Traditionally, ProPrint has been known more in the general commercial offset and digital production printing space. But as the printing industry evolves, we’re providing more coverage of the wide-format area.
The reason for that is twofold. On one side, the wide-format machinery manufacturers are looking to sell into the general commercial space, companies such as Fuji Xerox, the generous sponsor of our first-ever Breakfast Briefing, which has recently entered wide-format with Epson and Mutoh agencies.
On the other side, more and more printers are looking to diversity into this area. It’s a tough market out there and people are asking how they can add an extra arm to their business. Signage and point-of-sale are options, which is why ProPrint decided to host this event, to demystify the topic for those looking to grow their wide-format activities.
Steven Kiernan
Everyone knows the retail market is doing it tough. Dale, I just wanted to start with you. How do you see the retail market as it impacts on point-of-sale (POS) print and the kind of display work that you buy on behalf of your clients?
Dale Rees If you go back historically, POS has very much been driven by the brand, procuring POS and pushing that out into retail marketplace. The change we’ve seen in the past two to three years, with the concentration of the retail market in Australia, is that it’s now the retailers driving the process on products and the marketing tools they require. That is altering the brands’ marketing programs, which flows down to the suppliers and people in this room. The budgets the marketers had to spend are not as high as they once were and we’re faced with an environment where brand spending is highly influenced by the key retailers.
Innovation is the key to developing interest from the brands and, following that, allowing the brands to present these new POS ideas to the retailers.
SK How can printers get into those conversations with brands and retailers?
DR From an Ergo perspective, we’re sitting within the brand, so if a supplier has some innovations, some new technology, and they’d like to push back up to the brand we are happy to convene meetings and jointly present new ideas to the brands.
I understand there’s a situation where ‘here’s the brief, what’s the price?’ but from an Ergo perspective we encourage the suppliers to come back to us and say ‘we’ve got these new ideas we think would be worth pursuing’. Given our transparent model, Ergo are happy to encourage meetings between supplier and brand.
SK When the retailers are doing it tough, some say it actually drives more work for the printer because they want to get more messages up and change them more often. Is that what you find, Tri?
Tri Thoi Yes. As customers are struggling in terms of their sales, they’ll look to get more value out of their marketing dollar.
But it’s important to really have that knowledge base. There’s a lot to learn when it comes to setting up a new service for your customers. We were lucky. We never started off as a print company. We were CD and DVD providers, so we really had to learn all print processes. We had to know what offset printing was; we had to know what wide-format printing was. It was very important for us to train our salespeople to fully understand all those processes so they could give customers the right advice and ultimately the right solution.
SK We’re here to talk about diversification, and Xtreem is a good example. You started out in CD and DVD duplication and moved into wide-format, right Tri?
TT Yes, absolutely. We’d been producing CD and DVD marketing for about 10 years and created a pretty big database of loyal customers, so for us it wasn’t about going out and trying to find a heap of new print customers; it was about trying to create new offerings for our existing database. Our customers were using CD and DVDs at trade fairs and for mail-outs. There’s always a print component required when you’re selling your CD or DVD service, so we thought the best thing was get a wide-format machine in and see how it went. The term ‘one stop shop’ gets bandied around quite a bit but I think it’s still important to try and do a lot of it in-house.
SK Can I point out that Xtreem now runs 10 wide-format machines and has moved into production with a Xerox iGen4.
SK Let’s talk about another side of the industry, the outdoor space. Charmaine, what’s the market like?
Charmaine Moldrich What’s happened with the out-of-home industry is from 2002 to 2009 there was this rapid growth: 74% growth, year on year, and then in 2009 there was the big dip during the GFC, then in 2010 we picked up really quickly. Why are we still growing while other media channels are dipping? More and more people are spending time out-of-home, so as the other media fragments, outdoor becomes the last bastion of broadcast media. When I rang the Gruen Transfer last year and said, ‘Can you do something on out-of-home?’, they said: ‘You’re just a small media channel, go away, lady, we don’t want to talk to you.’
This year they rang me and said, ‘We want to do a show on out-of-home’ so it’s starting to become a media channel that people are taking seriously.
Something else we have done is MOVE [Measurement of Outdoor Visibility and Exposure]. It took us five years to build an audience measurement system, but we built a damn good one. Until last year, when out-of-home was sold to media agencies, it was sales guys saying: ‘Trust me, this works’. It was based on gut rather than science. With MOVE, we’ve gone from gut to science.
