Diversify or die

Two thirds of those polled for Widthwise this spring said they considered it a high/very high priority to find and enter new wideformat markets or offer new services, and almost three quarters said they would be buying new kit specifically to help them diversify. Hardly surprising then that plenty of those around the table have already diversified and continue to look for new avenues to revenue but, not all felt the heat of increased competition to be a bad thing.

“I think we have a hugely fragmented marketplace and competition is good – it gets people to sharpen up their act and does the market good overall,” argued Riot of Colour’s Mark Roblett, a comment that fired a debate on the impact of heightened competition.

A competitive marketplace “I feel the speed with which newcomers are entering the market is slowing down,” voiced Chris Stringwell of Digital Plus, “There are still people coming into the space but we’ve managed to grow our business in the last 12 months, though admittedly that’s because we have tried new applications.”

“Yes, we’re now seeing customers coming back to us. We’ve seen plenty of new businesses shooting up and undercutting us but over the last year we have had upset customers coming back because they’ve not had the service they expect elsewhere. It’s not all about buying cheap kit and offering cheap prices,” added Justin Murray from Pyramid Visual.

“The problem is, if clients see someone offering cheap prices they wonder why you can’t and take the attitude that you must be ripping them off, which is damaging to the individual business but also to the sector which is being harmed long term. The point is, to do a proper job you have the right levels of pre-press, software and finishing as well as print kit and consumables - the investment can actually be huge. Perhaps people are beginning to realise that,” added Morning.

“I just can’t see how people can get the finance now to enter the market,” stressed Andy Wilson of Press on Digital Imaging. “Two years ago screen printers were piling into inkjet wide-format and I think most of those who planned to get involved already have. I can’t see how those in the litho sector now have the money to diversify.”

While there was a general nodding of heads, Ian O’Connor of Superior Creative pointed out that this exactly what he’s done. “We got into digital wide-format because as a predominantly litho outfit we had 20 – 30 studio people already handling prep. work for wideformat print that we used to put out to the trade. We saw the sense in bringing most of that in-house and though it’s still under 20% of our business it’s growing, and it works for us because we can sell it as part of a solution with litho. We’re not doing specialist bespoke jobs – those we still put out but, we have an Inca that even our warehouseman can watch over if needs must. Finishing is where I think newcomers may fall down. It takes a lot more space than they might think!”

Diversification tactics

“I don’t think there is room for many more new players but the reality is that they are still coming in. Trying to pick up work that is worthwhile is increasingly difficult so there’s no real option but to diversify and

add-value,” said Austin McKinlay of Universal Imaging Systems. “When I started my business wide-format was new but now there are lots of small businesses that offer quite a good service. That has pushed us to diversify and seek something new – sometimes what we’ve done and has worked and sometimes not but you have to keep looking for opportunities worth developing.”

For the young entrepreneur and designer Steve Hart who founded Reddhart Graphics, running a wide-format print business is a fairly recent experience so he’s been looking out across the plethora of applications and markets from the beginning. “Because I have a creative background I can see all sorts of opportunities. What I don’t understand is the point of going out and buying new machines to diversify – surely you can do new things with the kit you’ve got?”

“Yes, we’ve got quite a cross section of kit, much of which is paid for, and I’m concentrating on what we can do better to add margin with that kit,” responded Wilson. “I also try and make sure we offer a ‘no way out’ value-added service, so we’re looking at doing more installation work etc.”

“The thing is, ‘diversification’ sounds like a good business action, but is it? We have a three-five year business plan and we won’t be going into markets where we don’t know what we’re doing. We will spread our net wider and do other things but it’s unlikely they will be earth shatteringly different to what’s available in the market now,” said a cautious Morning.

O’Connor was of a similar mind: “Our investment will be in wide-format but based on volume applications rather than niche products.”

Which means that those developing more novel applications should find room to grow, something that has not missed the attention of Stringwell. “We’ve already diversified into printed furniture because we can see margin there. It has taken time but we’ve now got a profitable new customer-base.”

“We would love to be able to devote time to developing a niche where we can charge a high margin and specialise in that but the reality is every sector has its peaks and troughs and we’ve found that you have to diversify in a number of ways to cover the roughs. For instance, we got into 3D engineering because building wraps went downhill,” added Murray.

Roblett stressed concerns over diversification to fill capacity and grow turnover as opposed to margin: “We spend a lot of time looking at what our customers might want tomorrow. To focus on actions that might increase turnover without margin can bring an abrupt end to dreams. We have a clear strategy on the types of client we want and the margins we want from them and so we’ll concentrate on those targets rather than have a scattergun approach.”

Market stimulation Having established that diversification, in whatever guise, was a necessary path to future success the conversation turned to who is stimulating new market development and where the most profitable niches may be found. The overall feeling was that despite the capabilities of the kit and consumables that empower printers to create new applications for new markets, the impetus had to come from the client/creative not the print company.

“We don’t have the time, money or ability to go and take niche ideas to niche customers” was the general consensus, though some, such as Stringwell, are obviously doing just that. “It has to be pull rather than push effort,” said Murray. “It has to be us taking information from clients who want something rather than us pushing information out to customers. I think you can forget consumers as a stimulus and print managers certainly aren’t driving this. The radical ideas are coming from end clients and creative agencies who want us to find them solutions,” said Murray, to which Morning added: “It’s about being open minded and listening to clients and then being creative in finding a solution that suits them.”

