News

- 08 July 2008

The first sectors that hit a recession are Construction and Printing. The Construction industry has been in recession since `October 2007`. The Printing industry is in `deep water` due to recession and other areas, for example of price cutting.

I share with you a few reasons to help you as follows;

Print organisations are being told to tighten their belts and prepare for a bumpy 12 months + as the developed world falls into a recession. Experts are calling for a slow down in the economy and the printing industry will see a faster shakeout of marginal print organisations in the coming months.

Print organisations who have been hanging on by their `fingernails` because they were unable to generate sales, failed to adopt new technology and procedures, never had their financial house in order, no people training and no business models will be closing their doors and disappearing very soon. So wake up to the solutions that are available to help you be successful!

But there is good news for the industry. As marginal print organisations close, their customers will have to find new printers. The surviving printers are going to have an opportunity to increase their sales volumes and demonstrate their value to a new set of customers. Customers still need printing and with fewer choices, the surviving print organisations will be in better shape to control the buying process. So, invest in the `right` people of any age, more training, the `right` business models and equipment that you really need!

Print organisations who can help customers overcome the pressures, they face the slow economy, will add a value. Customers will pay for that added value and everyone will profit. So, discuss solutions and partnerships for both parties to be winners!

Colin Thompson

Cavendish

www.cavendish-mr.org.uk

Matthew Parker - 08 July 2008

Any company should have a plan on how it is going to cope with the poor business conditions of the next year. Hoping to weather bad conditions is not enough: I am already planning specific new offerings to targetted markets to make sure that I start to gain new business streams to offset any downturn in my current offerings. It is interesting talking to printers: some are very aware of this and have interesting new plans in place, some are actively reviewing their sales strategy and some are doing nothing. Sadly, I think the last group are going to start struggling in the coming weeks.

Matthew Parker

www.printandprocurement.com

david hill - 08 July 2008

Gordon Brown, his government, opposition politicians and Whitehall Mandarins are all to blame for why the UK economy is not fit-for-purpose in the 21st century. They have all based their economic theories over the past 30-years on the ‘service industry’ phenomena that is highly susceptible to a global turndown unlike to a lesser extent, the manufacturing/industrial sector. Unfortunately now, the banks will not support that part of our economy, which has the propensity to weather a recession. They never have done as service industries have always come first and where our financial institutions have been progressively programmed and brainwashed in this way. Indeed, the banks do not understand also that only by having a high-tech manufacturing sector can any nation survive in the long-term in the 21st century. In this respect if they need advice, one has only to look at China for a comparison. With in excess of US$1.5 trillion in foreign reserves now that are increasing at over US$30 million a day anyone with any financial intelligence should understand this quite clearly and where manufacturing is king. Unfortunately our astute financial masters do not. No recession in China I can tell you, either now or in the future. The reason, the Chinese are the greatest savers in the world at 40% of all income earned and therefore in relative terms, recession proof. Indeed the Chinese economy has been predominantly built upon home savings and not inward investment as many would like us to believe. Therefore when will the penny drop in this country I ask and when will our governments and financial institutions start to understand that only through the principal support for high-tech industries will Britain flourish economically again. For this is the only area of economics that will count in this century I can tell you.

Therefore it will not be a change in political parties that will transform our economic fortunes, but a change in the way in which people in high places think. That is where it all goes wrong as it is certainly doing today and for many years to come.

Dr David Hill

World Innovation Foundation Charity

Bern, Switzerland

Charity No. CH-035.7.035.277-9

The Mighty wind - 08 July 2008

It will certainly be an interesting year, many companies have already hit the wall and more will follow. The switch to service industries david hill was discussing was due to the failure to compete in terms of wage costs with the likes of China and India, a process accelerated by "globalisation". The failure to control this process and the dismantling of the traditional controls over markets, financial and trading, is what I would blame the politicians for. Every decade or so some bright spark reinvents the economic cycle and discovers the answer to life the universe and everything until failure or another bright spark attempts to move the tanker.

The problems in the print trade are based in price pressure [mainly through overcapacity and the new holy grail of print procurement] and poor basic management skills. Without doubt the industry will over correct [and then the outsourcing debacle will start to squeal] before settling down.

John Grogan - 08 July 2008

I often think the people dishing out advice to printers in particular have little grasp of the industry. I am often bemused by the forecasts put out by the BPIF, which in recent months have been optimistic. However when one studies the breakdown of the research, it is obvious it does not represent the industry as a whole. The last time I checked the average number of employees per company responding was in the region of 50, however it is my understanding there are in the region of 13,000 printers in the UK with over 95% of companies employing employing fewer than 12 people.

