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New Age Signage

How Sign Shops are Surviving and Thriving in the Digital Age

By Thomas Franklin

The joke among those in the signage industry is that in ten years being a sign shop will be a distinction without a difference. Opinions vary as to whether this is a positive development, but they are uniform over its inevitability. The question before sign shop owners, and digital printers angling for the suddenly up-for-grabs signage business, is how to adapt in a transitioning marketplace.

What is blurring the line between a sign shop and other print and graphics providers, sign shop owners and analysts say, is the proliferation of lower cost, easier to operate digital printers, price-driven demand, and the desire to keep customers in-house. The first trend in particular—lower cost, more versatile, and easy-to-operate digital printers—has occasioned an enormous influx of competition both from start-up companies and from digital printers homing in on new markets.

"There is a blurring of the lines between a printer and sign maker," says Kevin Corrigan, owner, Granville Signs. The shop specialized in business identity and monument signs but has recently seen huge growth for digitally printed vehicle graphics. Corrigan pointed to a recent job—producing warning signs for use at a nearby beach—that encapsulated the definitional confusion. "It was a vinyl sign applied to existing posts on the beach. Is that sign work or just digital printing?"

Despite the change, Corrigan still refers to his business as a sign shop. "Our customer base hasn’t changed," he explains, "only now we’re able to do more for them."

"I compare it to the cable and telecommunications industry," says Patrick Tierney, director of reassurance at Aardvark Imaging. "Just like you’re increasingly able to get everything—phone, Internet, and TV—from one place, so you’ll go to one business for all your graphics and sign needs." Aardvark Imaging is more focused on fine art graphics than traditional signage, but does outsourced work from sign shops as well. "Solvent and UV technology have allowed us to be a sign shop. It’s all bleeding together," he adds.

To capture this new business, Tierney says the company just purchased a new UV flatbed, "to get outdoor and durable-application jobs."

Going Digital
Traditional sign makers have taken notice of the trend as well, and are looking to digital printing technology to stay relevant. Sign shop owners argue that if digital printers are muscling in on their turf, turnabout is fair play.

"An across-the-board reduction in pricing is forcing sign shops to make changes and adapt to digital technologies," states Janay Rickwalder, director of communications, International Sign Association (ISA). ISA is not immune. The association is, "meeting the digital train head on," inaugurating a new conference, DP Extreme, in an effort to train its members in the intricacy of color management and other aspects of the digital workflow, Rickwalder says.

Colorado Signworks is one such shop considering the jump to digital. The firm got its start in the 1960s specializing in hand-painted lettering and

signage under the name German Sign. Still a family-owned business, company president Diana German is considering the purchase of her first digital printer to keep work in-house. "We think it’s hot, everywhere you walk in the mall you see it. It draws you in."

Corrigan noted that digital printing need not be intimidating. "Two years ago you had to know a lot about profiles and software and inks and substrates," he says. "Now [digital technology] is a lot more user friendly."

Digital has also increased expectations for what a sign is. "Signage used to be straight copy, now its letters and graphics," Rickwalder observes.

Technology isn’t the only culprit driving the market change toward digital, Rickwalder adds. The end-user has gotten correspondingly more demanding, seeking smaller production runs and quicker turnaround times.

From Neon to LED
There have also been changes in the electric side of the signage industry which, according to the ISA’s most recent survey of operations, typically accounts for the number two source of sign sales behind architectural signage. Patrick Stieber, operations manager for Allied Signs, Inc., a service and installation subcontractor for national sign makers, has witnessed many of these changes throughout the firm’s 12 years in the business. Specifically, there has been a strong move toward digital electronic signage and away from traditional commercial illuminated displays. These new digital signs, while only ten percent of Allied’s business today, are the wave of the future, Stieber predicts.

The virtue of digital displays, which Stieber has been installing for clients, includes their permanence and the ability to offer variable copy via computer programming. The new technology has also demanded a new skill set. "We’ve had to re-train the entire staff. Now you need a laptop to diagnose problems," Stieber says.

That’s not the only concern. New digital signage has ushered in, "a lot of permit headaches." Because the newer type of digital sign was not anticipated in many municipal codes, there is often resistance. Nevertheless, "we’ve been forced into this business," Stieber says. The traditional electric sign business is also moving toward LED from neon technology due to energy efficiency and easier maintenance, he adds.

ISA’s Rickwalder does note that cold cathode technology has emerged to keep neon relevant, "so we’re not sure neon’s days are numbered."

Supply & Demand
When Leon and Dorothy Gregory set up shop in 1956, they specialized in hand-lettered signs, screen print, and outdoor advertising. In the intervening years, Gregory, Inc. has grown to a 100-plus employee business serving the nation as both a wholesale producer of signs and graphics, and a distributor of graphics and sign making equipment and media. From this perch, serving over 30,000 customers with 12,000 to 15,000 active accounts at any one time, president David Wierengo sees a market with, "tremendous and exciting opportunity," albeit one with challenges.

"Our industry has gone through some consolidation," states Wierengo. The general growth in the market, and its corresponding influx of competition, has ushered in, "difficult times," for some, "but others are having phenomenal years—I’m talking 50 percent growth."

