Down, But Not Out
A housing mortgage meltdown, shrinking nest eggs, collapsing financial institutions and a disappearing job market have brought the nation to its knees. Since American consumers have no choice but to spend less, businesses’ profit margins are suffering.
The nation’s current state of financial turmoil has trickled down to every sector, including the printing industry. Sales and profit margins are deteriorating, forcing companies to shrink salaries and workforces and come up with creative ways to maintain and boost their customer bases. It ain’t pretty. And the picture isn’t expected to brighten any time soon.
Joe Vincenzino, senior economist at the National Association for Printing Leadership’s (NAPL) Printing Economic Research Center, said businesses shouldn’t expect to see any meaningful improvement until late this year.
“This recession is having an impact like all deep recessions,” Vincenzino said.
Recovery won’t feel like recovery until 2010, according to the January-released Printing Business Conditions, which is part of the NAPL’s State of the Industry Series.
“The end of a recession simply means the economy has stopped contracting, not that all’s well,” the report showed. “Recoveries can be robust, feeble or anything in between. Given the depth of the economy’s problems, expect this recovery to be painfully slow at first despite Washington’s best efforts.”
Vincenzino added that the current forecast for 2009 for commercial printing sales is expected to decline between 3.5 percent and 4.5 percent—similar to last year’s declines.
Companies specializing in everything from forms to labels to commercial printing agree that business was pretty smooth until the fourth quarter of last year. At that point, business started to take a nosedive.
To stay afloat, many companies have had to re-evaluate the way they spend, watch every penny, cut back on overtime and layoff employees.
“As a result of this downturn, we had to lay off employees for the first time in our history,” said Bob Hakman, president of the Carson City, Nevada-based Diversified Labeling Solutions. “I am not happy in having to do that, but it was necessary for the future success of the business.”
Many companies feel they are at an even worse advantage than they were during previous economic downturns, especially since politicians, economists and media mavens have dubbed this the worst economic downturn since the Great Depression.
“The downturn in 1987 and those after that date had no effect on the industry since pressure-sensitive labeling was growing in the mid to high single digits for the past 20-plus years,” Hakman explained. “That same industry is now decreasing 1 percent to 2 percent or more depending on what section of the industry you are in.”
Vincenzino added this recession actually just further handicaps the printing industry.
The number of printing industry establishments has been on a “steady decline” since 1998, he said.
“The companies that learn to become more valuable to clients will be the ones standing,” Vincenzino mentioned. “The industry at large continues to undergo structural changes. Some companies that continue to do business the way they always have done will be at a disadvantage.”
Tim Urness, of the Brooklyn Park, Minnesota-based Royal Business Forms & Printing, agreed with those statements.
“The biggest difference to us is that in past recessions our industry was still growing year over year,” he said. “What makes this one so tough is that we were already facing the challenge of losing business due to technology. So the recession just compounds an already tough market. My only fear is that we have not seen the bottom of this recession yet and no one really knows how much worse it can get.”
Vincenzino said the most important thing to remember is that companies wanting to survive cannot spend this time resting on their laurels.
“You can’t hope to sit this recession out,” Vincenzino said. “You can’t wait and go back to business as usual. There is no business as usual in the print industry. It’s constantly changing and being redefined. If you are ignoring structural changes, then you are really in bad shape. You need to prepare for growth.”
Though no one can be absolutely sure what the future will hold, all industry executives are encouraging business owners to watch expenses, stay open to opportunities and diversify.
And, though it may sound simple, some of the best advice companies gave was to stay positive.
“The only way you will get through this downturn is by remaining positive,” Hakman said. “Once you think you are defeated, it will become a self-fulfilling prophecy. I don’t know how my competitors are faring, but I do see the pricing in the market and that tells me that everyone is hurting for business and out buying time for their presses. As long as you have a big bank account you can continue that type of business plan, but it is not a very good long-term strategy especially with banks as sensitive to customer income statements and balance sheets as they are today.” PPR