Let’s be honest, writing a gripping article about a data-laden market research report analyzing the size and growth trends of the wide format inkjet printing market is not that easy. Data tends to be dry. It helps if there’s a tantalizing tidbit in the headline that piques the reader’s attention. Now that I’ve got yours, let’s check out the changes in this exciting market, and try to pull some meaning from the numbers.
CYCLE OR NO CYCLE
First, we need to get something straight. Mother Nature likes to work in cycles. There is night and then there is day — repeat. Many of us experience four seasons: summer, fall, winter, spring— repeat. There is low tide and then comes high tide— repeat. There are championship sports teams in Boston — repeat! (Okay, that was a cheap shot).
However, unlike Mother Nature, the development of an industry in general is not cyclical; and the printing industry is no exception. Printing methods advance; the methods to produce signage advance; and technology as a whole — advances.
WHAT’S THIS ABOUT BUGGY WHIPS?
Technological advances, by their nature, change the way things are done, and the rise of one technology often comes at the expense of another. The end product may be the same, but the method for producing it changes. Recorded music is a good example. First was Edison’s cylinder-based phonograph, then came the disc-based gramophone, vinyl records, tape recordings, eight-tracks, cassette tapes, CDs and finally MP3 players.
I grew up in Reading, Pa— a stone’s throw from the heart of Lancaster County’s Amish Country. It was an unusual childhood day when I did not see a horse and buggy on the road. So it took me a bit longer to comprehend what the rest of my college classmates meant when they compared a struggling company to the last buggy whip manufacturer. And technology advances in this industry is creating a similar situation for companies that are not nimble enough to adapt.
During a more recent trip to the Keystone State, I thought of several other hometown analogies that may shed light on what’s been happening in the U.S. graphics market. But first, allow me to set the scene:
How big is the market for U.S. signage and graphics printing? The answer, of course, depends on your business. If your business is to supply the market with equipment and supplies, then the available opportunity in the U.S. was roughly $7 billion in 2007. Now, if your business is that of a graphics provider — printing and maintaining signage and printed graphics — then Web Consulting’s latest research pegs that 2007 opportunity at $22.68 billion. And this figure, based on annual shop revenue, represents a U.S. market growth of 9.6% over 2006. But the source of this revenue growth is changing.
And as I have said many times before, the accuracy of any market figure depends on its specific perspective. And the significance of that perspective to you relies on the fact that you share the same perspective. In each of my presentations at this year’s Sign Business and Digital Graphics Shows, I pose the following question: “How fast is wide format inkjet printing growing?” And I point to seven numbers ranging from -27% to 58% that scroll across the presentation screen. And attendees are surprised to learn that, depending on the particular business sector, each one is correct.
A SIMPLER TIME
For me, my childhood Pennsylvania summers were filled with hopes of finding cheap treasures at our weekly flea market or taking in the sights, sounds and smells of Thursday afternoon’s local livestock auction. It was indeed a simpler time.
It was also a simpler time for me when I could take a more historical view of the graphics market — of the days when shops really only competed against other companies like themselves. Historical business models —and the nature of the applications and customers these businesses served — fostered a situation where sign shops competed with other sign shops and where screen printers competed with other screen printers.
But today, if we look at the market with this somewhat antiquated perspective, inkjet printing is only just now starting to make a real dent. Let’s look at it from the perspective of sign shops and screen printers.
To date, the majority of revenue earned from these two segments (sign shops and screen printers) was from the fabrication, installation and maintenance of metal signs, banners, illuminated signs, vehicle wraps, posters, etc., serviced by traditional signage and analog printing methods. It may not be obvious, given the volume and variety of digital equipment on tradeshow floors, but it’s true.
But remember that technology is not cyclical, and inkjet printing is helping advance these industries. For example, Web Consulting estimates that the U.S. market for signage was $11.29 billion in 2007. This includes the revenues of some 23,000 sites representing four specific sign shop segments — namely commercial, electric, franchise and vinyl sign shops. In addition Web Consulting estimates that the U.S. graphic screen printing market topped $4.44 billion in 2007.
So here’s a $15.73 billion market driven by traditionally-produced signs and graphics as well as inkjet-printed applications. The market is growing, and inkjet already captures a full 27% of these shops’ annual revenue.
Well, my point is that while it is correct and valid to see this as the case, the market has changed. It is no longer that clear cut and simple anymore. Shops can suffer from “tunnel vision” today — like a train that is unable to get off of its own tracks.
FULL STEAM AHEAD
I’ll bet that most people in the United States have had at least one chance to “buy” The Reading Company— which in 1870 was the largest corporation in the world. This acquisition opportunity would present itself by landing on “Reading Railroad,” just five spaces past “Go” on the standard Monopoly game board. The Reading Company had capital worth nearly $175 million in the 1870s, but was forced to file for bankruptcy about a century later.
