WhatTheyThink recently published its Printing Outlook 2021, following a trend that dates back to Dr. Joe Webb and his TrendWatch surveys beginning in 1995. This rich history has allowed WhatTheyThink to track the printing industry on a continuum that includes many ups and downs, but nothing as sudden and severe as the pandemic. It’s nice to have a crystal ball, but this one had some cracks in it, with this unanticipated crisis that basically came out of nowhere. Nonetheless, the overall outlook is likely more positive that it seems on the surface. From the perspective of 2019, the outlook was rosier than it probably should have been, since we couldn’t see what was on the horizon. And hindsight is always 2020. But as we have always done in the industry, we’ll pick up the pieces and adapt.
Most respondents pegged the day of doom at March 17, 2020, but there was no St. Patrick to lead the snakes of despair out of the city. It was more like the Ides of March… According to the report, “The period from March 16 to mid-to-late April was a time of great confusion. Businesses across the economy shut down, travel ceased, events were cancelled in- and outside the industry, and print volumes plummeted—in some cases (again literally) overnight.” Not that we need to be reminded.
We’ve never seen anything like it before, and we hope to never see this again for good reason. But across the broader printing industry, from transactional and commercial print to display graphics and textiles, companies were forced to adapt, and quickly. Those that didn’t, those that chose to “wait it out,” are likely paying the price as their businesses slump to the point of extinction. Unfortunately, much of the distress landed on smaller businesses. In normal times, these businesses, which are largely digital, are able to respond fairly quickly to emerging trends. But with the sudden cliff of COVID-19, many simply didn’t have the resources to do that. Larger companies were more likely to be able to quickly take advantage of stimulus opportunities and have a cash position that helped carry them through.
As WhatTheyThink prepares for its annual franchise reviews in both print and display graphics, we’ll be delivering near-real-time insight into how these businesses fared compared to the rest of the market. While they are a collection of small businesses, they have the added advantage of a network infrastructure that likely helped them to survive better than the average small printing business. Stay tuned for the results of that research in April, including our webinar reviewing what we found (logistics forthcoming).
Meanwhile, Printing Outlook 2021 provides valuable insight using some of the tried-and-true forecasting models of the past, but adds a human analytical dimension to the mix to come up with a WhatTheyThink forecast through 2030. The differences between the average of the previous forecast models we have used and the human-element forecast are dramatic especially in the out years. We recommend reading the full report to gain insight into why this is and how you can position your business to thrive as we make our slow and painful way to the post-pandemic stage.
Of the four forecast models the report uses, two came closest to actual 2020 shipments ($84 billion) and only one is in the same ballpark as the “official” WhatTheyThink forecast in 2030 ($75 billion), with quite a bit of variance in between. Nonetheless, all of the models show a decline at the end point, which is not surprising if you have followed these outlook reports and actual industry results over the years. It was an ongoing trend even before the pandemic. For reference purposes, 2019 printing shipments landed at $86 billion ($87.6 billion CPI-adjusted). Remember, though, that any forecast can only ever predict the past, since unforeseen forces can arise at any moment. After all, WhatTheyThink’s original 2020 forecast—made in December 2019—was way off, as no forecaster, human or software, anticipated a global pandemic. (Other forces that negatively impact print, like the Internet, mobile, social media, and, eventually, 5G, take a while to kick in, while the pandemic was an abrupt hit.)
Another study, released at the end of 2020, was conducted by research group Smithers. It looks specifically at the impact of COVID-19 on the industry and projects three scenarios: mild, probable, and pessimistic. It has a shorter forecast period, and while the WhatTheyThink forecast is U.S. only, the Smithers report looks at a global picture. In its “probable” model, Smithers projects a 5.7% decrease in printing sales in 2024, as compared to 2019, while WhatTheyThink projects about a 4% decrease for that period.
Both agree that there will be different impacts on various print sectors, with packaging being the most optimistic. Packaging, of course, has been a growth market as the world population has grown. But the pandemic has had an impact there as packaging demands have changed with the growth of ecommerce during lockdowns and other stay-at-home orders. That can often call for different types of packaging than we would normally see on store shelves, leaving brands and converters scrambling to adjust.
