State of the Industry Report: Red-Tape Reduction
For the past several years, there has been an opening for real change in the print industry. Some may even go so far as to call the opportunity “historical.” That is, assuming the C-Suite can cut through the noise and red tape—the latter of which has been a priority for President Donald J. Trump.
Trump, who made his own history after winning arguably one of the most contentious presidential races in modern-day politics, has been vocal about the need for laws and regulations that are pro-business. In January, he signed a two-page executive order requiring federal agencies to eliminate two regulations for every one they propose, though the timing remains unclear.
The 45th president of the U.S. also pledged to eliminate up to 75 percent of federal regulations during his term, and, rest assured, business owners intend to track his progress. This includes printers, a demographic whom Trump seemingly won over during campaign season. In September, Print+Promo ran a study that was completed in August 2016 by NAPCO Media Research (NAPCO Media is the parent company of Print+Promo). The survey, “Make American Business Great Again: Corporate Leaders Choose Trump Over Clinton,” revealed then that Trump was performing favorably among print leaders, in particular. Of the 810 executives polled across the printing, consumer electronics, promotional products and nonprofit industries, 62 percent of printers said they planned to vote Republican in the 2016 presidential election, and as high as 70 percent felt Trump was better-suited to grow the economy.
So much is happening that it’s hard to say with confidence what’s ahead. But it’s no secret that the economy influences the direction of our industry. By that logic, if Trump succeeds, printers benefit. Dr. Ronnie H. Davis, senior vice president and chief economist for Printing Industries of America (PIA), Center for Print Economics and Management, Warrendale, Pa., remains cautiously optimistic. “The most significant impact from the election for print is positive,” Davis said, citing Trump’s proposed corporate tax reform and regulation reductions. “Both of these should be good for the economy and good for print.”
And what about now? A closer look reveals that average recoveries (post-World War II) last roughly six to seven years. To provide perspective, the current recovery is almost 8 years old. Although the sweet spot for the industry traditionally occurs when the economy is in a mature recovery phase, the mood has been sour. “It has been relatively weak—in fact, the weakest post-war recovery out of a total of 11,” Davis noted. “Our current outlook is for the recovery to continue and possibly gain strength if there is a corporate tax cut to make U.S. taxes more competitive.”
That doesn’t mean it’s all bad news. In fact, print’s economic environment continues to improve by the numbers. According to Davis, overall, U.S. printing shipments total approximately $165 billion, and are growing 1 to 2 percent annually. To be more specific, printing shipments (in revenue) were up 1.6 percent through the first four months of 2016; by comparison, all U.S. manufacturing shipments declined by 2.8 percent during the same time period, based on data from the U.S. Department of Commerce Census of Manufacturing. Think about that. Print exceeded all other manufacturing by more than 4 percentage points.
Davis listed additional bright spots. “Most of the severe displacement of print by digital media is now behind us,” he reminded. “[Furthermore,] print marketing and promotion, particularly direct mail, has demonstrated its effectiveness as a premium marketing and promotional media.”
Then, there’s product growth. PIA research uncovered opportunities in the following 10 categories (see Hot Print Markets chart for more details):
- Quick printing
- Food, beverage labels
- Private label convert.
- Direct mail
- Point of purchase
- Specialty printing
“Labels, wrappers and packaging print serve as an anchor on print sales, as [they] generally track very closely with the overall economy,” Davis explained.
Today’s resellers have an advantage. They are able to get involved in their clients’ work easier, stay involved longer and satisfy a broader range of communication needs. But, the current landscape doesn’t come without challenges. 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. And let’s not forget the flurry of high-profile M&A deals that have recently transpired. (Standard Register Co., anyone?)
“Printers are constantly challenged to maintain and increase their sales, and to maintain profitability,” Davis said. “The industry is very competitive, with multiple printers chasing business. It will likely continue in this mode for the foreseeable future, but it will also remain an industry of opportunity. While the average profitability of the industry is below [average] for U.S. manufacturers, profit-leading printers do very well.”
Profit leaders have been a central focus for PIA’s research. Davis defined this group as “printers in the top quartile of profitability in [PIA’s] Dynamic Ratios survey.” The key to breaking into this exclusive club is to think creatively, beginning inside the plant. Davis recommended implementing cost control measures (especially in managing employee costs and materials), and substituting capital for labor.
Thinking outside the plant is another habit of profit leaders. “[These individuals] provide a higher level of value add, in terms of services and customer knowledge,” Davis remarked.
Relative to past decades, the potential scope of products and services is wide. For those who have adjusted their business models, ancillary services may include:
- Professional creative design
- Mailing management
- Kit fulfillment
- Logistics management
- Digital database archiving
- Database management services
- Cross-media marketing services
- Digital asset management
- CD/DVD services
The problem is, in an industry where tangible products and intangible services coexist, how can leaders choose the most appropriate strategic management practices (SMPs) for their business? In a joint study by PIA’s Center for Print Economics and Management and the Department of Management, Jennings A. Jones College of Business, Middle Tennessee State University, called “2016 Effective Management Practices in the Printing Industry,” Davis and his co-authors expanded on this idea. Via the report:
SMPs are those activities engaged by upper management to develop and implement strategy [e.g., entrepreneurial orientation, strategic thinking, goal setting, quality focus, social capital and analyzing financial ratios]. The number of possible SMPs printing company leaders may utilize is large. And if printing company leaders are unaware of potential SMPs, or do not have insight as to what SMPs are most effective in the dynamic print industry environment, they may choose the least effective path to develop and implement strategy, thereby wasting valuable time and resources and risking the possibility of making the wrong strategic decision.
Some questions to consider may be: Who are your customers? What are their goals? What are your goals? What skills and costs are involved? The biggest—and perhaps, most dangerous—mistake companies can make is to assume they have everything figured out.
Need extra guidance? Print+Promo reached out to experts in four major market niches. Read on as they discuss their thoughts on the present state of the industry, complete with strategies for growth:
- ON PRINTED FORMS, featuring insights from Gordon Klepec, vice president of sales and marketing, Wright Business Graphics, Portland, Ore.
- ON LABELS, featuring insights from Craig Moreland, president and CEO, Coast Label Company, Fountain Valley, Calif.; current chairman of the board, Tag & Label Manufacturers Institute (TLMI), Alexandria, Va.
- ON PROMOTIONAL PRODUCTS, featuring insights from Paul Bellantone, CAE, president and CEO, Promotional Products Association International (PPAI), Irving, Texas
- ON DIRECT MAIL, featuring insights from Grant Miller, chief operating officer, Pitney Bowes Document Messaging Technologies, Stamford, Conn.