State of the Industry Report: Where is the printing industry going in 2018 and how does the Trump administration fit in?
Long before Donald J. Trump took office, he vowed to “make America great again.” For starters, he was vocal about his pro-business stance, something that resonated with executives across all segments, including the printing industry.
On Jan. 30, 2017, 10 days after being sworn in as the 45th U.S. president, Trump signed a two-page executive order requiring federal agencies to eliminate two regulations for every one they proposed. This action eased the business paralysis of recent years, inspiring a newfound confidence now that members of the C-Suite no longer had to fear surprise regulatory fights.
Naturally, business owners want results; President Trump said he has delivered. According to the Office of Information and Regulatory Affairs, 635 rules were withdrawn in 2017—a fast pace, no doubt. And the wave of optimism will only continue to swell as tax cuts soon take effect.
Because so much is happening, it’s hard to say with confidence what’s ahead. But one thing is certain: There is no better predictor of 2018 trends than the direction of the overall economy. Yes, that trickles down to the print industry, so, by that logic, when Trump succeeds, printers benefit. In response, economists are revising growth forecasts upward for last year and this year, as reported in Print+Promo’s 2018 State of the Industry analysis.
Andrew D. Paparozzi, chief economist for Idealliance Strategic Research Institute, Alexandria, Va., said growth has picked up in the commercial printing industry, and he believes the momentum will stay strong. By Idealliance’s estimates, total industry sales (all sources) increased 1.9 percent during the second half of 2017, which Paparozzi noted was well above the 1.2 percent first-half gain. In fact, for all of 2017, sales were up 1.5 percent.
“We expect sales to grow 2.0 percent to 3.0 percent-plus in 2018, with the likelihood of a finish near—or above—the top of that range increasing,” Paparozzi shared. “We also expect growth to continue in the 2.0 percent to 3.0 percent-plus range through 2019 and 2020. That isn’t going to solve anyone’s problems. But it is a significant improvement over the last six years, when sales grew an average of 1.4 percent per year and never by more than 2.4 percent in any one year.”
This makes sense considering that print does best in a mature economic recovery phase of the business cycle. We have been in this phase for a long time now—nine years, to be exact. To provide some perspective, average recoveries (post-World War II) last roughly six to seven years.
Dr. Ronnie H. Davis, senior vice president and chief economist for Printing Industries of America (PIA), Center for Print Economics and Management, Warrendale, Pa., offered a similar forecast to Paparozzi’s, projecting a future growth rate of 3.0 percent. “Generally, the printing industry remains healthy and is on-track to meet our expectations for around 2.0 percent growth in overall shipments,” Davis said. “While there was a slight cooling early in the year due to mainly seasonal factors [e.g., the reduction in print promotion from the fall Christmas sales season], I believe the expected solid growth in the economy will help print this year.”
Both men also agreed that the enacted corporate tax reform should add some bounce to an already-roaring economy. How it will affect individual firms remains to be seen. “The economy is likely to accelerate further because of the Tax Reform and Jobs Act of 2017,” Paparozzi surmised. “Although reform will obviously affect individual businesses and households differently, in the aggregate, it will be stimulative because it increases incentives to invest and spend through extended reductions in marginal tax rates.”
How to Overcome Industry Challenges
After the 2008 recessionary dust settled, the corporate landscape was filled with challenges ranging from inflation to high-profile M&A deals. Today, not only are printers competing against other firms, they’re doing battle with the non-printers that are providing electronic alternatives, office superstores and fulfillment service providers with newly added printing capabilities.
“Most of the ‘hollowing out’ of the industry due to digital replacement of print is behind us,” Davis acknowledged. “At the same time, print is still in a serious completive fight with other printers, so it is never easy.”
For Paparozzi, the aftermath of what he calls the “Digital Revolution” is still very real. “It is still redefining the commercial printing industry’s clients, competition, critical skills, labor force, technology, value proposition and everything else that matters.”
Idealliance conducts its own annual State of the Industry research to monitor print industry trends, and Paparozzi and his team recently uncovered some interesting data surrounding print revenue and print volumes. The short of it: Diversify or die.
“Like all revolutions, [digital] is creating opportunity—just not in the same old places or by doing the same old things—and heightened competition for those opportunities,” Paparozzi said. “So, while the gamut of opportunity both inside and outside of print is expanding—participants in Idealliance State of the Industry research expect something other than printing to provide, on average, 33.1 percent of their revenue in 2018—margins for error are shrinking. That means commercial printers now either get better or fall behind. There is no longer a third option.”
Printing Industry Trends to Follow
Although the economy and overall printing industry trends are significant influencers, historically, some printers always outperform others. Achieving high profits is not a random occurrence; rather, it is achieved through strategic and operational excellence. No single company’s story will be alike, but true print leaders share common characteristics.
These individuals recognize that the print industry is one of opportunity. They seek to grow revenue—whether by adding ancillary services (think inventory management, fulfillment, design, list management, etc.), or by moving to growth markets. In terms of print processes, Davis pointed to three fast-growth technologies: digital toner-based print, digital inkjet and wide-format print.
Then, there’s product growth. “In terms of products, the hottest markets are signage, packaging, labels and wrappers, point-of-purchase materials and the vast array of marketing and promotional materials, such as brochures and direct mail,” Davis noted.
Paparozzi elaborated on two of these segments. “Because commerce continues to expand globally, packaging isn’t susceptible to replacement by electronic alternatives, and its quality, appearance and capabilities keep advancing,” he said. “Also, direct mail [is a growth area]. But not mass, generic direct mail; personalized, relevant direct mail, because as Idealliance State of the Industry participants put it, ‘customized content delivers unique value,’ and ‘the more you connect with them [through personalization], the more resistance drops.’
“Technologies for capturing, linking, analyzing and sharing data are in their infancy,” he continued. “And databases on every subject imaginable will grow in size, detail and precision, creating opportunities for personalization far beyond anything we can do now. We’ll need advanced database skills to fully capture the opportunities, but the opportunity will be there.”
That’s not to say print leaders will follow the crowd into hot markets. In fact, it’s quite the opposite. If these product segments don’t fit their company’s vision, they’ll take a hard pass. “[These individuals] know that the challenge in the printing industry is not a lack of opportunity, but rather deciding what really is an opportunity given their company’s specific resources, capabilities and circumstances,” Paparozzi remarked.
Like what you’ve read so far? Click here for the complete 2018 State of the Industry Report, including our in-depth analysis, along with key insights and strategies for growth from thought leaders in the printed forms, labels, promotional products and direct mail sectors.
Related story: Print+Promo's 2018 State of the Industry Report