By Tim Greene
A recently completed study by IDC on the North American large format digital printing market called The Evolution of Large Format Print Services looks at different elements of the business of large format printing—applications, hardware, sizes, and print media. It focuses on customer demands for print service providers (PSPs) to determine where large format print is headed given the ongoing convergence among some of the traditional market segments.
There are a lot of important findings in this study but one of the most significant is what the companies in the large format printing market are saying about overall business and profit trends. As the market converges and more companies get into large format printing, it is natural to wonder if the market overall will continue to grow or if a concentration of competitors will drive pricing down so much that the overall market value starts to decline.
Growth by Cost Reduction
IDC believes that price compression is having a fairly significant impact on the growth rate of the total market, especially in terms of revenue. While forecasting large format digital graphics print volume to grow at a healthy 6.3 percent over the next five years, expect the revenue from that graphics print volume to grow at a more modest 4.5 percent. Referring to large format graphics print volume includes an expanding range of products and materials, from metal to fabric, which is required to produce the range of applications printed on large format graphics printers.
Commoditization of some large format print applications is likely driving some shops to pursue other, more lucrative business opportunities. Certainly many large format print shops can report that their local market has changed and they can’t get the price premium that many large format applications used to command. However, even if prices for commodity large format printing applications aren’t what they once were, shops have been able to develop ways to cut costs to offset those price declines to maintain profit margins.
Overall, the shops that completed the IDC survey indicated that, even in the face of convergence and commoditization, they actually had large format graphics print volumes and the profit margins derived from those sales increased over the past 12 to 24 months.
This primarily happened by cost reduction. About two-thirds of the shops surveyed indicated that their investments were about driving operational efficiency and all of its benefits such as the ability to turn jobs around faster or to run each job at lower cost by using more advanced printing technology to print at a lower cost or by automating tasks to apply less labor to each job. Many shops recognize an additional upside of new printing capabilities, such as new colors that provide a wider color gamut and make it possible for shops to drive a higher price for specialized printing jobs.
Of course, many of the investments shops make are not just about hardware, it is also about software that gathers and reports vital operational data that helps to find areas of inefficiency both on the production floor and on the sales side.
A lot of the development on the software side from some of the top large format print software manufacturers is designed to make shop management and quote development easier by making vital cost and usage information available.
Having that kind of information allows for decisions about jobs that can benefit shops’ overall profit margins since shops are able to recognize which jobs they can produce profitably and which jobs they should outsource. If a customer is beating them up on price they can take the orders then outsource the work to a wholesale printer, some of which operate all around the country and can turn even big jobs around on a next day basis.
In the survey, IDC asked large format printing service companies if they are or have investigated new applications and new markets. About three-quarters of the companies surveyed reported that indeed, even in their growing business, which, on average, has a growing overall print volume and a growing profit margin, they have investigated new market opportunities.
In some segments, such as graphics screenprinting and large format reprographics, that percentage is even higher because their traditional business is changing even faster than other segments. This just shows that these shop owners and operators recognize the need to find new revenue and profit sources because they see what has happened to prices for some of the core large format applications.
They invest in all kinds of things to evolve their business. The most common answer is to expand the services part of their business, whether that is design services—the number one answer; or installation services—the number two answer. These are probably a lot clearer to these shop owners since they are closely related to large format printing services and they see the need for these every day.
There is also a lot of interest in label and package printing. About 25 percent of shops interested in new opportunities are looking at these markets, which IDC believes is because labels and packaging, unlike other parts of the printing market, are not susceptible to digital replacement.
Along those lines, an area that IDC thought might/should be of more interest is digital signage. The thinking is that as certain applications go digital there might be more shops interested in developing digital signage solutions, or at least developing content for digital signage solutions.
Interestingly, about 20 percent of large format print shops reported that they are looking at adding narrow format print production. The other way around, where narrow format print shops such as copy shops and quick and commercial printers add large format printing services, gets a lot of press, but large format shops may find it just as easy to expand into narrow format production.
The biggest takeaways from this study, which combined surveys with a wide cross section of PSPs with in-depth interviews with suppliers and distributors, are that the large format printing market continues to grow. This is fueled by an expanding range of applications enabled by new technology and services created by the driven and entrepreneurial large format shop owners and managers.
Tim Greene is a research director within IDC’s Hardcopy Solutions group. Greene is responsible for coverage of the large format printing, three-dimensional printing, and digital signage markets. His research and insights help companies in these areas understand and take action on digital transformation of their business. Greene joined IDC in 2014. Prior to joining IDC Greene was the director of the large format printing research service at InfoTrends—now Keypoint Intelligence—where he covered large format printing on a worldwide basis for over 17 years. In that role he conducted primary research studies for syndicated services, multi-client studies, and custom consulting engagements for clients around the world. Prior to joining InfoTrends, Greene was a consultant with BIS Strategic Decision and GIGA Information Group covering the digital printing market.
Mar2020, Digital Output