Printers are going all out to stay alive
Like everyone else in this economy, printers are doing whatever it takes to stay in business. That means trying to integrate new technologies which will allow them to offer clients a wider range of electronic services, and mining their customer databases more deeply.
Over the past several years the printing industry has seen a wave of consolidation and several high-profile Chapter 11 bankruptcy-protection filings such as Quebecor World's last January.
Printers polled by Direct say the recession is trumping other concerns like paper costs and the threat of do-not-mail legislation.
“With the economy faltering, everybody's trying to do the same thing,” says Eric Blohm, vice president for direct marketing sales at Quad/Graphics in Sussex, WI. “The piece of pie has become smaller. For companies to survive they have to keep mailing and get people coming in.
“The formats are changing, but the strategies are similar. They're all mailing smarter, using fewer pages — which means less paper and lower postage rates. Some are surviving and some aren't.”
Blohm admits to a decline in the number of direct mail pieces and catalog pages Quad is printing but says double-digit growth in the firm's data services business is leaving the company about even financially with 2007.
Tom Wicka, chief marketing officer at IWCO Direct in Chanhassen, MN, puts it this way: “The elephant in the room is the recession. Our number-one issue is trying to adjust our business to reflect the times. I think everyone is coming to realize that this won't be an in-and-out 2008-2009 downturn.”
The company, which specializes in printing direct mail packages for financial services firms, is trying to recover from some market miscalculations it made recently.
For example, last October IWCO closed its Elm City, NC unit, laying off 380 employees and transferring equipment and production operations to three plants in Minnesota.
“That facility was new,” Wicka says. “We bought it thinking the market was still expanding and looking for more capacity. But the market dried up quickly in 2008.”
He adds that the firm plans to keep investing in new high-speed equipment and wants to hire about 250 workers in Minnesota by the third quarter.
IWCO's fate may not have been the worst of those in the printing industry. Last January, Montreal-based printing giant Quebecor World received bankruptcy protection in both U.S. and Canadian courts, sold off European facilities and has been operating ever since.
In June, Quebecor merged its U.S. retail insert, catalog, direct mail and Sunday magazine printing divisions into a new integrated marketing solutions group.
As part of its Chapter 11 reorganization, the firm closed a magalog plant in Quebec which printed advertising inserts for the U.S. and Canadian markets — after it had laid off about 700 workers at plants in North Haven, CT and Etobicoke, Ontario.
While continuing as a conventional printer, Quebecor also is putting faith in new online products, notes Ron Myers, marketing director of the Schaumburg, IL facility.
One is Net.Driver, introduced last June. It's an online method for reaching customers who buy from catalogers' Web sites rather than through the mail. Another, Store.Driver, rolled out in late November and is intended to steer people to retail stores through several channels.
Myers hinted that Quebecor was working on a mobile marketing product: “We're starting to leverage all channels using the print piece as a core.”
Does this mean traditional catalog printing is dying? Myers doesn't think so, but he predicts a spate of “integrated campaigns that take advantage of all channels” in 2009.
“We still know that 60% of consumers want to receive coupons by direct mail. So print isn't dying and is not going to die. As a printer, we just lean toward multichannel.”
Even without bankruptcy filings the industry has been consolidating over the past few years, with major players like R.R. Donnelley acquiring competitors like Banta and others.
But not every printer has pushed that approach to the same degree.
“Quad's not an acquisition-based company,” Blohm says. “We've done small, unique firms. We're all about growing into newer markets vs. consolidating in our existing market.”
In 2006, for instance, Quad bought Openfirst, a direct mail services firm “that got us more into the letter-mail side of the business,” Blohm says. “So again, as a cataloger might make decisions to mail fewer catalogs but uses direct mail to drive people to retail, we enhanced our business with that acquisition. Now it's a Quad/Graphics facility doing just direct mail.”
Besides the economy, perennial concerns like postage and paper prices continue to affect catalogers — and, therefore, printers.
“If you go back a few months it was an extremely big issue. But paper has flattened out some and it's more manageable now,” Blohm says. He adds that printers probably bought more paper than usual because private equity groups were snapping up paper mills and exchange rates were fluctuating.
“Internally, we were trying to find more storage room, so there was a little bit of panic that drove people to buy more paper. But I think that's leveled off now.”
As for postage costs, Blohm believes that, despite the enactment of postal reform legislation in 2006, many catalogers are still smarting from the aftereffects of the massive 2007 hike under the former law.
Like Quebecor, Quad is going deeper into online marketing. “Over the last six to eight months I've spent a lot of time talking to catalogers — the marketers with both retail and Web channels — who ask, ‘What's an alternative to this catalog?' Blohm says.
Another possible growth area for Quad is digital printing, which until fairly recently could only be used for small runs since it costs much more than conventional offset jobs.
According to IWCO's Wicka, “The positives we see for 2009 are the opportunities where variable color and personalization eventually become an affordable, mainstream option for direct marketers. Up to this point it's been a high-cost niche, more for smaller runs and one-to-one communications.”
So what lies ahead for printers?
“I think a lot of people will struggle,” Wicka says. “2009 will be a tough year — it's gonna be the haves and have-nots.
“You'll have to be healthy enough to reinvest in your business because customers are going to require new technology to be brought online,” he adds. “If you're not, it will be a tough year because you're not going to put new technology in play for your customers. So it might be hard to keep up with the competition.”
