Those of us who love and devote our lifeís work to the printing industry have endured almost a decade of reductions. The traditional printing industry has seen a reduction in the number of printing establishments and suffered the demise of a number of relatively large vendors. It has lived through the loss of analog printing both faster than the growth of commercial digital printing, and faster than the traditional printers could economically join into the new growth in digital. Once the second largest manufacturing business in North America based upon number of employees, it is now fourth or fifth. Outsourcing continues to grow and printer consolidation continues.
Weíve seen the remaining traditional printers struggle to rebuild themselves into communications companies, information powerhouses, short run producers, Web site designers, and more. Finally, theyíre becoming wide format powerhouses. This market has been substantially filled already by commercial photo labs, screen printers, reprographics houses, and just plain new entities. Only in the last year, though, traditional offset printers have begun to see the light and join in. Overall, offset print has been seen as a declining business opportunity.
The Wide Side
The only print market segment that seems to be continually and significantly growing is that of short run digital printing, especially wide format printing. Through this growth, there are the beginning signs of market maturity. This raises the question, "Is wide format printing still a growth industry?" We can say with certainty that it still is, but there are some developments that show that maturity of market is beginning to occur. And these changes are mostly to the benefit of the buyers of the equipment, even though there may be some uncomfortable dislocation among the suppliers.
Adding to the situation is the fact that the question is not black and white. As we can see here, maturity is beginning to occur while the market continues to grow. So the question is somewhat future-oriented and is focused on timing. Let us recall that some film companies did join the digital color business when proprietary systems were still robust. PostScript was visible on the horizon but its devastating market impact was not yet widely understood and acceptance was slow to come in the supplier community.
So, the same is true in the wide format market. It started with entrepreneurial firms developing printing devices for a market yet to blossom. Over the last few years, the entrepreneurs have been slowly cashing out in favor of the conventional big dogs. Screen bought Inca Digital; HP purchased Scitex Digital Printing; EFI, Inc. purchased VUTEk; DuPont has come to market with its own branded products imported from China; and Agfa has also brought out a series of products developed for them by others. At ISA in early April, Fuji announced a new line of wide format inkjet printers that take advantage of its internal technology and its ink production capabilities.
As these big guys have entered the market, another major change has taken place that reminds us of the early days of the Canon Color Printer rollout. No longer unique in most markets, the wide format printer is finding that he has to compete to get work based upon price per square foot. What started as a money making market opportunity is now becoming overly competitive. Some existing printers are learning to streamline their operations to squeeze out costs by focusing on smoother workflow, and others are turning to new digital finishing technologies as the next market wave where competitive undersupply still allows for profitable pricing.
Overall for this market, there is still a significant growth forecast. Fortunately, the opportunities to use large format digital print are still growing dramatically. Most of this growth is at the expense of average price, with the low end of the market, the under $200K printer sales, growing about three times as fast as the higher priced printers.
For the printer manufacturers, this competitive drive has forced them to develop lower and lower cost technology. As prices decline, the buyers have the opportunity to gain significantly competent products for lower and lower prices, allowing them to move into more markets for which the printed price/cost is now acceptable. New printers with superior accuracy and good throughput continue to enter the market providing further opportunities for smaller and smaller buyers.
Lower prices mean that distribution becomes an attractive alternative compared to the cost of a single product direct sales force, forcing change. At the higher prices, direct sales had been the bulwark of this marketplace. But in keeping with the expected patterns of maturity, there has been a recent push to develop alternate distribution channels in order to grow. Inca is sold through distributor Sericolís network. VUTEk added Pitman, Global Imaging, Ernest Green, and others in North America. Agfa brought on a new group of dealers to match its new push in wide format. And DuPont added Spicers in Canada.
In addition, we are seeing much more price competition, as an endemic activity, taking place throughout the world. Regardless of value, and even without specific product competition, it has become harder and harder to capture list price deals, we are told. This is another one of those signs that maturity has begun to sink in. The entrepreneurs and early adopters will pay almost anything and accept product immaturity to enter new markets first. But, once the chasm has been crossed, technology becomes more and more treated as a commodity. Often the decision-makers shift from art directors to accountants. Price becomes more important than inherent quality, as long as the product is perceived as meeting needs.
Usually such price reductions begin to occur only as the market growth slows down. This does not appear to be happening here. In fact, there are some other contrary signals. For example, we were recently approached by a major international router company, perhaps the largest such manufacturer of industrial routers for the woodworking and architectural industries. The company determined that there is little growth left in that marketplace and it has decided that its long term path to continued growth is to enter the wide format print marketplace. They will be introducing a new router targeted for print at the Fall SGIA Expo in Orlando, FL. Where current products fit the upper and lower thirds of the typical product-market triangle, this new product is aimed squarely at the middle, high-growth area.
More to Come
Itís been a long time since major vendors from outside of the printing industry have entered this market because it is a healthy place to grow. This is a clear indication of the expectation and opportunity for continued growth.
Certainly, the excitement at the April ISA Expo supports the fact that wide format is still a major growth opportunity. The buyers were out in force and representing the many different facets of the industry. Business was booming. Although we are concerned that the larger players entering generally mean that commoditization is setting in, the end result, for now, seems to be greater technical and price competition, meaning additional growth opportunity for the buyers of the equipment.