State of the Industry: Why 2016 Could be the Start of a Printing Revival
Four print leaders discuss how our $86-billion industry is doing and identify some hot tech trends for this drupa year.
This year of 2016 should bode well for the North American printing industry, in an economic context. Amid ongoing contraction, third-quarter 2015 commercial printing shipments rose more than 3.5 percent in the United States, marking the highest growth rate in 19 years according to statistics published by the U.S. Commerce Department.
- Said shipments were up more than $2.2 billion compared to 2014.
- Q4 started strong, too: up more than $200 million (+3.3 percent) to $7.73 billion.
- Last September, current dollar printing shipments were almost $7.6 billion, also up over 3 percent when compared to 2014 and adjusted for inflation.
- August shipments, although down by $40 million, still were up $188 million compared to the prior August.
Overall, the industry has registered eight months of shipments more than $7 billion -- the longest number of months at that level since a 10-month period in 2010 – and 17 consecutive months (as of October 2015) of increased shipments when compared to the previous year’s same month. The 12-month-moving-total of inflation-adjusted shipments is greater than $86.2 billion: the highest level in four years. Inflation-adjusted shipments are growing at a rate slightly better than U.S. real gross domestic product (GDP).
With another drupa mega tradeshow on the horizon in Germany, PN interviewed four industry watchers and participants to better gauge what lies ahead for the remainder of 2016.
How Are We Doing?
So, how is the printing industry market faring overall? “With the economy coming back, the industry is coming back,” said Andy Rae, senior VP of equipment at Heidelberg USA, “never to the mid 2000’s level, but it’s nice to have a semi-positive atmosphere again.”
“The printing market overall is doing fine,” reassured Marco Boer, VP of research firm I.T. Strategies, Inc. “Many see offset as flat, with not much decline, if any.” Especially in areas such as direct mail, where the USPS has stated 2015 growth was 0.3 percent, Boer noted. Meanwhile, “inkjet production volumes are growing in double-digit percentage rates; toner in single-digit rates,” he reported.
The triennial drupa tradeshow “sets the trend for the next several years,” Boer continued. “Expect to see a lot of focus on digital packaging and entry-level production inkjet printing in Dusseldorf. We’re to the point where we are fast enough at today’s print quality levels but need to increase the productivity of graphic-arts quality levels. In other words, two to four times the speed for today’s [HP] Indigo-type quality output,” he explained.
From a digital perspective. “the print market is not homogenous,” contended Francois Martin, worldwide marketing director of HP Inc.’s Graphics Solutions Business. “While the past five years saw a 20 percent decline in total commercial pages (analog and digital), driven by mega trends, including a global recession and increased adoption of social media, HP digital pages continue to grow, demonstrating that the future of commercial printing is driven by digital.”
Within Xerox Corp., Andrew Copley, president of Global Graphic Communications Operations, pointed to the OEM’s comprehensive level of investment, which he said “signifies our support and belief in the industry -- one that continues to thrive as it transforms to meet new playing fields and customer requirements. For example, we continue to maximize the growth of our xerographic cut-sheet business by refreshing our portfolio ….” He cited:
- the Versant 80 and 2100;
- Xerox 800i/1000i Color Presses;
- iGen 5 Press;
- and the introduction of silver and gold metallic inks.
“We have also made significant inkjet investments with the Impika acquisition and with the Rialto 900 Inkjet Press, which addresses a sweet spot for customers and opens up a new market category with entry-level continuous feed. We continue to see strong interest in our CiPress Production Inkjet Systems.”
To support packaging, Xerox’s iGen Automated Packaging Solution allows for the production of short-run digital folding cartons, “opening up new revenues streams for our customers,” Copley noted.
HP’s Martin added, “The packaging market continues to grow globally, driven by the population increase. In this market, the consumers and brand-driven trends (SKU proliferation, customization, micro segmentation, etc. ) accelerate the growth of digital printing solutions.”
Future Opps
We also asked, what developments on the horizon could impact future opportunities? “Inkjet continues to be the dominate ‘change agent,’” Copley stated. “We anticipate the inkjet buzz will grow even stronger since 2016 is a drupa year. And, that’s good for the industry,” the Xerox leader said.
“The goal is to provide the best technology available to produce high-demand applications, such as transactional, direct mail, and catalogs,” he added. “We are also opening up inkjet’s accessibility, through the Rialto 900 Inkjet Press, with a cost of ownership and footprint that breaks down traditional barriers.”
Heidelberg’s Rae agreed with Copley’s inkjet assessment and added a few additional developments of his own, including: sheetfed inkjet, 3D inkjet, folders running as fast as presses, and “Industry 4.0” approach to print as manufacturing.
HP’s Martin added, “In commercial printing, future opportunities continue to reside in using print for high-value and top customer touch points – mass-produced volume pages will continue to decline and some will disappear totally, replaced by other means to access content. In this new world, the ability to deliver personalization, on-demand, and new innovative applications will be key success factors.
