COVID-19 rapidly started to impact the economy at the end of Q1 (and beginning of Q2) 2020, driving market speculations and assumptions that many commercial printers will be pushed out of business due to the pandemic. Business bankruptcy estimations at that time were high, but have since proven to be wrong as only a very small number of commercial printers were tracked to have closed their businesses by the end of 2020.
It is true that this crisis impacted almost every printing business in terms of print volume declines and staff reduction, but the pandemic did not force many out of business. A Keypoint Intelligence-Big Picture Magazine survey launched in November 2020 showed that even though 35% of PSPs are back in full operation and fully staffed, almost half still operating under reduced labor. An additional 17% had to also reduce their hours of operation. The good news (considering the circumstances) is that the survey shows that only 3% had to close their business, which is lower than anticipated at the beginning of the pandemic.
| Which of the following statements best describes the current state of your business operation during the pandemic? Please pick the statement that BEST describes your company’s current state. |
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The low rates of business closure are in line with other findings from other companies, such as The Target Report (which publishes data around mergers, acquisitions, bankruptcy, and closures). The tracked numbers of bankruptcy filings and closures without bankruptcy in commercial print businesses during the COVID report period (August 2019 to 2020) were 24, which is lower than the 39 tracked in the previous non-COVID report period (August 2018 to 2019). As The Target Report does not go full calendar year (Jan-Dec), we looked at the additional tracked numbers for closures from September through end of December 2020 and found only 6—a very low and positive number of closures during a crisis.
To put this into context, this number of tracked closures is very low in comparison to 9,129 commercial printing establishments that was last reported by the United States Census in 2018. The target report also tracked less business closures (August 2019 to 2020) vs. the previous annual report in packaging, wide format, and even mailing services.
At the same time, other printed related industries (e.g., equipment and materials manufacturers, publishing, and newspapers) were tracked to have a larger number of closures during the COVID annual report than the previous report before the pandemic.
All this data also supports our US forecast, which estimates that—even though most applications were affected by the pandemic—promotional, books, and wide format are expected to bounce back and grow as packaging never really declined.
Perhaps part of the reason for the low bankruptcy and business closure tracked numbers could be related to government support. It is important to keep monitoring changes (especially after government help has stopped and some printers’ financial resources might have disappeared due to the crisis) to see if there will be a more aggressive increase in the number of closures or acquisitions/mergers.
What Can PSPs Do?
PSPs have another thing to worry about besides the economy. The rapid acceleration towards online print purchasing (even though it might have been received as an opportunity) could bring challenges. Most traditional PSPs can better manage customer loyalty retention when relationships with buyers are face-to-face and more personal. Once these PSPs’ customers go online, competition is only one click away and very easy to compare. This might favor big online printers operating under economy of scale models with very aggressive pricing.
PSPs (even more than ever before) will have to sell additional value (e.g., consultancy, design, and specialty printing) to justify a higher price. Online printers are mainly a big threat when print buyers purchase commodity print based on price. Strategic print communications and products often bring a better ROI to the print buyer, but PSPs need to effectively promote, sell, and create that strategic print.
The technology and materials to create that strategic/specialty print product that can be found in variable data printing, color embellishments, sleek finishing and folding, special papers, augmented reality, NFC tags, etc. is not enough. Digital printing vendors and PSPs need to work together to successfully prove the better ROI that high-value, specialty printing products bring.
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