From a manufacturing perspetive print has in my view been in recession for over 15 years The benefits of new technology has allowed us to become so much more efficent, yet margins are diminishing year on year. This leads me to believe efficency is not the issue at all, price is the issue as that determines the profitability. The issue is supply and demand, and the food chain for the procurement of print. It's a buyers market swamped by middlemen, basically due to a diminishing market, more effiiceint machinery we are all fighting for a diminishing piece of the cake. I doubt there are many business models that stack up in the industry. Money is tight as levels of risk are being reappraised, residual values of kit are decreasing dramatically, and many companies may unbeknowingly be insolvent. I can only use my company as an example, but the cost of the factory is £1.5 million. the cost of the kit is £3million. the monthly wage bill is £50,000, and I basically have to operate 24 x 7, turnover £200,000 per month, to break even. From the biggest to the smallest operations things are not that different. However more efficent we become if the past is anything to go by this will be passed on to the middleman, and possibly the end user.

I suspect many of us are in the situation we are because we don't know any different, print is all we know, we are printers as opposed to businessmen. Its a life style, it makes me smile when I tell people I'm in print and they often respond"There's money in that game"We have been used and abused for too many years, we are a dying breed. Maybe digital is the answer, but I doubt it!

Julie Cook - 08 July 2008

Well put John Grogan

John Grogan - 08 July 2008

I find I have to correct myself, I have just opened the Directions document from the BPIF statistics. The number of respondents was 95 with total employees 13,059, which means an average of 140 per company, the average turnover if my calculator serves me right is over £15 Million. It suggests it represents the trends of the printing industry, which I find dificult to accept. It would be intersting if Printweek could use this medium to research the market, with a few simple questions, which I would happily furnish. Thank you Julie.

Jack Sheperd - 08 July 2008

John very well put

The main problem for us all is low pricing and I am sorry but printers set prices not customers so there nust be a lot of printers out there who cannot add up!.

The Mighty wind - 09 July 2008

Well said john, price is the issue the high capital costs involved in print is not reflected in the current prices that can be achieved. i cannot agree with jacks comments normally printers would dictate the price but supply is above demand and thus the customer can shop around forcing printers to lower prices. Other factors are the print procurement guys driving prices down and some idiot printers believing they can knock out competitors by diving lower [mainly in web offset]. The end result is misery for print company owners and employees, I wonder if this industry will be of any importance soon. The only answer i can see working is some form of protectionism where the print industry fights off the procurement guys by mutual action. The only business model that can be discerned at the moment is stagger on until enough of your competitors fall to bring the price back up and pump out PR saying you are doing well. having gone through the recession in the late 80's early 90's this one is the worst yet

Mark Smith - 09 July 2008

Hi John

What you say is very much the case. Having been in print myself (and lost) the spiralling decline in profitability is a huge problem, along with the focus on print as a commodity by most buyers (it isn't, in my opinion). The problems with ever improving efficiencies is a constant reduction in profits as savings are passed on to end users, middle men etc. This method of running a business is how many printers operate and it is a difficult cycle to break (believe me). As we move deep into another recession (and that's what it is) we can expect more ridiculous pricing as firms get ever more desperate to fill empty presses. The winners will be the buyers (as ever). The idea of protectionism isn't a bad one, maybe some kind of trade body or organisation that somehow guards against some of the selling issues out there without infringing trading laws. Maybe it would be a step forward.

Matt Whipp - 09 July 2008

[quote user="John Grogan"]

It would be intersting if Printweek could use this medium to research the market, with a few simple questions, which I would happily furnish.

[/quote]

 That is a fantastic idea John. We have around a third of the UK print industry on printweek.com each month - what better platform to gauge the state of the nation. I think the first thing to do here then, given your previous comments, is to turn the metrics over to you, the readers - what should we be measuring, what questions would you like answered? You can just post your opinions by replying to this or mail me at matt[at]printweek.com

Patrick Curran - 09 July 2008

What would be good would be a forum attached to this website.

Matthew Parker - 09 July 2008

John has written an excellent piece, and I hope lots of people get to read it. I the the most telling comment is "we are printers as opposed to businessmen".

I have just put out a tender for a client. Over 20 printers were invited to participate (the client has a large supply base!). Only one has come back to talk to me to find out more about the tender, what the opportunities might be and to try and no-one has tried to proactively sell to me. I have had to chase 40% of the printers as they did not respond to my deadline to state if they were participating! It's not a great advert for the sales skills of the print industry!

Unfortunately, print has now been commoditised. For an unethical buyer it is easy to take a below-cost price because if the printer goes bust there are plenty of others willing to do the work instead.

