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Commentary & Analysis

December Printer Confidence Index

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By WhatTheyThink Staff
Published: December 1, 2001

 

 Confidence Indexes and Research






December Printer Confidence Index

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Welcome to our first Printer Confidence Index with CAP Ventures. Each month, we will publish essential intelligence about trends in the print and graphic arts industry. Members of our free services will receive overall findings, while Premium Access Members will receive full details with analysis, charts and cross tabulation. Survey participates also see the full results.







Highlights of the Printer Confidence Index:

- Over half of printers see a decline in demand.
- December demand for print will be the same or down from November.
- Printers expect a (-0.6%) decline for their local market in the next 6 months.
- For their own business, printers see an (3.3%) increase in demand.
- The Mountain region of the US showed the strongest confidence.
- In December, the most cited planned purchase is digital black & white printers.
- Over the next 6 months, frontend and backend equipment will mostly be acquired.

Respondent Profile

Respondents to the December Print Industry Index represented a wide range of companies by various business and demographic factors. Roughly half of the 168 respondents characterized themselves as general commercial printers primarily offering offset printing services. The other half included a mix of digital print specialists (mostly digital), quick printers, prepress services and other graphic service providers.

The actual respondents were mostly owners, presidents, general managers, VP of Manufacturing, and production managers. Clearly this group of respondents have a detailed knowledge of their local market conditions, company activities and plans.




Local Market Conditions for Print

There is clearly a negative sentiment among print providers about the conditions in their market for print. Over 50% of printers indicated that demand for print in their local market is either starting to slip or continues to decline. Only 12% indicated that their local market is growing.

CAP Ventures gave print providers several scenarios to describe their current local market conditions and their operating plans:

- Demand continues to increase, we can routinely charge a premium; we are adding capacity
- Demand is starting to increase, some ability to charge a premium; we are considering adding capacity
- Balance between supply and demand, normal pricing; we have no plans to increase or decrease capacity
- Demand is starting to slip, very competitive pricing; we are considering reducing costs or capacity
- Demand continues to track down, extremely competitive pricing; we are reducing costs or capacity



By assigning a value to each of these scenarios ranging from +2 (demand continues to increase) to –2 (demand continues to decline), we are able to generate a print industry growth index for the current month. For the month of December the index was –0.7, a relatively strong negative sentiment.



In general, CAP Ventures believes the current market conditions in most regions and size of companies is highly competitive, with significant pricing pressure and many companies seeking to reduce capacity by lowering hours and/or reducing staff.

One interesting note is that large printers ($20 million+) generally had a more negative perception of current market conditions compared with small and mid-size printers. CAP Ventures believes many large printers are being especially hard hit by the widespread downsizing and cost reduction efforts of Corporate America.

Smaller print providers appear to be more insulated from the impact of a rapid reduction in print spending. Many smaller print providers have a relatively large customer base that includes small businesses, home offices and consumers (e.g. invitations). CAP Ventures believes as print spending rebounds, the smaller print providers are also less likely to experience as sharp an increase as large print providers may.


Print Volume Growth Expectation

As might be expected given the negative sentiment for local market conditions, the majority of printers indicated their December print volume will either be the same or decline compared with November. 75% of printers indicated that, given their current backlog of work and expected sales, they expect their total December print volume to stay the same (41.1% of printers) or decrease (33.9%) compared with November.



CAP Ventures has derived an average expected change estimate using the following formula:

Percent of printers expecting an increase (25.0%) * average expected increase (12.4%)

minus

Percent of printers expecting a decrease (33.9%) * average expected decrease (-12.3%)

equals

Average expected change in print volume (-1.1%)

The result for December is a decrease of 1.1% in print volume compared with November.

The research suggests continued soft demand for paper, ink, toner and other consumables.



6 Month Outlook

CAP Ventures asked printers to indicate by what percent they expect demand to change in their local market and for their business. Overall, printers’ outlook for their local market over the next 6 months is flat to slightly declining (-0.6%). However, printers’ also have an optimistic view for their own business indicating an expected increase of 3.3% over the next 6 months.



CAP Ventures believes part of this anticipated increase in their own business could be printers having positive thinking about their prospects. It could also reflect a notion that there may be some industry consolidation through mergers, bankruptcies and other activities that reduce local capacity.

By geographic region, once again, printers are more optimistic about their own business than their overall local market. Over the next 6 months, expected local print demand for the Northeast, Pacific, South and Midwest was negative. The Mountain region showed the strongest confidence followed by the Midwest.



The research suggests that the market may be bottoming out and not continuing the significant declines in demand for print that have characterized 2001. The data also suggests that demand for capital equipment will be modest as printers defer decisions until signs emerge for sustained demand of print services.

Capital Equipment Purchases

The near term and mid-term outlook for capital equipment purchases is modest. For the month of December, the most commonly cited equipment that printers plan to acquire is high-speed black & white digital printers (6.5%) followed closely by prepress equipment (6.3%) which includes workstations, scanners, imagesetters, proofers and other devices.

