Is there a place for Small Businesses in the Printing Industry?

By | August 26, 2010

By Doug Fruscione, Director of Procurement & Estimating at W. A. Wilde

Like a bidding war at an auction house, the printing business has been undergoing a fairly silent, yet the biggest consolidation this industry has ever seen. In addition, there have been an unheard number of plant and company closures resulting in a shrinking of the industry. This has led to a unique environment for buyers like us and a shift in the industry that has always been dominated by small business.

To first understand the impact of this current trend, you must take into consideration that printing is not just a big business–it is the biggest. US domestic printing is an $83+ billion industry that tops the automakers in terms of size and the number of people it employs (1+ million). Sounds pretty outrageous until you stop to think about it. In a society that’s constantly in search of access to information and literally obsessed with record-keeping, it stands to reason that printing is ubiquitous. From new car manuals to tabloid newspapers to t-shirts to those little tags on mattresses, nearly every product calls on the printing industry somewhere along the line. Put in that light, the numbers don’t seem so far-fetched. So the big question is: if the printing industry is suddenly starting to be controlled by a small group of industry leaders and many of the 70,000 plants in the country are shutting down, what happens to principals such as market competition and market controls such as “supply and demand”. . . not to mention the people and personnel it effects?

In the last year alone, as the economy has struggled, the industry giants have been buying up large portions of the market through mergers and acquisitions. This has pushed out the middle part of the market and, at the same time, made it difficult for smaller shops that make up the largest percentage of the industry to compete. Huge print companies like RR Donnelly, Quad, and Quebecor have acquired other players like Cenveo and Bowne and have solidified their hold on the market. Even in our own backyard, six very prominent regional shops have succumbed to economic pressures. This is a result of the economic times, coupled with a reduction of work available and renewed competition by these large national companies. With everyone competing for a slice of a much smaller pie, it has become increasingly difficult for these smaller shops to storm the weather.

As the volume of work continues to shrink and the number of players competing continues to shrink, we as buyers are faced with a market place driven by issues such as risk aversion and longevity tied to heavy pricing pressures. The landscape for print companies is really changing. Former relationships are always in question these days, and price and fiscal viability have become the benchmarks by which these companies are measured. The good news is that those with solid portfolios and strong business practices seem to be rising to the top. There is no question that once things have found equilibrium that there will be more work going to fewer players and that we as buyers will have fewer choices, less competition driving the marketing, more pressure to use the big companies, and less influence.

So for an industry that has remained fairly unchanged for so long, the next few years will usher in an era of reinvention and realignment. I believe that companies that have a business strategy that can readjust, be nimble, and be reliable will rise to the top and may be in a position to challenge the goliaths on the block–others may soon find themselves on the auction block. 

What do you think smaller firms need to do to survive and thrive in this market?

Share this post


7 thoughts on “Is there a place for Small Businesses in the Printing Industry?

  1. From Large Printer

    For the smaller firm to survive, it’s going to take them to also reinventing themselves just as the larger firms have. Example: Those of us that had large warehouses, when the large runs went away and more work was created on-demand, we took the empty warehouse and we added fulfillment to not only fill the empty space and pay for the footage but we dove into an additional service that we provided our customers.

    The small firm will need to do the same, adding postal and shipping services, adding mail box rentals, email and purls, it should also be easier for those to add even more creative services and becoming an advertising firm with in house printing capabilities, because many of them don’t have the long relationships that the large firms have had with their agencies, designers and creative firms. The large firms not dare move to fast into the creative services do to the fact that it would upset their current agency client base. The small firms should be able to move directly into this industry with the right staff.

    The next bit of advice for the small guy to remember is don’t buy large equipment. Customers don’t care anymore about the print or how it was printed, it’s become a consumable product and it’s about turn around and price. Making a large equipment purchase without the business to support it will kill your business. Don’t try the method “build it and they will come”.

