Costs scupper the Christmas cracker
By Jon Severs Wednesday, 31 October 2012
The soaring level of investment needed to operate in the short-term seasonal markets means that the sector is now only open to the very biggest of players
There was a time when the pre-Christmas period was such a bonanza for a certain set of printers that for the rest of the year, some of them could tick along with vastly reduced activity and still turn a healthy profit. Sadly, times seem to have changed.
For while the run-up to Christmas still brings a massive upsurge in work for those printers in the photo gift, calendar, diary and, in some cases, POS markets, accessing to that work has arguably never been harder. The overall consensus appears to be that only the biggest beasts can afford to survive in the pre-Christmas jungle – but there are signs that even they are struggling. Relying on Christmas work for your profits may well be a thing of the past.
The number of products that peak in the pre-Christmas period are extensive in the print industry. Everything from POS to novelty mugs and from calendars to photobooks are bought more in the period from late October to the last postal date before Christmas than at any other time of the year. It means that the companies in this sector may have to scale up significantly come October to meet demand.
"We do have a steady flow all year round, but a substantial proportion of our turnover comes in Q4," reveals Julian Marsh, commercial business development and photo products consultant at one of the UK’s largest photo product manufacturers Harrier LLC. "For that period, we balloon up and become a much bigger business; to put it in context, we are five times busier in the run-up to Christmas than in our quietest period of the year. In May, we could be receiving 20,000 online orders per day. In November, we could be receiving 100,000."
The pay-off for this seasonal boom was that you could dine off the rewards for the remaining 10 months of the year, getting by on a much lower turnover baseline.
"We used to be very heavily into diaries, calendars and other seasonal products and we would make all our profit for the year in that last quarter," reveals Gavin Page, managing director at Manchester Printers.
‘Would’ is the crucial word. Making a business model that relies on the pre-Christmas rush work is becoming ever-more difficult. The investment now needed to cater to the modern consumer print market, one heavily reliant on online sales, is nothing short of astronomical.
"You really cannot underestimate the capital investment needed to cope with big peaks in demand," says Marsh. "We have to be able to produce large numbers of products of the highest quality in a very short time. That capacity does not come cheap – we have the UK’s largest fleet of HP Indigo presses in order to cope with the demand. We even have an HP Indigo engineer on site during the busy period and we have a complete Indigo in spare parts ready for repairs. It is critical we run right through.
"You also have to have extremely robust disaster recovery systems. We have a number of partners around us, commercial printers we can outsource to if we have a problem. Our IT team plans for every eventuality, too – we have three fibre-optic cables from three different suppliers on three different networks, so orders can always get through whether someone cuts through a wire or a supplier goes down. All our servers also have full redundancy, we have back-ups on second sites, and we have battery back-up and generator back-up in case of a complete power failure. You cannot afford a mistake or even a temporary blip in production. Our clients won’t tolerate it, neither will their customers."
Deep pockets required
This scale of investment obviously runs into the millions of pounds, but Marsh says that kind of spend is now essential in order to reap the rewards. Today’s consumer wants to order online and receive their goods within 24 hours. This change has meant that those smaller print operations, such as Manchester Printers, who used to command a slice of the pre-Christmas market are focusing their efforts elsewhere.
"In years gone by, diaries and calendars and the like were a massive part of our business; we did a lot of work in the Christmas period and a large proportion of the company’s profits relied on that end-of-year peak," explains Page. "But over the past couple of years, deadlines have got tighter and the investment needed to compete is more extensive. We do not have the volumes to make that investment justifiable, so we have had to scale back our work in this area and concentrate on a more balanced workload across the year."
Considering Harrier prints photo products for the likes of Boots, Truprint, Tesco and Snapfish, you’d have thought it would be big enough to still follow the model Page has had to abandon – millions of orders ought to be enough to carry the business through. However, Marsh says even an operation of Harrier’s scale is having to become less reliant on a seasonal boom.
