Commercial Printing Industry Outlook: Preparing for the Upturn in 2021
The commercial printing industry will grow in 2021. Growth will begin during the second quarter, and accelerate through year end. No company, however, should count on the upturn or the shakeout of weak competitors to make everything right. Much will be different in the post-COVID world. And much of the gains ahead will be reserved for companies already thinking about those differences, and how to make them opportunities rather than threats.
Those conclusions are based on the COVID-19 Print Business Indicators Survey, conducted every other month by PRINTING United Alliance and NAPCO Research. Nearly 200 commercial printers participate. The diverse group has annual sales ranging from less than $1 million to more than $700 million, and is located across the U.S. and Canada.
We measure percent change in sales in two ways. Year-over-year is the first to capture the depth and breadth of the downturn. Among all companies surveyed, sales fell 16.9%, on average, during the first three quarters of 2020 compared with year earlier levels, declining for 81.9% — by at least 20% for more than half and at least 30% for nearly one-third — and increasing for just 17%. One participant speaks for many when he describes what’s happened this year as a “seismic downturn.”
Change over the last 30 days compared to the previous 30 days is the second way to track what’s happened since the pandemic began earlier this year. (To compare 2020 with 2019 is to compare two different worlds.) As Figure 1 shows, last spring sales declined 53.7%, on average, 30-over-30, with reports of contraction exceeding reports of growth 89.5% to 4.3%. Now sales are rising fractionally, with reports of growth exceeding reports of contraction 47.9% to 30.9%. That’s movement off bottom. And it’s the first step toward recovery.
Confidence and capital investment plans also give us a read on the state of the commercial printing industry heading into 2021. As Figure 2 shows, just 30.9% of our survey group expects business to improve during the month ahead, down sharply from 45.2% in summer. We still don’t have the answers to critical questions such as: When will clients be able to operate at full capacity? When will restrictions on in-person events be eased? And when will travel and tourism rebound?
Investment Plans for Capital Equipment
As Figure 3 shows, just 33% plan to invest in capital equipment next year, 23.4% do not plan to invest, and 43.6% are not sure whether they will invest or not. Again, the problem is uncertainty far beyond the garden variety. (For the minority who do plan to invest, e-commerce, MIS, prepress/premedia software, digital infrastructure, and bindery/finishing capabilities are the top targets.)
Where we go from here will depend on the American economy. Forces pulling the economy down include renewed lockdowns due to resurgence in COVID-19 cases, fading effects of initial rounds of fiscal stimulus, and Washington’s failure to pass additional stimulus.
And because this recession is rooted in biology, not economics, recovery will not reach full strength until we are comfortable traveling, staying in hotels, being in large crowds, and doing all the other things we did routinely prior to the pandemic. No one knows when that will be.
Forces pulling up include a strengthening job market — we’ve recovered more than half the 22 million jobs lost during March and April — and record monetary stimulus, with more on the way. We also know much more about the COVID-19 virus than we did last spring, have better therapeutics, and are very close to a vaccine, which of course, will be a game changer.
Economists surveyed by The Wall Street Journal see the forces pulling the economy up as stronger than the forces pulling it down. The consensus expects GDP to grow 3.7% in 2021, well above the 2.3% average annual gain during the 10 years prior to the COVID-19 recession. That would create an additional $681 billion of final goods and services — more than the combined annual shipments of computer and electronic products manufacturers ($333.6 billion), beverage manufacturers ($104.7 billion), and paper/paperboard product manufacturers ($193.7 billion).
As the economy strengthens, so will the commercial printing industry. PRINTING United Alliance expects the industry’s total sales (all sources) to grow 2.5-4% next year, after falling 15-18% this year. In dollar terms, we expect sales to reach $78.3 billion, more than $2 billion better than 2020, but still $8.1 billion, or 12.1%, short of 2019 pre-COVID levels.
Some commercial printers we surveyed are not waiting for growth. They have been creating it by capturing opportunities created by the crisis — “We made a pivot to PPE, face shields, sneeze guards, etc. This has been incredible for us. Print is down about 30% year-over-year” — and by moving into industries that got a boost from the pandemic, such as health care, home entertainment, home education, and food packaging, their sales were up 25.7%, on average, during the first three quarters of 2020.
Who are they? They are not companies of a particular size and do not offer a particular set of technologies, products, or services. Rather, they are aware, entrepreneurial, and agile. Those traits will be as important to participating in recovery as they were to beating the recession.
So will thinking ahead. Of course, priority No. 1 is leading our companies through the COVID crisis. But we benefit little from entering the post-COVID world unprepared for its opportunities and challenges. We cannot think about tomorrow without losing sight of what we need to do today. Many in our research panel already are.
We asked where they see opportunity. Some don’t see any, aren’t sure where it will be, or see it only as an ongoing need for PPE, social-distancing signage, and COVID-related printing as the pandemic drags on. Others, however, see opportunity in a number of areas, with these cited most frequently:
Targeted, personalized direct mail/printed communication supported by the advanced data analytics. We heard a lot about the high ROI this service delivers to clients, about how “more people are getting back on the direct mail bandwagon because they are Zoomed out and the number of emails is overwhelming. How do you get your message through that?” And about direct mail “resonating with people again — even a few who say they wouldn’t have thought of using it six months ago.”
Helping clients rebuild and advance through deeper knowledge of their businesses. One commercial printer puts it concisely: “The opportunity is in selling advice and expertise. How can you make the client money? Learn about their businesses. Use their website, social media platforms, and forums they participate in. Bring them ideas. It’s particularly important now; everyone needs more business. And everyone will need more business during the recovery.”
Diversification. Offering services such as fulfillment and kitting for virtual events, and wide-format graphics and signs has been a difference maker for many commercial printers. The plan is to diversify further because “it is more important than ever” and “old-fashioned ink-on-paper-only companies are finding themselves irrelevant.”
E-Commerce capabilities. Like diversification, advanced e-commerce capabilities have been a difference maker for many we surveyed. They have expanded online capabilities to product demonstration, client education, marketing, consultative selling, and other critical areas, and plan to expand further so even when face-to-face restrictions are lifted, clients can still do more remotely.
A widely shared sentiment: “E-commerce will be bigger than ever. If your company isn’t prepared to compete in the e-commerce space, you will get left behind.”Building on trust created during the crisis. Some companies recognized the seriousness of the crisis early, moved aggressively to “earn new clients and gain further trust with existing clients,” supported their communities, lived their values, and created goodwill. Now they plan to build on that good will.
Our research panel discussed many other post-COVID opportunities, ranging from M&A — “The weakest competitors will close. Other competitors will be for sale at below pre-COVID market values” — to “anti-microbial printing,” “touchless interfaces,” and “the application of anti-viral inks as protective overlays.”
We heard about “social media promotion and using virtual selling to open up new geographic markets,” “learning how to create value for clients who want to do business remotely or whose workforces are remote,” and opportunities in retail food packaging as “restaurants close and more people eat at home.”
Some see opportunity in “more domestic production,” as supply chains return to the United States. Others see it in “increased individual shipping and mailing services, and the increased digitization of records.”
Their enthusiasm is encouraging. So are the numbers we’re seeing for the commercial printing industry and the American economy. Those numbers will be revised as we move into 2021. But all signs are they will be revised up rather than down. The bottom line: An upturn is coming. Let’s be ready for it.
