This stable market niche held strong in 2002 amid tough competition and price wars.
Here's a telling story of two men in a camp who are approached by a man-eating bear. One of the men starts to lace up his sneakers and the other man asks him, "Do you really think those sneakers are going to help you outrun the bear?" And the man answers, "I don't need to outrun the bear, I just need to outrun you."
Greg Muzzillo, founder and CEO of Proforma, Cleveland, recounted that story when explaining his company's belief that competition is a much greater concern for them than the market.
Whether commercial printing is driven by competition, sparked by the increased need for independent distributors or being exposed to new markets because it is becoming more digitized, one thing remains certain. It has continued to be a profitable sector of the business forms industry and distributors don't see that changing anytime soon.
Sales Report
In fact, Brian Wiedenmann, general manager of Monroe, Wash., Merrill Corporation reported that commercial printing contributed 50 percent of total sales in 2002, or $28 million. He stated that Merrill's largest sellers were signage, point of purchase products and components for human resource applications. All in all, he added, commercial printing "remains a central offering and core source of income" for Merrill.
The Shamrock Companies, Westlake, Ohio, cited packaging, point-of-purchase materials, bro-chures, posters, catalogs, and other collateral materials as large revenue producers for 2002, with commercial printing accounting for 40 percent of Shamrock's business—$20 million in revenue. Said CEO Bob Troop, "Most of the orders were for point-of-purchase materials and packaging."
Commercial printing represented the No. 1 category for growth rate of sales for Global DocuGraphix, Chicago. Recognized by President and CEO, Graham McClean as the fastest growing segment of Global's total sales, commercial printing has become the product that he said many independents have latched onto as a result of declining forms sales.
For Proforma, commercial printing sales are all about the competition. Reporting that 10 percent of Proforma's owners have achieved the $1 million sales mark, Muzzillo said, "I think last year we saw a record number of commercial print shops file for bankruptcy and go out of business. So, it's not about the marketplace, it's about the competition."
What's Going On
It's the general consensus that this theme of competition describes the nature of commercial print. In fact, Wiedenmann reported that one of the largest trends he has noticed is the move toward increased price competitiveness.
"Due to today's economic condition, our clients' budgets have been more closely scrutinized and even reduced in some cases," he said. "As a result, competitive pricing for commercial print has pushed this service offering toward a commodity-based product category."
In order to overcome competitiveness, McClean said strong distributor relationships are essential. He added that the production community and manufacturers in commercial print who used to depend on their own salespeople, are now opening their production to independent distributors.
"What's also been happening is that sales reps are prone to find other opportunities for sales," said McClean. He noted that Global tends to find most commercial print business in mid-sized accounts, and stated, "Large commercial printers tend to be much more competitive and involved with long-run, multi-page complex commercial print jobs."
On the other hand, Troop credited digital printing for opening up new markets and increasing profits in commercial printing. "We've also focused on reducing our vendor base and are making stronger commitments to fewer business partners in this area," added Troop. "In fact, we have positioned ourselves as a boutique agency with high-end, in-house design capabilities for a one-stop-shop approach."
Merrill, too, has been able to maintain profits by implementing certain strategies. "We have been able to keep a constant profit even with the competitive nature of the industry by utilizing our diversification and total document solutions strategies," said Wiedenmann. He added that he has not recognized increased requests for any single product category and that commercial print requests have remained regular due to the addition of several clients.
However, Wiedenmann has discovered a sales factor that worked for his company when pitching a commercial print job. "One of the key factors we found successful is the consulting nature we present to our clients about our programs. Our clientele are looking to us more to provide cost-saving options and improved efficiencies to generate better solutions," he said.
Proforma is growing in this arena by increasing the number of its owners with commercial printing experience. "Today's commercial print professional realizes now more than ever that the distributor is the more effective model for them to go to market with," said Muzzillo.
He reported that Proforma has attracted owners with backgrounds of $300,000 to $2 million in commercial printing.
What to Expect in 2003
Wiedenmann sees commercial printing as an important part of his company and witnessed other distributors' eagerness to get started in this sector of the industry.
"We view commercial printing as an extremely important component of our value-added service structure," he said. "We have noticed that other distributors who haven't already broached this sector are excited to add these services to their mix."
Wiedenmann added that his clients have had no demand for creative requests in commercial print, but have increased re-quests for assistance in cutting costs.
However, Troop noted that commercial printing projects are becoming more sophisticated and creative, with end-users requesting more high-end color and design work. "The marketplace, it seems, is primed for offering customers more comprehensive online services, including online proofing systems and direct-to-plate capabilities," he said. "Being able to provide customers with the latest technology is imperative."
By Sharon Cole, Maggie DeWitt, Cynthia Graham and Jennifer Hans