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Just What's Happening to the US Wide-Format-Graphics Market?

(July 2005) posted on Fri Jul 29, 2005

Find out what market changes have led the decline of wide-format inkjet printing equipment purchases and what graphics producers can do to remain competitive.


By Michael Flippin

For many print shops—and for many suppliers—remaining competitive has meant cutting prices. I recently spoke with an industry colleague who, before making a presentation, asked the audience how many shops made their revenue goals last year. About half of the people in the room raised a hand. That wasn't too bad given the recent economic climate. He then asked how many made their profit goals last year and only one person raised his hand. After the presentation, that lone person felt obliged to add comment. He said the only reason his shop hit its profit goal was because he projected they would lose money. While they were still not profitable, they ended up losing less than expected.

We have confirmed this trend through our research at Web Consulting, as we track both supply pricing and finished graphic pricing in a quarterly economic snapshot report. In the screen-printing segment, gross margins have been seriously pressed for the last several quarters. In our most recent report, looking at the first quarter of 2005, screen printers indicated that, on average, their purchase pricing for basic screen-print supplies increased by 6.6%, yet they had only raised their finished graphic selling prices by 2.7%. The long-term effect may not be good, particularly for the smaller screen printers, as it may be harder for them to run on the leaner margins. This fact may point to the possibility of even faster market consolidation. In short, the bigger guys are likely to continue getting bigger.

So what do you do? In some cases, maybe change means outsourcing, instead of printing in house. The outsourcing of printed graphics is quite common and in many cases is the best solution. Approximately 40% of shops currently not using any wide-format inkjet printers mentioned outsourcing of graphics production, and this, on average, represented 5% of shops' overall revenue. In other cases, it may unfortunately mean price cutting, but that should not be the direction of choice.

I believe we will continue to see more specialization and focus around applications. In this market climate, the generalist approach doesn't appear to work. The digital printing process has all but become a commodity, so the focus for the print provider needs to be on adding value in the form of service and support before and after printing. I'm not suggesting this approach is easy, but there are opportunities. Many of them just may not be in areas where graphics producers have direct experience.

Moving on

So as the market moves from being an aqueous-centric one to one that uses more solvent and eco-solvent inkjet printers, what does that mean for the typical graphics shop? We believe that the answer often varies by a shop's history. For example, a sign shop that adds a solvent/eco-solvent printer may expect to replace traditional cut-vinyl jobs with the inkjet printer. What often happens, however, is that the inkjet printer compliments the cut-vinyl business and both the inkjet and cut-vinyl businesses end up growing. Or a screen printer that adds a solvent or eco-solvent printer may be able to run some of its smaller run jobs on this equipment, thereby earning larger profit margins.

In many cases, however, these are new opportunities and inkjet cannot simply replace traditional graphics technologies. Inkjet will have its place along side these other technologies for years to come.

It would be an untruth for me to say that the state of the wide-format digital graphics market at any given time makes sense. What you see today is rarely what you get tomorrow. So don't worry, you are not alone in trying to figure it out. Just keep running.
 


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