For all the talk of industry challenges, like most mature industries, there are still many opportunities to be exploited in our channel. Arguably, these opportunities may be greater at the dealer level, but they exist throughout the industry nonetheless. Let’s take a look at each opportunity and see who potentially stands to benefit.
Core business growth (general office print)
It may sound odd that growing one’s core business in general office print is an opportunity; however, despite continued declines in page volumes, shifts to lower-priced A4 engines, and lower maintenance contract pricing, there are opportunities. These opportunities exist in the areas of contiguous geographic expansion and market share capture. In the case of geographic expansion, dealers are clearly in the driver’s seat. Through a combination of organic growth and acquisition, dealers have quite a long runway given their existing geographic footprints. While OEMs have some opportunity here, it’s likely not enough to move the needle. In the case of market share, however, in addition to the opportunity presented by market share gain for dealers in their operational areas, OEMs can grow by capturing share. However, doing so will be difficult in the short term. It is only when OEM consolidation begins in earnest that we might see gains by OEMs due to share capture. Even then, however, it is questionable whether the economics of the industry at that point will allow for share gains to outpace overall market declines.
Core business growth (production/commercial print)
OEMs and dealers are likely to be the beneficiaries of production printing opportunities as page volume continues its steady migration from traditional offset printing presses. Keep in mind though that this opportunity will be dampened by inflation and the cost of capital as commercial printers (the largest users of production printing technology) are plagued by challenging business fundamentals, making capital equipment purchases very tricky. Also of note is the fact that virtually all industry players are flocking to this space, ensuring that commoditization will happen quickly and the production/commercial print landscape will rapidly take on the characteristics of the general office.
Another key area of industry growth potential is label printing. Given the continued expansion of e-commerce, there is little doubt that label printing will follow suit. This will take the form of both lower-end devices used by small businesses and high-end commercial press-oriented engines for use by major shippers including Amazon, UPS and FedEx. This is a sizable market and one that shows great potential. It is also a market that should be a winner for both OEMs and dealers, with OEMs likely dominating large customers and dealers supporting SMBs. As with production and commercial print, many of today’s major OEMs are already pursuing this market. As a result, we are likely to see rapid commoditization provided some unique technology doesn’t make its presence felt.
Several years ago, the markets for 3D and other types of specialty printing such as printing on textiles or ceramics for example were all the rage. And why not? The applications for these types of printers are very interesting and bring a level of excitement to print that printing on paper (even in color) just can’t match. But are there significant market opportunities here? For all the hype, these markets would still have to be considered niche opportunities, and while many vendors have expressed interest in entering these areas, there are technology hurdles that make the cost of entry significant particularly when weighed against the prospect of these markets growing considerably. These markets are almost exclusively opportunities for OEMs. And while a number of dealers jumped on the 3D printing bandwagon early, these engagements are basically hobbies, not businesses. Of these specialized areas, I personally feel most will remain niche markets with the exception of printing on textiles and for wall treatments, and even these don’t show significant growth until capable of being personalized at relatively similar costs to mass-produced items today.
Packaging could very well be the long-term savior for the printing industry— at least for OEMs that want to remain in print. While this market is still in the very early stages of migrating to digital technology and OEMs are trying to get their offerings designed to meet the technical hurdles of dealing with various packaging substrates and brand-owner requirements, the stars will align here and this market will be big. Much like the explosion of on-demand printing, the packaging market, particularly the folding carton area, is ripe for a transition to digital technology and the flexibility such technology can provide marketers in terms of product promotion and cost. Given these dynamics, it’s not a question of if but when. For OEMs, this spells good news as the volumes here are significant. Also, because there are technical challenges associated with entering this market, not all OEMs will have the capability. And those that do will have the ability to drive differentiation. OEMs with first mover advantage in this market stand to be positioned very well and to create a stream of net new revenue in print that will augment other parts of the print business.
Unfortunately, while some dealers may be capable of playing in this space, it is highly likely that this number will be small. As with commercial printing, the expertise needed to enter is high as is the initial investment. Only the largest of dealers will likely have the ability or guts to make such investments and go after this opportunity.
Of the non-print opportunities, digital transformation continues to be the most enticing long-term opportunity for the industry in my view. Dealers are generally better positioned here given their direct relationships with SMBs. However, industry players need to be careful. While dealers have been successful in establishing managed services businesses, including IT systems management and security, and packaging these services with print for existing customers, this service area is littered with fragmented competitors and could quickly become hypercompetitive like the existing print business. The key here is workflow, an area most dealers and few OEMs are truly capable of supporting. While SMBs are still in the basic stages of automation, workflow requirements will emerge in these markets as they have for large enterprises, leading to major opportunities in the market. Dealers and those OEMs desiring to compete in this space need to carefully select application areas (e.g., HR, F&A, sales automation) where they can build deep expertise, as traditional VARs and ISVs will possess these skills and will likely represent key competition. Dealers and OEMs will also require AI knowledge as almost all DX apps will incorporate some form of AI in the near future. Dealers and OEMs so inclined to compete in this space should be investing in these areas now and planning those workflow areas they wish to compete within.
So, what is the likelihood that any of these areas will be the magic elixir capable of offsetting the declines in traditional print revenue and profit? For dealers, the likelihood is quite good – 7 out of 10. Heck, some dealers are already seeing 30-40% of their revenue coming from non-print-related sources.
For OEMs, the story is quite different as I forecast a likelihood of 4 out of 10. Unfortunately, it’s still not clear where OEMs will pivot to stem traditional print declines and find new businesses that can scale in replacement. Certainly, select OEMs will get stronger as the industry continues to mature. For the others, the future is not so clear.
Dennis Amorosano is the president and founder of Dendog Strategy Insights LLC, a management consulting firm focused on strategic planning, new business development and go to market execution. Providing services in the areas of strategic business planning/execution, new business development, content creation/marketing automation and technology sourcing support, Dendog Strategy Insights brings 30 years of technology marketing, sales, product planning, software engineering, and professional service experience to help clients implement strategies that yield success.