"It’s a massive challenge to make the peak work pay for the quieter months in the year," says Marsh. "We have had to adapt and look at new areas, and thankfully we are a big enough company to have the resources to do that."
New areas means going against the tide and moving into commercial print – utilising the massive press capacity to chase commercial print work, while those in the commercial sector are moving in the opposite direction, into photo products.
What Marsh is aiming for, if unknowingly, is the situation Augustus Martin is in.
Daniel Pattison, sales director at the POS giant, explains that his market enjoys a similar peak in the pre-Christmas period, as retailers seek to capitalise on Yuletide shoppers, but he says the extremes in demand are much less dramatic than in the photo gift, diary and calendar markets.
"Because it is Christmas, retailers will push the boat out and we see an increase in ad hoc work – extra pieces of POS not necessarily for the permanent fixtures. While this means there is a surge for Christmas, it is not as pronounced as, say, greetings cards or calendars," he explains.
Of course, Augustus Martin is a substantial operation, with a stable, high-volume turnover of work throughout the year. While Christmas does bring an upsurge in orders, the company absorbs it into its existing capacity. The preparation for the period requires no extra staff or expensive bespoke kit, it is just about planning and keeping on top of things.
"We put a lot of work into our relationships with clients so we know what is happening well in advance," says Pattison. "We need to know months before delivery what we are going to be expected to produce in terms of the look and feel so we can put the production and logistics in place. We also manage the capacity with what we have already. When pitching for work, we ensure that we have the resources to meet that client’s expectations."
Augustus Martin is able to make the Christmas period work, then, because it is a large enough company in its own right, with all the kit and infrastructure in place already to cope with the workload, rather than being a small operator scaling up to service a short-term demand.
Of course, POS is an established year-round market, while received wisdom suggests that products like calendars are tied to the last two months of the year. This, however, is not the case, according to Martin Rees-Davies, sales director for the charity and mail order division at calendar behemoth Jarrold Calendars. He explains that calendars can be made to work on a year-round basis too.
"We do a lot of work with charities, such as the National Trust and the RNLI, and they take delivery of their calendars in May," he says. "The regional range of calendars – counties and sites of specific interest – is needed just before Easter as the tourism and heritage markets begin to kick in. And then over the summer you have the organisations such as mail order catalogue companies that send calendars out to mailing lists. You then get the retail market from August onwards, the main bulk being in September to December, right into January when the sales are happening. With the right mix of work, it is a 12-month job, not just an end-of-year rush."
He admits, though, that while some smaller operations may be able to replicate this client base on a much smaller scale, competing on cost with the bigger companies will be extremely difficult.
"It is possible in some cases to do it as a smaller operation, but there is a lot of upfront cost in every element of the process and that can be helped by economies of scale. The sheer volume of calendars we produce means we have an advantage in every element of production," he explains.
So it seems that relying on the end-of-year profit boost of seasonal work may be a thing of the past for many companies. The massive infrastructure that needs to be put in place now to cater for the tech-savvy consumer means that any kit brought in to cater for the Christmas period has to earn its keep all year round.
Unfortunately, the required spending power and economies of scale means that this task is easier for the bigger printers than the smaller ones, and so the once open Christmas bonanza may now be restricted to a few very large companies for whom the Christmas work is not actually that much more of a task than their usual day-to-day business.
Latest jobs Jobs web feed
- New Business Development Manager Key Recruitment Upto £60k dep on exp, London
- Senior Account Manager (POS/Retail) Pyramid Consultancy Ltd £35000 - £39000 + benefits, Central London
- Print / Direct Mail - West Midlands asg £60,000 + Bonus + Benefits, West Midlands
- Large Format Digital Printer | Digital Print & POS | Cambridgeshire Mercury Search and Selection £16k-£22k + OT + excellent benefits package & 20 days' holiday allowance, Cambridgeshire
- Client Services Director - UK asg Up to £110,000 + bonus, car & executive benefits, UK