IT Strategies earns its keep by helping manufacturers look ahead—way ahead—as they develop new products in line with the changing marketplace. That’s what made my conversation with Marco Boer, vice president of IT Strategies, such an interesting one. As the printing industry adjusts to a “new normal” resulting from the COVID-19 pandemic, here’s what he had to say about how the big picture is shaping up.
Heidi: With transactional documents in decline, growth in inkjet is being driven by other market forces. Can you talk a little about that?
Marco: Yes, transactional printing continues to decline. Our numbers indicate that, in billions of pages, there were 119 billion letter-sized simplex inkjet impressions printed in 2019 alone, a rate of 4% CAGR. This is projected to drop to 95 billion by 2024. Compare this to direct mail, where there were 120 billion inkjet-printed pages in 2019, projected to grow to 201 billion—a CAGR of 11%. So while direct mail overall is declining, the portion that is inkjet is on the rapid incline.
Heidi: To what do you attribute this growth?
Marco: One of the reasons is the cost of paper. As a result of the impact of the pandemic, more and more paper mills are closing, either temporarily or permanently. As they do, the economies of scale for paper production are being lost. This will make the delta between offset-printed pages and inkjet-printed pages that much smaller. In this environment, it no longer makes sense to mail 100,000 pieces at 1% and 2% response rate. Whatever gets mailed must be more relevant.
Heidi: Will this drive transpromo, as well?
Marco: We don't believe in transpromo as a word. “Transpromo” used to refer to space that transactional document mailers essentially rented to other marketers to promote their products. That model never really materialized. Instead, statement providers began to use that space to educate their customers about new service offerings, ways to save money, and so on. That isn’t transpromo in the original sense.
In fact, as transactional communications become more focused on delivering customer-focused messaging, we expect the definition of what is transactional vs. direct mail to morph. Ricoh began using the term “critical communications” a few years ago. It’s a useful term, but it started being used too early. By the time we get to 2024, however, you will see that “critical communications” message starting to take hold. Take utility companies, for example. They don't want to build new power plants, so they are incentivizing their customers to use less electricity and using space on their statements to encourage that.
Heidi: What is the long-term impact on print?
Marco: As we come out of the pandemic, we may need to be patient for a little while, but print will continue to be strong. However, we predict that offset will disappear two years faster than we originally thought. The pandemic has accelerated that decline.
Heidi: What about printers? What will be the impact on them?
Marco: As we come out of this, we will see fairly significant attrition of the number of print shops. Those whose business is marginal will disappear. We will see attrition in smaller shops, in particular—those that were barely holding on—as well as at the higher end. However, expect to see the middle of the market, the $20 to $75 million shops, do quite well. They have enough capital to reinvest in more automation, and they need to dramatically reduce their labor. You can’t find labor, you can’t afford it, and right now, you don’t want a lot of it anyway. That will further accelerate the decline in offset. Already, the mid-range shops are using this time to get rid of their offset presses.
Heidi: Ultimately what we end up with is a smaller world of print volumes, but much more relevant?
Marco: Yes. We can’t have marketing collateral with 30% waste because it sits in the closet and gets outdated. The model of the lowest cost per thousand is broken permanently.
Heidi: What other impacts do you see?
Marco: The days that color has to match exactly to specific Pantone colors will disappear, as well. Color consistency will still be increasingly important, but in most cases, the buyer won’t care if it’s Pantone 104, 105, or 106. If the printer doesn’t hit the color on the first round, they’ll get it on the second round. Clients are increasingly accepting of this because they aren’t losing tons of money on wasted inventory.
When it comes to printed output, the goalposts are moving dramatically. The quality of print still has to be salable, but at the end of the day, what matters more is that the content is relevant, compelling, and reflective of want the piece was intended to do.