Given the generally negative sentiment for print volume, CAP Ventures believes a growing percentage of capital equipment purchases, especially for digital printing equipment, will be to replace devices that have expired leases vs. for additional capacity.


For each of the production equipment categories, roughly 10% to 15% of printers indicated that over the next six months they plan to purchase something. Most printers indicated they will be investing in the front-end (prepress 33.8% of respondents) and backend (bindery and finishing equipment 23.7% of respondents) of the printing process.

Another interesting note is that, in general, large print providers ($20 million or more in annual sales) were the least likely to be making any capital purchases in December or over the next 6 months. CAP Ventures believes this lower investment sentiment is a function of many of the larger printers having been hit hardest by the recession.





* WhatTheyThink.com and CAP Ventures have entered into a strategic alliance to offer research and forecasting data to premium access members of this site.

CAP Ventures is a strategic consulting firm for providers and users of business communication technologies and services. They deliver key research, analysis, forecasting, benchmarking, and strategy recommendations to make a competitive difference in their clients’ businesses.




 

 Confidence Indexes and Research






December Print Buyer Pulse

Please allow a few seconds for the charts and graphs to load.

CAP Ventures and WhatTheyThink.com have released December’s Print Buyer Pulse. The data is compiled monthly and helps industry executives understand demand trends right from the end user. Members of our free services will receive overall findings, while Premium Access Members will receive full details with analysis, charts and cross tabulation. Survey participates also see the full results.



This month, we are offering the complete findings to illustrate the value of becoming a Premium Access Member. Other reports will arrive weekly as well as our monthly Printer Confidence Index which gauges the outlook from printers.



Highlights for December:

- Average print spend per respondent is $750,000
- 73% of these print buyers will purchase print in December
- 80% of buyers spending over $250,000 annually will buy print in December
- Over the next 6 months, 34% will increase their spending, 13% will decrease
- Expected overall increase in spending in the next 6 months, 2.3%


Respondent Profile

Respondents to the December Print Customer Index represented a wide range of companies by various business and demographic factors. The sample of print customers included professionals from advertising, healthcare, retail, government, manufacturing, professional services and other key sectors.

The sample included a mix of companies by number of employees and annual print spending with a bias towards medium and large companies. 25% of the respondents indicated their company had 1,000 or more employees, and nearly half the respondents indicated they spend $250,000 or more per year on print. The average annual print spend per respondent was nearly $750,000.

There were respondents from all major regions in the United States with a bias towards the Midwest region. The actual respondents were mostly in purchasing, marketing, creative or administrative functions.




Print Spending Plans for December

The majority of print customers (73%) plan to purchase print in December. There was little difference by size of company (number of employees) in the plans to purchase print in December.

However, companies with larger annual print budgets were much more likely to be purchasing print in December than companies with smaller budgets. Over 80% of companies that spend $250,000 or more per year on print plan to purchase print in December. Just over 50% of companies that spend $50,000 per year or less plan to purchase any print in December.




Of those companies that plan to purchase print in December the mean planned spending for December was just over $25,000. However, there is a huge difference depending on the company’s annual print budget with companies that spend $1 million or more per year planning to spend nearly $95,000 in December.



6 Month Outlook – Is the Cup Half Full or Half Empty?

CAP Ventures asked print customers to indicate whether they expected their print spending to increase, stay the same or decrease over the next 6 months. We followed that question by asking what percent they expect their print spending to change over the next 6 months.

The good news is that 34% of print customers expect their print spending to increase over the next 6 months; only 13% are planning on the print spending to decline, with the remaining 53% anticipating their level of print spending to stay the same.

The optimists can say 87% of print customers expect their print spending to remain the same or increase. The pessimists can point out that 66% of customers expect their print spending to be flat or decline.



Overall, printer customers’ outlook for their print spending over the next 6 months is to increase modestly (2.3%). CAP Ventures derived this average expected change estimate using the following formula:

Percent of print customers expecting an increase (34.3%) * average expected increase (11.9%)

minus

Percent of printers expecting an decrease (13.3%) * average expected decrease (-13.7%)

equals

Average expected change in print spending over next 6 months (2.3%)



Another important observation is that companies with big annual print budgets are more likely to indicate an increase over the next 6 months than companies with small budgets. Between 42% and 50% of companies spending $100,000 per year on print expect their print spending to increase over the next 6 months. The net increase for these companies is around 4%.

Only 19% of companies with relatively low annual print spending (under $100,000) expect their print spending to grow the next 6 months. The net increase for these companies is essentially flat.

The research suggests that demand for print market may be bottoming out and not continuing the significant declines that have characterized 2001. The data also suggests that large corporate customers will lead the way for growth in 2002.





* WhatTheyThink.com and CAP Ventures have entered into a strategic alliance to offer research and forecasting data to premium access members of this site.

CAP Ventures is a strategic consulting firm for providers and users of business communication technologies and services. They deliver key research, analysis, forecasting, benchmarking, and strategy recommendations to make a competitive difference in their clients’ businesses.




 

 

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