Can PSPs become demand creators?
Print has fully transitioned into the mature industry stage. Demand destruction is now minimal. Slow growth and steady income are now the norm. And that is not bad at all.
Expect more consolidation as overcapacity continues to cap prices, even with the temporary boost inflation provides. A small but positive inflation rate is economically useful. A slightly positive inflation rate greases the wheels of commerce. The current furious rate of inflation will slow either through Federal Reserve actions or by free market forces.
The question is how does the print industry grow in the face of 20 years of demand destruction? Chasing trends will continue; embellishment, textiles, and such. But growth is unlikely to be much more than 1-2% per annum. A mature industry has a strong reliable customer base. Typically, the maximum amount of that base is already capped. This means the demand that remains is at its most reliable state. The mature status of the print industry is what is driving consolidation. The stable characteristics are what investors see: reliable demand, steady cash flow.
Going forward the best model for growth is to add services the existing market also uses. For print this includes design services, fulfillment, and distribution. PSPs should understand, for example, that Direct Mail is print plus distribution and is not an exotic, mysterious service. Through current technology it is relatively easy to add to an existing manufacturing workflow. Automation applied wisely will deliver efficiencies allowing a competitive pricing position while maintaining quality and reliability.
Heidelberg Car Charger and RICOH Service Sectors
To go further and leave the strictly defined print space is a viable strategy. Heidelberg recently announced products for charging cars as they search for revenue channels outside of printing, utilizing their considerable engineering and manufacturing strengths. Another press manufacturer is using their foundry to produce parts for electric generators, a non-print division of their holding company. RICOH and Konica Minolta have business interest in areas entirely unrelated to print, both through leveraging their existing technologies and acquiring others. Can printers do something similar?
Consider the pandemic and resulting need for Personal Protection Equipment. The pandemic inspired innovation resulting in PSPs designing and manufacturing masks and sneeze guards. Things they could manufacture. Not print, but still a manufactured product.
Some of the channels print used to serve are now digital services. PSPs would seem to benefit by offering support for those services. Digital media is not a trend, it is a growth area where printers have, or least had, a foot in the door. Printers of all sizes should look to serve specialized markets. Ideally, they will create opportunities with digital media services; and with minimal effort. The ad agencies and marketing studios that ordered print for ad campaigns simply started creating content for digital. Why aren’t PSPs that nimble? Ultimately, success and growth will likely require a move away from pure play manufacturing.
There is a lot of buzz promoting certain print processes as growth opportunities. The problem with trends is that they tend to be temporary. Processes like embellishment, wide format and textile printing are not new, they simply are easier to produce with digital technology. And just like all print, the demand is from the creatives, upstream from manufacturing. PSPs must wait until someone asks them to manufacture. Can PSPs compete by becoming demand creators? It is possible if they incorporate design services or create products in a sector where there is demand growth.
Print is a stable industry; an increase in market demand is not likely to grow new business. If PSPs want to grow their business, they will need to acquire other printers, be acquired, or find new services to drive revenue higher. It is good that the print sector has reached a stable state. The challenge is to see what path to take for relevancy, innovation, and driving growth. Not just to survive, but to be successful.