Plenty of work and wealth keeps the commercial print market strong.
When it comes to paper-based products, commercial printing may be one of the most stable products in the forms industry. Ranking second only to forms in a recent survey conducted by BFL&S, commercial printing accounts for 22.3 percent of our Top 100 Distributors' sales. This is because the market for colorful, full-process print work continues to be infinite. At least, that is what several distributors, whose commercial printing sales account for a large percentage of their revenue, are saying. But will the market for commercial print remain strong?
Andrew Duke, co-owner of Metrographics Printing & Computer Services, Fairfield, N.J., thinks so.
"Commercial print opportunities will continue to increase because so much of the market is still untapped," Duke said. "In fact, commercial printing actually fell into our laps about 15 years ago because our existing customers started requesting it. Now it accounts for 70 percent of our business."
And the abundance doesn't appear to be diminishing. According to Janis McNeal, president of McNeal Graphics, Memphis, Tenn., "There are 500 commercial print companies in Memphis alone. Simply stated, there are a lot of end-users for this market, considering that most companies need training manuals, brochures and folders."
In many cases, those end-users are already clients for whom distributors are providing other products. This is the situation for Monroe, Washington-based Merrill Corporation. According to Vice President Jeff Scott, commercial print became a natural extension of its distribution and fulfillment programs.
"With a need for commercial print already existing among our clients, offering it has become a way to maintain our stance as a single-source provider—a characteristic that is highly desirable within the industry," he said.
In that way, he added, commercial print has proven to be lucrative for Merrill. "It leverages our distribution and fulfillment programs as well as our technical expertise," said Scott.
In terms of total sales, commercial print ranks high with Metrographics, which reported $7 million, while Art Collins, president of Northern Printing Network, Wheeling, Ill., reported $8 million. In addition, McNeal Graphics sells more than $2 million, Merrill $26 million and Barry Hoffman, president of BC Graphics, Tempe, Ariz., reported $6.5 million.
Finding Success
So how have these companies managed to find success in the commercial print business?
"We are successful because of experience," explained Duke. "We've had the opportunity to stumble a little and gain a certain know-how. That way we can forewarn clients about possible problems and express our desire to handle projects a certain way to ensure the best result."
Duke added that, in this sense, distributors at Metrographics have actually become advisors instead of salespeople.
Another reason commercial print is so lucrative, noted Duke, is because price is not a priority.
"When handling commercial print, a strong emphasis is placed on the quality and execution of the piece. This translates to higher costs and better margins," he said.
Being successful also stems from the close relationships Metrographics has built with two of its top suppliers—CPG in Parsippany, N.J., and Jersey Printing in Patterson, N.J. By working well together to come up with the best possible solution, noted Duke, both parties can create optimum solutions for the clients.
Collins reiterated the priorities of commercial work, stating that many commercial jobs are big dollar projects that mainly focus on color and quality as opposed to price.
Hoffman added that it is also the broad offerings of commercial print that make it a profitable product niche.
"I think more companies today have a real option of whom they want to do business with, and if distributors only bring the lowest price, then they are only as good as that price," said Hoffman. "But if a distributor offers creative options, which may cost more, then clients will be willing to pay for the value that is brought to them."
Many of the products BC Graphics produces are for market retail. For instance, said Hoffman, a lot of clients market themselves with brochures, direct mail and promotional products.
Adding to commercial print's profitability are repeat orders. According to McNeal, who produces a lot of presentation folders, color brochures, sales materials and booklets, first time orders may require multiple proofs, but thereafter, they are not necessary.
A Possible Decline?
While many distributors report great wealth in commercial printing, it may be due to the fact that, during the 1990s, they benefitted from an economy that embarked on its longest period of growth. According to the Printing Industries of America's (PIA) Vision 21 report, during this period printers watched revenues grow 4 percent to 5 percent.
The economy, however, was growing at a faster rate—5 percent to 6 percent a year. As a result, commercial printing is beginning to represent a smaller share of the overall economy.
PIA added that changes in the structure of the industry, rather than product demand, will pose the greatest challenge to general commercial printers over the next three to six years, particularly for those too small or too unprofitable to adopt new technologies. To survive, said PIA, printers need to find their niche and focus on their areas of expertise.
Scott, however, predicts that the demand for commercial print will remain constant because of its excess capacity and the increasing desire of end-users to consolidate. This is true only for distributors offering formal programs to their clients, he added.
"Clients and printers have the need to offer complete print management solutions, and doing that will distance them from other distributors who can't avoid competitive bidding, which favors print facilities," he said.
"We see low prices being tossed around by some printing companies just to fill up equipment time, and though this may benefit printers in the beginning, it hurts the industry, and its distributors, in the long-run."
Scott went on to say that distributors will see a significant increase of commercial print work in one-to-one marketing. "We haven't seen clients take that plunge entirely, but they will," he said. On the other hand, bro-chures, point-of-purchase displays and direct mail sales are starting to re-bound.
Collins's belief is that consolidation will keep commercial print work steady. He stated, "If a distributor is calling on a company for business forms, they might as well offer commercial print since it makes it easier for the client."
After all, he added, some of the most requested items are training manuals.
Duke admitted that because there is such a large market for commercial printing, there is also a lot of tough competition. Even still he concluded that the need for commercial print is so great that distributors should still experience a significant amount of success.
By Sharon R. Cole