“For labels and packaging,” Martin continued, “the productivity of digital presses will continue to drive a stronger adoption of digital printing. Brand owners and print service providers [PSPs] have mutual benefits in using digital printing, including less waste, on-demand, better supply chain, and faster time to market. The label market was the first one showing how digital can transform an industry – today more than 1,000 HP presses are installed, printing day and night a lot of the labels consumers hold in their hands daily. The same will happen for flexible packaging, folding carton, and corrugated.”
In the wide format printing segment, “We’re seeing the rise of new applications for retail,” Martin reported. “The customer experience, to compete with online, needs to be relevant and amazing. HP Latex technologies enable new applications not possible before,” he said. (Read Wide Format & Signage’s state of the wide-format print industry report: www.PrintingNews.com/12122702)
5 Years: Looking Back and Ahead
Over the next five years, heavy trends are easy to predict, saod Boer, the industry analyst: less offset volume, more digital print volume. But “what we all get wrong is the impact of what seems like disruptive entries,” he noted. “E-mail marketing did not kill direct mail, and neither has social media -- which is what many had thought back in 2010. However, what social media has done is re-oriented how direct mail should be used. More relevancy was one effect during the last five years; in the next five years it will be more timely messaging. In other words, within two to three days a personalized trend is spotted, [and then] a highly relevant DM piece shows up on your door. This can only be done if the print is done closer to the recipient to cut down on mail transport time. By implication, decentralized printing plants (hub and spoke) might become more common.”
HP’s Martin added, “To predict what’s coming in the next five years, it’s important to look at the past five. In the last five years, HP has seen increased demand for printing books and the ability to produce indoor and outdoor applications on the same printer, along with shifts toward digital label printing and digital commercial printing moving from ‘nice to have’ to ‘must have.’ It is clear that the future belongs to the believers in digital. We’ll likely see a significant increase of web-to-print solutions, and more intuitive printers and presses which can run repairs and maintenance through the cloud.”
Copley and Xerox concurred: “As print solidifies itself in the digital marketing world, the industry will respond with even more personalization and customization to satisfy the need to make human connections strong and lasting,” he added. “Digital print will continue to evolve, building on the automation that currently exists to produce more, faster.
Copley added that cloud-based workflow, “such as what’s available now in FreeFlow Core Cloud, will be standard -- not an option. Printers will fully embrace the role as a marketing service provider, further cementing their relevance in the digital arena.”
“Printing is a manufacturing process,” explained Rae from the Heidelberg perspective, “[and] the more standardized your approach to the market, the lower your costs will be, and profits will be higher. Most printers still haven’t grasped this concept,” he added, “but we can see the growth trend in the customers that have worked it out!”
Who’s Who in Print?
Who are the most important people in the industry today? “With such streamlined operations these days, every employee, profitable customer, and trusted supplier should all be ultra important to you!” advised Rae.
HP’s Martin identified early-adopter PSPs: “The most important people in the industry today are the print service providers who are the early adapters of new technologies, helping their clients reach new limits, making the impossible possible and reducing the environmental footprint,” he said. “The most successful customers we have started with digital early and broke free of the industry norms. Today, they enjoy growing revenues across many markets – commercial printing, labels and packaging, large format printing, and more.”
Xerox spoke broadly about two groups: the same game-changing PSPs as well as creative agencies, according to Copley. “First, the game-changers are print providers who are aggressively and confidently transforming their business -- now. They realize the tremendous benefits associated with offering marketing services and are making technology investments to fulfill that new role. They also understand the value of business development tools and aren’t afraid to commit time and resources to ask for help and guidance.”
“The second group,” said Copley, “is the creative professionals in advertising and marketing agencies. The creative, client service, and production directors understand the value [that] print brings to the digital media landscape and are shaping its future daily.”
Boer doesn’t think it’s a particular person who is important, but rather a type of personality. “While it is easy to point to individuals, rarely does a single individual change a market. They might be associated with the trend, but rarely the execution,” he said. “Some of the most impactful digital technology developments over the past 20-years, frankly, have been a cumulative financial disaster for those who owned shares in the companies that developed the technology. So it is better to talk about the characteristics that define people who change the industry: [the] risk-takers, optimistically naive visionaries, but most critically people who thoughtfully implement the execution of these ideas.”
Top 3 Market Segments
What three market segments will have the biggest growth in 2016, and why? I.T. Strategies has identified:
- Textile inkjet printing. “The fast fashion and sportswear apparel industry is being revolutionized by inkjet printing technology,” Boer reported.
- Mass market personalized direct mail printing (previously discussed).
- Packaging mainly because digital printing is starting from a very small base. “High growth but little absolute impact,” he explained.
Heidelberg pointed to these three areas:
- Production inkjet, as the technology hits bigger formats at the required quality and improving speeds;
- Flexo/digital hybrid label production, as it simply offers “the best of both worlds,” said Rae; and
- Process automation, as integration between processes improves and streamlines costs and capacity planning.