Even when physical retail locations are back to a full-open status, it is not clear that consumers will totally give up the convenience of ecommerce, and likely retail locations will continue their own hybrid models of in-store and delivery. They would, of course, prefer your in-store presence, and that could boost the signage market as retail businesses work to attract consumers back into their stores.
One segment neither report covered, at least in detail, was textiles and apparel. That segment was hard hit as global supply chains virtually disintegrated, leaving brands struggling to repair, replace or restructure them. On the textiles side, though, this “seismic shift,” as it was described by textiles expert and WhatTheyThink contributor Debbie McKeegan, seems to be forcing change that has long been needed in an industry that is the world’s second largest polluter. This shift is a drive toward more sustainability in the form of materials and production processes being used, including growth in digital textile printing which uses less energy and water, and creates less waste in the form of both inventory obsolescence and chemistry. Digital printing comprises only a small percentage of total fabric printing (6% to 10% depending on who you talk to and what you include). McKeegan cites a recent report from Allied Market Research predicting that digital textile printing will grow by more than 230% by 2025, with growth being driven by “the success of web-based on-demand business models, the urgency of the sustainability agenda, and the sheer economic efficiency of digital textile printing.”
The other change, at least until we get back to some sense of normalcy in our ability to be out and about, is the change in demand for types of clothing—you don’t need a business suit to participate in Zoom meetings from your home office. This has driven increased demands for the athleisure category, which may or may not sustain as we move past the pandemic.
Across the board, sustainability has also been getting more attention, and with the new administration in the United States rejoining the Paris Accord and placing increased focus on addressing climate change, that attention grab is only likely to increase, especially with millennials, a growing population cohort. McKinsey reports, “Millennials are four times more likely than older consumers to say that they resist buying mass brands” if they don’t align with their beliefs. Deloitte found that “Nearly nine in 10 consumers say the pandemic is an opportunity for large companies to hit ‘reset’ and focus on doing right by their workers, consumers, communities, and the environment.”
This perhaps has driven another trend: the activist CEO. Especially during the last administration, when the focus was taken off of climate change and deregulation was rampant, many CEOs stepped up to lead their companies down a more sustainable path. We hope that trend is accelerated as leaders on the government side place more focus on trying to shift the trends associated with climate change as well.
The bottom line here is that agility in business models and products produced across the broader printing industry is more essential than ever before for these businesses to survive and thrive. Waiting for things to “get back to normal” is not a strategy for long-term success. Things may never get back to “normal” as we perceived it pre-pandemic. But inside of that change is huge opportunity for those who are willing to make the effort to adjust to new demands and new business models, driven by changes in customer demand. We saw some companies make that fast adjustment early in the pandemic by shifting manufacturing to much-needed PPE—some just changing the products that came from existing equipment, others making investments to enable them to help. Following that, leading companies took advantage for the demand for COVID-19-related signage, which helped fill the gap left by event cancellation and retail closures.
Another effort that some companies undertook which should not go unremarked was to use this time of decreased demand to attend to long-overdue deep cleaning and equipment maintenance as noted in this interview with GraphCo’s Chris Manley that got a lot of attention on social media, often applying government stimulus money to these efforts. Others used the time to take advantage of online training. All of this positioned them better for recovery, ensuring their facilities, staff and equipment were ready for what we hope will be growth along the lines the WhatTheyThink Print Outlook 2021 projects.
Finally, despite declining revenues in many companies, there are investors out there—both ongoing concerns and private equity—that are willing to establish business valuation based on pre-COVID results in many cases. (Many also use up to three years’ worth of earnings for a valuation, mitigating somewhat the economic impact of the pandemic.) For those that were thinking of retiring anyway, or moving on to a new chapter in some way, it’s a surprisingly good time to buy or sell in spite of the COVID revenue dip. Acquiring a business through a full acquisition or a tuck-in can help companies with increased bench strength and/or diversification that will put them in a better market position coming out of this.
It is still a challenging period, no question about it, but it does look like there is light at the end of the tunnel for businesses that are willing and able to make the necessary changes. I’m not sure I would go as far as some leaders who believe we are in the Golden Age of Print, but there certainly is opportunity, as there always has been, for those who are willing to look ahead and adapt to the “next normal”—whatever that turns out to be.