    Technology has changed all of our roadmaps, we all have to learn how we can make the drive down those roads.

  2. David Svenson

    The mindset must change. The business model must change. Small printers must move away from the pack. They must up sell your base and open an entire new market place, eliminating their competition by being a solution provider.

    Value, not fear, must drive price. Recognize confidence in the services and quality you provide and allow that to command a fair price. Become a solution provider for your client, not just a printer. To be successful printers must think beyond the “print job.”

  3. Bob Lindgren

    There is no question that the number of establishments has shrunk in the last few years. However, I suspect that has more to do with a shift in the demand for conventional offset printing toward short-run digital or forgoing the use of print altogether. The assumption that we are headed to an industry dominated by a few very large producers (like autos) seems very unlikely. Large scale consolidation occurs when it is supported by economies of scale which exist in industries needing very large amounts of capital. The consolidation slows and stops when the diseconomies of scale arising from the difficulty of manageing large organizations (giant ships take a long time to turn and as a result hit icebergs) overwhem the advantages. The reality of the printing industry is that it is becoming less capital intensive in the software based digital era and thus the economies of scale are weaker. The stock performance of almost all of the majors cited easily confirms this. The future really belongs to the innovative and nimble who can develop ideas faster than the big guys.

  4. lee weiner

    There is no doubt the industry is changing and to survive we must adapt. For the smaller firms like ours there must be that switch from print provider to solution provider (MSP). With the amazing advancements in technology and equipment there is actually greater opportunity to sell larger dollar deals on smaller projects while building a very tall fence around your customer base. It is very exciting to see these changes happen but the uncertainty of where the industry will wind up can be a bit nerve racking. Small firms are more flexible by nature and I agree that this advantage will help the small firms thrive.

  5. Elizabeth

    Can many small firms equal a large firm? In some cases I think many small firms can rival a large firm due to the ability to bring together partners who specialize in particular areas rather and can be nimble. However – while this may reduce the amount of capital investment necessary to drive value for customers – it increases the amount of time and management capital. Partnerships take time and energy to manage successfully and agreements must be carefully crafted to avoid unintended consequences – or simply wasting everyone’s time.

  6. Buzz Tatom

    I think smaller firms have advantages they can leverage. In almost all of the large firms you are not dealing directly with top management. Decisions can be slower and the big firms are less able to react and change directions as easily as a well run smaller firm. If smaller firms are easier to deal with and have less red tape and corporateness they can win work and make long time customers out of frustrated buyers.

  7. Eddy Hagen

    With the industry becoming more and more hi tech and investments becoming more and more expensive, this is a very valid, even essential question. Can small shops survive in this new environment?

    Well (as usual), it depends… If you digg a little deeper into financial figures of the printing industry, you can see something interesting. A few years ago I did an exercise with figures from several European countries. I’ve looked at the statistics of balance sheets and specifically the net profit margin. Not the ‘average’ (which is usually shown), but where is the top 25%, the median, the bottom 25% (so the good, the average, the bad).

    The result of this exercise? Smaller companies are more extreme: the top 25% has a higher net profit margin than the top 25% of the larger printing companies. But: the bottom 25% has a lower net profit margin than the bottom 25% of the larger printing companies. The larger the size of the companies, the more ‘average’ the results were (they were divided into 5 sizes). And this was consistent for the 6 or 7 European countries that I looked at.

    Ok, the figures, the exercise are a few years old, but my feeling is that this still is valid. A part of the industry is doing really well (taking the economic situation into consideration of course) and have a future, another part is already in (financial) troubles and has no future, unless they make a fundamental turn.

    BTW: what is also interesting, I’ve also compared these figures (the most recent ones, being 2008) from the printing industry with the rest of the manufacturing industry. And you know what has been a constant (and I have figures going back to 1994)? The top 25% of the printing industry has always had a better net profit margin than the rest of the manufacturing industry…

Comments are closed.