“Xerox seees growth in a number of segments but looks to packaging, catalogs, and direct mail as strong contenders,” Copley said, because “… each are supported and driven by personalization, regionalization, and customization -- must-have’s in today’s marketing scenario.”
For HP, the big three are:
- Labels and packaging, as the digital penetration is still low and the opportunities for enhancements are tremendous, per Martin;
- Retail signage and decoration, as customer experience is key to compete against online shopping;
- High volume production, as the traditional analog process cannot keep up with the need for customization and the increase of short runs.
The Big Issue
Heidelberg cited cost to print as the print market’s single biggest issues right now. How should it be addressed? “Printers need to understand in detail what their cost rate is to produce a sheet through each cost center in their organization,” Rae explained. “Any investment needs to establish what that will do for their cost rate or, in other words, their competitive position. Just as importantly, the cost recovery should drive the investment, not the technology itself,” he added.
Xerox believes “one major issue facing the industry is how to embrace and sell print as a differentiated component in an omnichannel world,” Copley said. “To address this challenge, providers need to start -- or strengthen -- their transformation from pure print to marketing services. This transition aligns print providers with marketing and creative professionals who are driving the revival of print.”
HP also identified something we’ve all heard before: “One adjustment we are seeing in the industry is that PSPs are becoming more of service providers than print providers due to increased web-to-print jobs and higher volume print jobs,” Martin said, singing a familiar tune. “As plates are replaced by electronic workflows, interaction with customers is moving from cost per page to campaign relevance. Employees need to be trained to address these evolving needs of customers. Successful PSPs create digital teams to better sell digital printing capabilities and additional offerings.”
From Boer’s analytical standpoint, the biggest issue, where focused mainly on the mechanical parts, is making those more efficient. But “we’ve forgotten about the people part -- retraining how personalized print should be sold (sold, not bought), the manual labor required to get the print into the container/Post Office mail box, and the aging operational workforce,” he said. “There is not a lot of vocational training to encourage the next generation to make a career in print.”
How to Grow This Year
So, what do PSPs need to be doing now to position themselves for growth for the remainder of 2016? “What is your true market sweet spot?” asked Rae. “How do you compare against your best competition? Strategically, what should you do to either beat them on cost (so improving your margins, not just passing it on to the customer) or expand services to grow the top and bottom line?”
Boer offered this observation: “PSPs need to position themselves for flexibility. The days of consistent, long-runs are over,” he said bluntly. “Everything is last minute, a rush, and it is rarely prepared print ready.”
HP’s advice: “A way that PSPs can positions themselves for growth in 2016 is by valuing the relationships they have with existing customers and offering them more applications,” Martin said. “For example, if you successfully sell labels to a given customer, he will probably value access to shrink sleeves as well. If you sell small-format retail POS/POP, you probably can sell larger format ones. If you sell window decorations, you may as well promote wallpaper and in-shop decoration.
“The more you work with your existing customers, the more you will appreciate their needs -- some are defined, some will emerge from showing them what digital can do,” he continued. “Most of the brand owners still do not know what they do not know. For example, HP Latex technology enables new applications like never possible before in high regulated locations such as hotel rooms, schools, and hospitals.”
For print providers to capture more pages and growth in 2016, Xerox recommended four key efforts:
- Produce more high-value applications.
- Automate your digital environment.
- Embrace new inkjet technologies.
- Migrate from offset to digital.
“We realize print providers are at different stages, and so it is important to help them at whatever point they are at,” Copley acknowledged. “That’s why Xerox takes a critical look at their goals to ensure they are making the right technology, workflow, and solution investments at the right time. We are prepared to help them make those decisions based on their individual needs. That’s important, particularly in a drupa year when so many new technologies surface.”
Final Word
“The future belongs to digital believers, and instead of being scared of the digital movement PSPs should instead use it to their advantage,” HP’s Martin believes. “Since the creation of the Internet and the first mobile phones, the technological evolution has been limitless. The same goes for print, and its growth will only continue to accelerate.
“Since the first digital press from Indigo back in 1993, no one could have predicted that one day those machines would help create millions of different Coke bottles on store shelves. Who could have predicted that you can print your own wallpaper to decorate homes and offices? Who could have predicted that publishers rely on HP digital solutions to print books? The sooner PSPs embark on the … digital journey, the better they will be able to operate in the market,” he concluded
For the offset print perspective, Heidelberg’s Rae offered a final tidbit: “Focus on the manufacturing process; think of a print shop like a car production line. What can you do to standardize input and output to that line to maximize output at the lowest cost per unit (i.e. sheet). I can guarantee you buying the cheapest equipment, consumables, parts, and paper is not the way to do that!”
“Don’t stand still,” urged Boer. “If you stop investing, you’ll lose that flexibility required to serve the new customer need. Be prepared for more hand holding as professional print buyers disappear. And foremost, keep helping customers make more money using print as a core marketing communication medium.”
Now, go grab 2016 by the horns!
Watch a video webinar of Epicomm’s “The State of Our Industry” report featuring the association’s senior VP and chief economist Andy Paparozzi: www.PrintingNews.com/12140455