Many attribute the company’s demise to the fact that, like most railroad companies of the day, it failed to recognize that they were in the transportation business and not the railroad business. And for shops participating in the graphics industry, the question should not be “What business are you in,” but instead it needs to be “Given technology advancements, what business will you be in, and who will be your competitors?”
NEXT BIG THING
Another common question is “What’s the next great application?” Well, if I knew for sure then I’d be doing the printing rather than just writing about it. But what I can do is report on what applications are growing and how much revenue these applications are generating.
The better question to ask, perhaps, would be “What’s the best way to position your business?” Are you a one-stop shop or a specialty/value-added provider? The current trend appears to be for shops to focus on certain core sectors or product capabilities— be it similar applications, functionality, substrates— as opposed to doing a little bit of everything.
That’s not to say that there isn’t business potential in being a one-stop shop. The point is that doing a bit of everything may distract from a shops’ ability to offer “value-added” services that prove to be the key to client relationships. And on the flip side, another possible danger could be expecting too much opportunity from a single application.
In today’s market, sign shops no longer compete solely against other sign shops. Similarly, screen printers no longer compete exclusively against other screen printers. The availability and affordability of wide-format inkjet printing technology paired with its relative ease of use has all but eliminated historical barriers between user segments.
And just by widening the view of the market to include these other competing shops — in addition to sign shops and screen printers— inkjet printing immediately takes a far more significant position in the overall scheme of things.
By taking into account these new competitors — photo labs, service bureaus, digital printers and quick printers — inkjet’s position is certain to capture the majority of the market in 2008. According to our research, the value of inkjet-printed applications in 2007 has increased from 41% of the aggregate market in 2005 to 49.4% in 2007.
So this year will mark the first time that inkjet printing will actually surpass, in value terms, the signage and graphics produced by traditionally produced methods. I am not suggesting that neon bending, or cut vinyl or screen printing face the fate of the buggy whip; but there is no question that inkjet printing will continue to capture a larger piece of the growing market for U.S. signage and graphics.
And although the overall businesses for sign shops and screen printers are growing at 6% and nearly 1% respectively, the total market for wide format inkjet printing is growing more than 12% annually by value terms.
One of the other important and interesting attributes is the profile of the shops serving the U.S. graphics market. Over the years I have spoken with many shop owners and managers who were surprised to learn just where their business fits into the mix of U.S. shops. To some, the distribution of shop size is not surprising, while to others it is.
Some 66% of U.S. shops serving the graphics industry have annual sales under $1 million. And this makes sense if we recall how wide-format inkjet technology gained its foothold — by serving the specific advertising needs of local retailers. And it was the advancements of inkjet productivity that allowed it to grow and serve a growing piece of the advertising pie. The growing viability of longer print runs from inkjet is making this possible.
AUTOS AND INKJETS
When most people think of early U.S. car manufacturers, the name Ford often comes to mind. But although founded in Springfield, Mass., the Duryea Motor Wagon Company — the first American firm to build gasoline-powered automobiles — had one of its manufacturing sites in Reading, Pa. And just as today’s automobile industry is seeking more environmentally responsible fuel options, the printing industry is investigating eco-friendly options of its own. But compared to many sectors of commercial printing, inkjet technology is only at the beginning of its “green” evolution.
About ten years ago, UV-cure inkjet technology made its way onto the inkjet graphics scene. Soon thereafter the market was introduced to lower-odor and less aggressive solvent chemistries. And while it can be argued that these inks — sometimes called “eco-solvents” — are not 100 percent environmentally friendly, I applaud the movement by ink developers to find more renewable and non-petroleum bases for many inkjet inks. And our future analysis of the wide-format inkjet market will certainly include at least one new category of inkjet technology. Inkjet printing is certainly growing up and acting more like its predecessors in analog printing.
WHAT’S TO COME
And while Yogi Berra said, “It’s tough to make predictions— especially about the future,” I am happy to give it a shot.
The U.S. signage market will continue to shift towards inkjet printing — but only to a point. A good example can be seen inthe population of electric sign shops. Electrical shops represent a significant segment of the U.S. sign shop population; and for a laundry list of reasons, these shops have been very hesitant to add wide format inkjet printing to their businesses. So there is a limit to inkjet’s opportunity and potential for growth within certain segments of the signage industries. But have we reached that point yet? Absolutely not. Inkjet technology will not only continue to replace and complement traditional technologies, it will also carry on in developing new and creative opportunities for the users of inkjet technology. But for the health and overall profitability of the industry, the size of this opportunity simply needs to be kept in perspective.