So what is the solution? I have seen printers developing some great revenue ideas which mean that the purchase process becomes more than a price decision . One printer can charge double any of its competitors because its clients save so much through the ease of its ordering process. Others are offering value added services, such as digital asset management, which are very attractive to a client and make a decision to move away from that supplier extremely difficult.

For printers to survive they are going to need to stop thinking of themselves as printers and think more about how they can provide value added services to their target markets. A culture shift is needed.

It's easy for me to say this and to sound critical and I don't have a press to fill tomorrow. But I hope this post is seen as a positive contribution. I love the print industry: I just wish that more printers would be prepared to think differently sometimes!

Matthew Parker

www.printandprocuerment.com

Andrew Garnham - 09 July 2008

As someone who has sold equipment into the print/graphics sector, its my opinion that a lot of the profitability issues are self inflicted. On the whole the quality of salesman and marketing done by printers has been poor. If buyers (I was one once) bought on price and price only there would be just a couple of big printer in the UK. If the print sales person has the mind set that they are just selling a commodity then that’s what the buyer will perceive. I still firmly believe that people buy on value not price, and all too often the printer does not have a complete value based service packaged in a simple, presentable way to the buyer. The big opportunity with the internet is to get right into the corporate marketing departments (when is the last time your rep talked to a marketing director?) and look to provide good services directly using technology. But if the print reps go in with the mind set of “commodity” it will be. Print is definitely not a commodity because of all the diverse products and processes. - As a parallel look at the energy companies. They now package real raw materials (or what a commodity to me really is) with other services. As for low cost production - China may be referenced as a big problem, but they cant really offer the quality combined with service that a lot of printers over hear can. But if your convinced that’s the case, jump on a plane and do a deal with a Chinese printer and front it up with services in the UK – print remotely QC and service locally (we set a company up in China – its easy). Put your energies in solutions rather than doom and gloom and that means walking away from some deals – let some other fool do it.

John Grogan - 09 July 2008

Sorry Matthew Parker, I have to take exception to both your articles, and cite yourself as one of the blights of the industry. You seem to have a very simplistic view of the industry, with little conception of what is involved in running a print business, or even a print procurement business. You seem put out that of the 20 printers to whom you have sent tenders only one responded, I suspect the others have got you sussed as a time waster. 19 probably filed them in the same place I would! If you are a professional print buyer you should know your market and suppliers, and hopefully have struck up a relationship with them, judging by the fact 95% did not correspond with you would suggest your relationship management is not what it should be, or maybe that's reserved for clients. I spend many late nights on quotes for loyal customers, and bin the time wasters. I'm not sure on the size of your tender but these can take hours, lets assume 4 hours, if you were to expect 20 companies to spend that time, can you not appreciate how much time you are wasting in a very lean industry!

The solution may be that printers charge for all quotes, lets say £100.00 for a tender, would you then have sent it to 20 companies? I am sure you would have had a better response.

I was interested in your first article where you think printers should plan their business with new offerings like yourself. What you may fail to appreciate is new offerings require investment, training, space, power etc. I suspect your new offering is based on words, and if it doesn't work the only time wasted will be that of the poor printer who responded to your tender. Sorry Matthew but you touched a raw nerve, I would be intersted to know if you would be prepared to pay for quotes, as I genuininely think this could be a solution.

Matt Whipp - 09 July 2008

The print industry survey written by the print industry.

We have seen a lot of interest in the effects of the recession on

the UK print industry and the need for a means of representing the

state of the UK print nation on the industry's terms, so we want your

help in compiling a survey that answers the questions that matter to

you.

First of all we'll need those questions. You'll find a few

of our ideas below, but please feel free to add your own or suggest

different phrasing. Remember it's your survey, so get involved. You can simply reply to this post with your ideas or take a look at the main discussion thread on this topic by clicking here.

Suggested questions 

1 Which

areas of your business are profitable/loss-making?

2 What

percentage of your work do you make a loss on?

3 How

will you cope with the current economic climate? (muddle through, downsize,

acquisition strategy, organic growth strategy)

4 Have

you invested in new technology in the last six months/currently investing/last two

years/last five years/intend to in the next year/no investment

plans?

5 How

much of your business is domestic/international?

6 Company size?

(staff/turnover)

printers?

John Grogan - 09 July 2008

Issues I would be intersted in?

Turnover

Employess

Profit (Net)

Sales Forcast

Profit Forecast

Employee Forecast

Hours worked per week

Investment, Press, Digital, Finishing

Exit Strategy / timescale

Employees leaving the industry

Training Budgets

Naturally these questions are aimed at directors owners. My final question is if they could exit the industry would they?

