New Skillsets Are Required for Growth in the Commercial Printing Industry
The commercial printing industry is likely to grow only modestly in 2020, with margins again under intense pressure. But plenty of commercial printing companies will thrive nonetheless. They will not be a particular size or offer a particular mix of technologies, products, and services. Rather, they will be skilled in disciplines such as opportunity evaluation, execution and human resources, creating growth and shepherding that growth from the top line to the bottom line.
How 2020 plays out for commercial printing will, of course, depend on the economy, pricing power, and a number of other factors. SGIA business indicators currently suggest the industry’s sales (all sources) will grow 1.2% – 2% next year. That would follow gains of 1.8% in 2019 (preliminary) and 2.4% in 2018. At $87.5 billion, sales are still down 11.6% from the 2007 pre-Great Recession high, but up 11.5% from the 2011 low.
On-the-ground reports from the 166 commercial printers SGIA surveyed fill in the details. The group is diverse, with annual sales ranging from less than $1 million to more than $150 million. On average, they have outperformed the industry, growing 4.1% in 2019, with 61% growing by more than 5% and 32.2% growing by more than 10%.
Verticals That Are Showing High Growth
As Figure 1 shows, our research group is finding growth in a number of end markets. Health care is growing according to 60%, architecture/construction according to 55.6%, and interior decoration/design according to 50%. Seven other markets, including corporate branding, hospitality services, and athletics, are growing according to more than one-third.
Majorities report display/POP advertising (58.3%) and personalized, targeted direct mail (54.8%) are growing, and 44.7% report marketing collateral is growing. Additionally, 66.7% are pursuing opportunities outside commercial printing. Interest is greatest in graphic and sign production, which 65.4% have entered, offering products from posters, banners, and window graphics to vehicle wraps, back-lit signs, and digital displays. (See Figure 2.) Smaller, but significant, percentages have added functional printing (21%), package printing/converting (19.8%), and garment decoration (14.8%).
Building margins is a major challenge. The most frequently cited obstacles — nearly 20 were cited in all — include extreme shortages of skilled production personnel, rising wages, the rising cost of health care benefits, the rising cost of essential supplies and materials, workflow inefficiencies, and the inability to capture a bigger share of the client’s wallet despite adding products, services, and capabilities.
Need to Cultivate Key, Mission-Critical Skillsets
We asked how to overcome the obstacles. The consensus is that sustained profitability isn’t about finding the next big thing. Rather, it’s about cultivating skills in mission-critical disciplines.
The disciplines the commercial printers we surveyed mentioned most often follow. The key is cultivating skills in all of them, not just one or two.
- Human Resources. Competitive compensation packages, but also investing in training, mentorship programs, career development, employee engagement programs, and employee recognition programs.
- Efficiency. “Working smarter,” minimizing steps and touches companywide, eliminating what no longer adds value, lean manufacturing, continuous improvement, etc.
- Execution. Not just effective planning, but making plans happen. No “set and forget.”
- Evaluating Options. Deciding what is and isn’t an opportunity given my company’s resources, capabilities, and circumstances. Not following the crowd into the next hot thing, no matter how much buzz it is creating.
- Customer. Hearing the voice of the customer — creating deeper knowledge of what customers really value and never assuming we already know — and acting on what we hear. Eliminating habitually unprofitable clients to focus on recruiting, retaining, and developing profitable ones.
- Capital Investment. Certainly to increase speed, productivity and automation, and to open new markets, but also to capture more timely, accurate data on what’s happening internally so we can build on strengths and immediately address weaknesses. Can be used to capture the “wow power” of new printing and finishing technologies, and of advanced personalization.
- Culture. Creating a culture of innovation that encourages employees to find more efficient ways to work and to create more value for clients.
- Sales. Selling value rather than commodities, consultative sales rather than transactional sales, and selling to marketing executives, creative directors, and others who set media strategies, rather than print buyers and purchasing agents.
- Marketing. Including social media marketing, to show clients and prospects who we are, what we stand for, how we contribute to the community, and how we can help them prosper.
Print in the Modern Media Mix
We also asked if clients and prospects are coming back to print. More than 56% said “somewhat,” 33.6% said “no” and only 10.3% said “yes.” The explanation was that print is increasingly perceived as ineffective, especially by younger clients and prospects.
Articles such as “Why Print Catalogs Are Still Important in the Age of Amazon,” Suman Bhattacharyya; “Amazon Releases Their First Ever Printed Catalog,” Sam Upton; and “Not Surprisingly, Amazon’s Toy Catalog Is All About Data,” Kiri Masters; can change that perception. All three explain how e-commerce icons such as Amazon, Wayfair, Ebay, and Greats have embraced print that is personalized, integrated with electronic media, and interactive/mobile.
For example, Amazon’s catalogs — highly personalized by drawing on its vast database of client purchase history and preferences — do not include prices. Instead, readers scan images of interest and are taken to the relevant pages on Amazon.com. That’s not abandoning print; that’s finding compelling new uses for it.
The bottom line: The gamut of opportunity is expanding for commercial printers, but the margin for error is shrinking. Every company should ask:
- What will we do better in 2020 than we did in 2019?
- What are we doing to cultivate the mission-critical skills required to sustain profitable growth?
- How are our clients’ communications needs changing? Are we prepared for the changes? If not, what are we going to do about it?
- How will we create even greater value for customers and, just as important, ensure they recognize the value we create for them?
The answers will determine how a commercial printing company performs in 2020 and beyond far more than overall industry conditions, the economy or anything else happening on the outside.
Andrew D. Paparozzi joined SGIA as Chief Economist in 2018. He analyzes and reports on economic, technological, social and demographic trends that will define the printing industry’s future. His most important responsibility, however, is being an observer of the industry by listening to the issues and concerns of company owners, executives and managers.
Previously, he worked 31 years at the National Association for Printing Leadership. He has also taught mathematics, statistics and economics at various colleges.
Andrew holds a Bachelor’s degree in economics f rom Boston College and a Master’s degree in economics — with concentrations in econometrics and public finance — from Columbia University.