SK From what I’ve read on MOVE and what it can offer to people who are trying to sell that sector, it’s very effective. Print goes up against online channels and online can give very specific traffic figures: ‘This is how many hits we got, this is how many eyes we got’. Do you think there’s a lesson there for the wider print industry?
DR Having been involved in POS for a long time, globally there is limited effective measurement of the success or failure of point-of-purchase products in the retail space, and that’s something the industry is currently dealing with on a global basis.
SK How is outdoor and wide-format work actually bought and sold?
Paul Towsey The reason why ‘tier one’ customers tend to choose print managers more often than not is they want control and they want transparency. Advertising agencies used to control a lot of the print for their large customers. There’s a factor called ‘unbundling’ or ‘commoditising’.
If you have the business already, it’s called commoditising; it’s cheapening the value proposition and your margins erode. If you’re the guy outside looking in, trying to get the business, it’s called ‘unbundling’ and it’s good news.
These products have been bundled with a lot of other services and some will continue to be bought that way, bundled with installations for instance, where the value of the print is fairly minor when you look at the entirety of the project.
A lot of installations are done by third-party providers: media and advertising agencies. A lot of work in the wide-format space resides with those vendors, but as happened with print, there is a way to unbundle that and give that volume access to a broader range of suppliers.
CM Out-of-home is a really old-fashioned industry in lots of way. There are three or four printers who are printing for the industry, who have grown up with some of the CEOs of the industry, so it is relationship-based.
The other way print is bought is through the media agency. In out-of-home, 90% of our business is media agency business and 10% is direct. Most of
the business is bundled up with media agencies or creative agencies and really the relationship is with them.
APN Outdoor have their own print company [GSP Print] and they’ve taken over that part of the production. But I don’t see a lot of other of the big companies running to do that themselves.
The big billboards are done on a lunar calendar and that’s because roads need to be closed, cherry pickers need to be brought in, abseilers need to be brought in. If you’re doing a national campaign, that means if the printing is done in Queensland, it has to get around the country at a certain time because if you miss that window of getting a substrate
up then you have to wait another
lunar month.
Bus shelters and street furniture is sold on a two-week rotation, while some is on a one-week rotation.
SK I want to talk about entering the market. Tri, can you give us some insight?
TT I see a few offset printers here and perhaps they’re looking at getting into wide-format digital. There’s just so much to learn, there’s so many types of different substrates and media. When we first started getting into printing wide-format, we were lucky enough to have some customers who were willing to be patient with us. You may want to get into wide-format, but you’re not going to go out and try to get a million-dollar job. Stick with a few customers you have a good relationship with. It took us about six months or so to really understand the differences, managing the colours right, using the right media, getting the installation right. We also import our own media for short-term marketing promotions. But we certainly wouldn’t go about using the imported media for products such as a car wrap or something that needs to last substantially longer.
SK Speaking of importing and exporting, I believe the turnarounds times mean finished print can’t really be brought in from offshore?
DR Typically marketers are constrained by timelines. Offshore sourcing is based on having an appropriate amount of time to bring product in. Often the marketer has insufficient time to exercise this option.
SK What is happening in terms of deadlines generally?
PT We all know that the runs are getting smaller, lead times are getting shorter all the time, and it’s also a cost factor because [with on-demand printing] that’s where your obsolescence cost is next to nil. That’s the beauty for the marketers, but unfortunately for the producers, it’s a nightmare. At the Victorian government, we’re seeing a heck of a lot of that. I’m actually surprised at the high level of work that’s coming through that is immediate work. That’s a tough gig but that’s where you need to make sure the processes are clean so that your overheads are efficient and that you’ve got the right product and you’re able to deliver it properly.
SK The other thing I hear is that the general level of buying expertise among people in this space is coming down. What does this mean for printers?
DR There might be an opportunity here for the industry. One of the challenges and opportunities for print companies is that the ability of marketers to understand different manufacturing processes and know what they’re buying. So from a print management perspective, that’s an opportunity because you can fill that void. In the retail space, marketing companies and brands have got tight budgets, and finite resources. You can also become a trusted partner of a brand or a marketer and grow their knowledge. If you’re able to bring innovation to the table and assist in creating effective campaigns that is going to work for you and the client.