German says that industry-wide, businesses seem to have more difficulty in urban and metropolitan areas than in less populated suburban and rural areas. In addition, sign shop owners are not concerned about the demand-side of the business; it’s the supply side that worries them. The influx of lower-cost digital printers has allowed graphics producers to horn in on the signage business. "It used to be there would be a few bids on one job. Today, there are 60," German laments.

"This is a relationship market," Wierengo adds. In the past, if a customer asked for something you couldn’t do and you referred them away, you could still count on seeing them again. "Now, when they leave your shop, they don’t come back."

"I’m not pessimistic about demand, just worried about the general lowering of prices," Corrigan says. So is German, of Colorado Signworks. The years following 9/11 were lean, German states, where folks lost, "horrible amounts of money." Today, as the macro economy thrives and business demand has picked up, competition is flourishing. More competition not only drives down prices but also encourages less than above-board business practices, she adds.

"We’ve had two competitors go out of business in the last six months. One took off with a bid, the other didn’t pay their taxes. We finally discovered how they could offer such low bids," German laughs, adding that the situation has deteriorated to the point where some customers are reluctant to even leave deposits.

"The last five years, a lot of inexperienced people have come into this market," says David Gershman, owner, Brussian Strokes, Inc. A Russian immigrant, Gershman founded the business in the late 1980s, catering to the exhibition business. He adds that recently business has, "stabilized a bit."

The Keys to Succeed
While there is no formula for success in the sign industry, larger shops seem to enjoy a number of advantages. According to the most recent ISA survey, larg volume shops—defined as those with seven million dollars or more in sales—enjoyed higher gross margins at 34.5 percent, compared with 29.8 percent for small shops. ISA attributes this difference to lower factory overhead and lower direct labor payroll for larger operations. Larger companies outperformed small and medium volume ones with net profit after taxes averaging 4.9 percent versus 1.3 percent. The Achilles heal for smaller shops—among other things, higher administrative expenses.

For smaller companies to succeed, productivity may have to improve. ISA notes that the sales-per-employee in a larger operation was substantially higher—an average of $151,223—than it was for smaller firms—who averaged $96,455.

Wierengo analogizes his theory of success to a three-legged stool. Neglect just one and no business can be supported; become a student of them and a business may thrive. The three legs—cost, communication, and a commitment to excellence—have guided his four-year stewardship of Gregory, Inc.

Keying in on cost is of particular importance, Wierengo says. "It’s not simply a matter of knowing the cost of materials." You need to know the throughput of your machine and the amount of scrap produced when you use certain media sizes in certain printers. It requires a command of all your printing and media options so that expenses can be avoided before the job is even accepted. "You don’t need to know that you have waste, you need to know why you have it," he says. By way of illustration, Wierengo recalls how the company was recently approached by a shop for some print work. "We told the customer, ‘yes, we can do it the way you’ve requested, but did you know if you made your image a half inch narrower we can save you 21 percent on your materials?’ Now that’s knowing cost."

Another essential leg is communication, or in Wierengo’s words, "over communication." He adds, "Don’t give a customer what you think they want, give them what you know they want." The only way to know for sure is to ask a lot of questions and keep the lines of communication open. In this sense, "email can be a negative thing. Sometimes, you just have to pick up the phone and talk to a person."

For Brussian Strokes, reliability has helped Gershman’s business weather the price-cutting storm. "Anyone can buy a good printer and design program these days. You have to make a promise and keep it every time," to keep customers coming back. Low-balling your competition is a losing strategy, he adds. "You cannot use price," Gershman insists. "Everyone pays the same for media."

Brussian Strokes is also looking to build up its design services business to off-set the commodization of traditional sign making. "It’s not enough to accept an order, you have to make a sign work for your customers."

Part of Gregory’s success was not, "tying ourselves to any one type of technology. We have learned that equipment has strengths and weaknesses. No one single piece of technology can do it all."

Kevin Corrigan at Granville sees significant potential in vehicle graphics. "It’s so easy to do now."

"We’re looking to be more selective with our bids," German says. The company will also shed two obsolete crane trucks, replace a paint booth and, explore digital printing.

"In a down market there is a temptation to cut corners," Wierengo warns, "but those who succeed make excellence their priority. Sometimes, it’s okay to say ‘no’ to a bid."

Embracing Change
Digital printing has begun to permanently tread on sign shop territory, forcing the shops to adapt to new demands in order to stay in business. As with any business, sign shop owners understand that the key to success is keeping their customers content and in-house. The prominence of digital printing forces sign shops to embrace the technology and offer their customers quick, cost-effective products. At the same time, it is important to maximize profit, improve production, and eliminate waste.

Established sign shops have to offer lower bids with more competitors in line for the same customer. The advances on technology not only make it easier for small sign shops to pick up a place in the digital print market, but also allows for anyone with a digital printer and the right software to become competition. With the line separating digital printing from sign making fading quickly, sign shop owners are keeping an open mind to new technology, and in turn, keeping their customers.

 Mar2006, Digital Output

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