Industry Consolidation: No Panacea
When previously asked what they were counting on to increase sales, 52.8% of NAPL State of the Industry participants cited “gaining work from companies that go out of business.” Fortunately, few companies (3.1%) were counting entirely on the failure of their competitors.
There is no question that the industry is consolidating. NAPL estimates that at 25,735 in 2012, printing establishments will have fallen by almost 5,000—or 16.2%—since 2007 and almost 32.0% since 1998. Based on these data, it is not difficult to see why some companies are counting heavily on industry consolidation to improve their situation going forward. But there is a stumbling block with this line of reasoning: Despite consolidation, the commercial printing industry is more competitive than ever. Companies looking upon consolidation as a panacea to the many challenges confronting the industry are setting themselves up to be disappointed. Business from companies closing their doors is not going to be distributed evenly among surviving companies.
For starters, no company is guaranteed a share of that business. Having made it through the recession does not necessarily indicate that you are on the right side of the market redistribution that typically follows recession—a redistribution that is already taking place. During the first three quarters of 2012, commercial printing industry sales (from all sources not just ink on paper) are barely up (0.1%) over last year. However, results for NAPL State of the Industry participants show that performance varies widely from company to company: Almost 53.0% report an increase in sales, with 34.3% reporting sales up more than 5.0%. At the other end, 47.0% report sales had declined, and for 26.4% the decline was at least 5.0%.
This wide variation highlights the presence of factors other than consolidation in determining sales performance. Factors such as companies:
• Trying new approaches to marketing.
• Deepening relationships with clients.
• Learning more about their clients business.
• Increasing efforts to provide greater value to clients.
• Adding new services or entering new markets.
These and other factors are helping companies create their own recovery. As the data indicate, some have been quite successful at it.