In late 2010, corporate advisors Ferrier Hodgson published a short paper entitled “Limited Edition? The future of Australian printing”.
In essence, it was 4 pages of little more than doom and gloom, focussing on the decline in the number of businesses and in total revenue, industry-wide.
However, they did highlight what they considered to be the opportunities for the future. These included the consolidation of smaller entities into larger businesses, the provision of new services beyond the traditional printer offerings, and the introduction of collaborative remote printing, to reduce transport costs.
The last few years, since the report was published have seen several attempts at consolidation fall flat on their faces. So it may be timely to re-consider some of the points that they listed as “success factors” that we should be encouraging our SMEs in the printing industry to aim for.
- Client service and accessibility
- Diversified income streams/client base
- Expanded service offering including consulting and branding services
- Web-based services
- Increased focus on design and value-add services
- Low gearing
- Strong brand
- Corporate supply contracts, focus on high-volume, bulk print-runs and add-on services, such as design consulting
- High-quality product with rapid turnaround time
- Variable cost structures
Each of these, on their own, warrants a separate discussion. But perhaps not right now.
On the other side of the fence, Ferrier Hodgson also singled out several risk issues facing the Australian printing industry, many of which are extremeley relevant for SMEs, especially digital-printing companies.
Key among these, in my opinion, were:
- Rapid deterioration in asset values
- Reduced margins
No-one I have met in the digital printing industry would argue against the first premise – all would agree that investment in new technology must pay for itself within two years, before the next wave of upgrades and updates hits the streets.
One cannot criticise the manufacturers for constantly improving their offerings, but I am reminded of something I said over fifteen years ago, after visiting Düsseldorf for DRUPA 1996. “Printing is the only industry sector I have been involved in, where the owner of the business has to invest more and more money every year, just so that they can charge their customers less and less.”
With DRUPA 2012 just around the corner, I am sure that new technology (especially in the arena of fast, inkjet-based, sheet-fed printing) will be uppermost in the minds of many printing company owners, both here in Australia and overseas. But will we be able to take advantage of this amazing technology in time?
The current price wars that afflict the printing industry in Australia, especially the digital printing sector, may see many more casualties before the new technology reaches our shores.
Digital print providers have been their own worst enemy when it comes to valuing (or should I say undervaluing) the worth of a printed job.
Why is this so? I believe that there are three main reasons…
First, it is easier to compete on price than any other basis. All you have to do is advertise lower prices.
Price, quality and turnaround time. These are the only three measures by which any product, in any market, can compete. To provide better quality requires an investment in better (read “latest”) machinery and better processes – not always a cheap solution. To provide better turnaround times also requires faster (read “latest”) machinery and streamlined processes – again these can require significant investment. However, to provide cheaper prices, all a business has to do is advertise their low prices – and, miracle of miracles, the customers come flocking.
But, how long does the honey-moon last? Only until their accountants sound the warning that income is not exceeding expenditure and the business cannot survive.
Second (and this of course is the reason why said digital printing companies embark on price-cutting measures) is a lack of understanding of the true costs of production.
How many times have I seen a CSR for a digital printing company (or worse, the owner of the company) calculate an estimate for a printing job in their head and give it to their customer on the spot.
Sure, experience will allow them to come close to the number they would get if they did it carefully, or used a spreadsheet, or (if their company has it) a proper estimating package. But who is to say that the spreadsheet or even the estimating package is correctly allowing for all the costs of producing the job they have just won on the basis of quoting such a cheap price?
Understanding the true nature of all business overheads, running costs and the actual cost-of-goods-sold is fundamental to staying afloat. And measuring these and having timely feedback is crucial for the business owner to be able to react appropriately. I really do wonder how many small-to-medium digital printing companies allow for all of these factors when they establish their pricing policies.
Third is the fact that the digital printing industry has sub-consciously educated its own customers to buy on the basis of price only, by proclaiming this as the most significant advantage of the “new” technology. In other words, the only perception of digital print that is portrayed to the market is “cheap”.
This perception denies the many other advantages that digital print can offer to the end user – such as personalised print, print-on-demand, higher response rates, minimal warehousing and faster turnaround times, among other advantages – all of which should be valued by the customer to the point that they are prepared to pay well for them.
It is time for digital printers to properly value the contribution that they make to their customers’ bottom line. Price the products on the basis of the benefits they deliver, not on the cost of the clicks paid.