Is it worth the effort, stress?

Should we charge for quotes i.e £5.00 per item, but not charged if successful in winning the business.

Final Question does anyone want to buy a large format printing business?

Trevor Collins - 10 July 2008

I am of the same oppinion that we might end up in a recession.  My business, Modern Print, is in Pembrokeshire, West Wales.  Only last month one of the oldest printing firms in the county closed its doors.  What's more today the receivers went into Colour Print UK, the largest printing firm in Pembrokeshire and I receved the receved notification that an old customer of mine had gone out of business.

www.modernprint.co.uk

Andrew Garnham - 10 July 2008

 I am not a printer, but an owner of a software business supplying software to manage the graphics supply chain (call it project management software). As someone who has sold into printers in the past both in the UK and Europe, I have visited more print shops that I care to remember.

I don't believe charging for a quote is acceptable, its part of the cost of sale.  We often get invited to RFI, (request for information) RFQ's (request for quotes). An incredible amount of work goes into a RFQ, with spreadsheets to fill in, company references - but having filled many of these in, we don't bother now if we did now know it was coming, we are just making the number up for the buyer, because they have partly set the criteria for selection with someone else. Ask your selves what % of quotes are you winning, and what the relationship - people buy from people !

If your sales were not talking to the prospect and have had input into the tender/quote request, then the chances are you are just making up the numbers. Again, its about sales skills. Now is the time to start selling like hell !. Increase the number of sales cold calls, get into the existing client base keep them well serviced. Do you have a good database, are you emailing clients with news of new kit, better service - keep drip feeding into their inbox's (not too much, but once a month). You need a good database of suspects, prospects and customers though.

Web advertsing grew by 39% last year - 39%, cinima ads went up by 10%, so what other media output channels can you get into ? (not easy I know).  That means marketing spend is moving to different media out put in reference to direct mail type. It cost about £300 to do an email type mail shot through a specialist company to around 1000 names, but £100 - £200 + to design the HTML ad / POS that is sent. Can you redeploy your creative to get into this area ?

On the pay for a quote thread - the last time I was told I would have to pay for a quote, which was by a builder my reaction, like most of you are thinking, was that its just the cost of sale. He did not understand this, so went on his way - the skill is not being a busy fool quoting on stuff you did not know about or were prospecting on and influencing. The more important question to ask is why you weren't talking to that prospect 6 months ago ?

I also think it prudent to keep you bank manager well informed in these time, they are a week lot and dont like surpriese, drag them in and keep them involved in what your doing (well most of what your doing) tell them what they want to hear, so the focus on other customers :-)

Steve Jay - 14 July 2008

I may be kind of controversial in saying this, but it is truly something I believe in. I have been in this industry since leaving school, I was apprenticed as a machine minder and grown up within this industry; an industry that I have enjoyed since leaving school. Whereas once upon a time there was value in our industry, pride amongst the workforce and a common goal throughout the company with everybody aiming to achieve the same thing, healthy profits so everybody can benefit. Healthy profits to ensure continual growth and re-investment and perhaps a nice christmas bonus at the end of the year. Recessions come and go as they have done in the past and will do in the future, but the amount of household name companies who have disappeared over the past 10 years has made me realise that this industry has metamorphicised (excuse the spelling) into something I no longer recognise or particularly like. The value has been smited from this industry, the change of making any decent money has long gone...unless you are in a niche market. I blame this atrocity entirely on print management. The cream has been taken away from us and we as manufacturers have to compete against each other and lose jobs to each other for ridiculous amounts, amounts as small as £ 20.00!! Margins are as such that we have to go in on prices as much as less 20-30% and even then we are undercut but a further 10%. When will this madness end??? we are simply destroying each other by allowing these huge conglomerates who invariably rely on our knowledge (as manufacturers), for which they are earning off. The talk earlier of paying for quotes...can you honestly imagine anybody paying for quotes when already we are 20% too expensive before we start!! I hope I haven't upset anybody as this is not a personal attack on anybody who works within a pm organisation. It is an attack on the principle of what these organisatins believe in..a drill the manufacturer into the ground; and when they've gone, find another one!! So in light of this forthcoming recession I don't think there is one "Safehouse" in the country. With margins already suicidaly low, we can strategise as much as we like, it all comes down to price, loyalty and "Gentleman's agreements" are a thing of the past. Everyone offers quality and service, there are no more "USP's" and we are in an already saturated market. Many people of my era have left the trade, I will be another one...how many more will there be until we all wake up!!!??