,
have passion to be successful and have a strategy for this rapid changing
world.
Colin Thompson FIP3
Website: www.cavendish-mr.org