CM I don’t think anything’s changed. When I first started in marketing a very long time ago, I had a printer who took me by the hand and showed me through the process.
What has changed dramatically is there’s so much fragmentation. When I was buying media, I was buying a poster campaign, maybe I was buying a bundled-up radio and print campaign, perhaps my boss was buying a TVC. Now I look at these young kids in their early 20s and they’re having to buy across so much media. They’re buying banner ads, they’re buying Google searches, they’re buying digital. It changes so quickly.
I think the people who’ll survive are people who are nimble, who aren’t bemoaning the fact that ‘oh, in the good old days we did this’ but who are looking at the opportunities and being a little bit ahead of the game and holding people by the hand. People ultimately want to learn and it’s actually really flattering to have someone think that you’re smart enough to know their business.
PT In terms of knowledge, let’s face it, there’s always more to learn. I think printers want nothing more than an opportunity to speak to customers, to have an opportunity to talk about their value-add. We recognise that, so I think an effective print manager facilitates that; it doesn’t just treat printers as ‘here, how much for this?’ So that certainly is an engagement that needs to happen and as a print manager who is responsible and trying to do the right thing by the customer, you look for opportunities for that to happen. In this space, it is critical.
SK Do we have any questions from the floor?
Garry Knespal, GASAA We and other industry associations are grappling over the sustainability of print. Charmaine, does the sustainability of outdoor and signage come up in discussions?
CM There’s a lot of rhetoric around it, but I don’t think the rhetoric is necessarily being matched by reality. Using PVC is a difficulty. I think there are options out there in the marketplace but they’re not cheap enough yet. The rhetoric is about quality and sustainability but when it actually comes down to it, people want quality and service, really fast and cheap.
At the moment, we’re working to the rules; we’re not necessarily working with the ethics and the principles around sustainability. I think the market will grow up very fast in this area and it needs to grow up very fast in this area, but it’s still all about margins, so adding sustainability means your margin goes down even lower.
SK What are the other panellists seeing in terms of the environment?
PT Due to a lack of knowledge and information – or convenience – print is being challenged. We have a common enemy, which is the fiction side of the environmental story and a lot of us have lost print business because of it. We have to educate our customers.
TT In the current economy, my customers are more about getting more value for their money. The perception is that if they’re going to go environmentally friendly, the job is going to cost a lot more.
DR I think from our perspective, what we’ve seen is our clients are indeed driving us towards environmentally friendly solutions. One of our largest global clients actually has a policy that stops us from using PVC. So we are actively moving to different substrates, design solutions and alternative processes.
Tom Eckersley, Print Approach A lot of commercial sheetfed printers are moving into other areas, wide-format being one of them. When they get into that space, what do you see happening to the margins?
TT If more offset printing companies are getting into the market, of course margins are going to come down for everyone else. That’s the natural transition, isn’t it?
CM ProPrint did an interview with Richard Herring from APN Outdoor who said, 15 years ago a print job would cost $6,000, now it costs 20% of that. I think it’s a no-brainer that if more people are coming into the market then your margins are going to drop unless you innovate.
David Booth, Xscite Ink. The comment I would make is that margins will only drop if the industry forces them down, like they have done in the offset industry, where the key differentiation has been price. Eventually it comes down to cost plus minimum margin and the industry isn’t sustainable, and you get companies going bust left, right and centre. If large-format is to be an industry that companies can enter and make money out of, then it has to recognise it can’t drive the costs down to win business. Otherwise in 10 years’ time, the large-format industry will be looking for another industry to get into because there’s no money left to be made.
TT It really depends on your market. If you’re an offset printer and you’re thinking of providing wide-format services to your customers, it’s a value-add for them rather than going to another large-format printer to get the service. If you want to set up a whole wide-format division and go on out and try and get specifically wide-format work, then your prices are going to have to be competitive enough to get the bigger contracts, but if you’re just to your existing customer database and offering a wide-format service then you can keep your prices up.
PT I’ll just add, on margin erosion, it’s going to happen. It’s gravity. You’ve got to diversify and one thing that I don’t think has been mentioned too much today is about relationships. Once you’ve got credibility with a customer, that also protects your margin because there’s a certain point where a buyer of print, where you respect where that point is, what a supplier is worth. If there’s a slight price difference, I’d like to think that the right decision is going to be made, so that can also protect your margins.
For extensive coverage of this event, including video and a photo gallery, go to www.proprint.com.au
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