“We do communicate outwards in terms of unusual jobs we’ve done but what you want is to be seen as a company that creatives can come to with a set of visual problems that we can resolve for them,” added Wilson.

“That means you don’t want to call yourself a printer – that limits you - you want the creatives to come to you for the bigger conversation so you get a crack at providing a higher margin job,” “At the end of the day it’s all about collaboration,” stressed Roblett. “We all need to work together to make sure as many as possible understand what wide-format can achieve.” But is that really happening?

Impact of technology

According to the Widthwise poll a significant number of printers think they are failing to realise the opportunities their kit affords them. 67% of those polled reckon they fail to ‘sell’ the full potential of their printers, with 43% saying they would like a fuller explanation of the applications possibilities of the machines they buy, and almost 40% wanting suppliers to be more involved in showing the potential to end clients. The discussion among the Round Table panellists didn’t always reflect this messaging. “If you cannot sell the full potential of 

your kit you should shut the doors and go home,” said Wilson. “Why is it the manufacturers responsibility to do your marketing for you? Those that expect them to expect too much.”

Morning’s attitude was similar: “Surely it is your own responsibility to think about the applications you want to undertake before you buy any kit. As purchasers we need to ask the right questions - if you do most suppliers will help you because at the end of the day, if you handle more applications and have the machine running more, they’ll sell more ink!”

But McKinlay flagged up a key point that had others around the table nodding in assent. “I spend ages asking questions of manufacturers and end up waiting for answers that never come because the people selling the machines often don’t understand my issues/problems and don’t have the knowledge to come back with the relevant responses.”

“ROI is the key and it would help to have more research and development between the printer manufacturer and the materials people,” added in Murray.

Asked what other developments on the technical side would help those around the table diversify and/or grow business came calls for higher production speeds for printing onto board, a better speed/quality ratio for fabric printing, more versatile hybrid printers, improved print quality from flatbed printers and cheaper inks!

Business structure

But what are the printers themselves doing in terms of changing their business structure to accommodate strategic change? Of the Widthwise respondents 11% said the way the company operated was affecting their ability to diversify and a massive 70% said they would be making strategic changes within their business to enable them to better win work from new markets/applications. For Hart this was easy: “We’re a new and tiny company so there’s not a lot yet to change,” but for others the issue was of major importance. “Six months ago we changed our marketing strategy and set-up to ‘futurise’ the business,” said Murray. “Print as it is today is not going to be around for ever and so we’ve prepared for that by taking on more IT literate staff a

nd focussing on online presence etc.” “We changed out strategy well before we even got into wideformat,” added O’Connor.

“Five years ago we got rid of all our on-road sales staff and employed a younger, quicker learning staff with a bigger cross-section knowledge-base. And we started brining in interns for marketing. How we handle sales now in wide-format is nothing like how we booked jobs for short-run litho.” Stringwell said that at Digital Plus “what we’ve done is move staff around as we’ve moved into new markets, especially on the sales side where we’ve struggled to get good people. We also had the Manufacturing Advisory Service in earlier in the year which gave us some good advice.”

“What we have done is make sure we employ people who are likely to come up with creative ideas – we’ve built it into the culture of the company,” enthused Roblett. “We have some people who are very good at that and we pay them more because they are keen.”

McKinlay admits that he takes a slightly different tack: “Our sales structure has changed significantly – largely because of the internet. However, I am Mr R&D. In another company I might have somebody else do it but I feel happier being the one who investigates new markets etc. – I’ve just spent four months investigating a new textile material and I feel comfortable doing that myself because of the knowledge I have. “It’s difficult to quantify what we spend on R&D and I guess nearly everyone else would say likewise – it’s not like it’s a separate budget for most companies. But, as the Widthwise poll highlighted, it is clear that we all have to devote time and energy to building up a base of higher margin work.”

Image Reports will be conducting its fourth annual Widthwise survey in the new year. If there are specific topics/issues you would like to see included please contact the editor Lesley Simpson. Email Lesley.Simpson@imagereportsmag.co.uk Go to www.imagereportsmag.co.uk to download the 2010 report.

THE BIG PICTURE

Steve Hart, Reddhart Graphics

There are only two of us and I bought my large-format printer just as the economy went downhill. But saying that, we’re making a living; we’re making profit month on month and the last couple of months have been really good so fingers crossed.

Austin McKinlay, Universal Imaging Systems

We’ve seen certain sectors hit and others that have grown. Overall I’m seeing opportunity for development, to some extend in traditional sectors like POP/POS, but I’m also diversifying and seeing more scope for fabric print in the exhibition/conference market etc.

Iain Morning, Screaming Colour

We’re having a decent time of it – in fact this year will be a record year in terms of profit and growth. We’ve refocused on markets that make us money and converted customers from using long run screenprint to short run digital wide-format. We’ve also made a point of telling people why they should bring their exported print back home to the UK (from the likes of China) and found areas where we can offer a really good service for time-sensitive applications.

Justin Murray, Pyramid Visual

It’s been a roller coaster sort of two years. 2009 was the best year we’d ever had but bad debt and restructuring affected us. We had profitable business coming in during 2010 but again we’ve been hit by bad debt though turnover was better than in 2009. We hope to be more internet based in 2011 so we expect that to be good move.

Ian O’Connor, Superior Creativel

We have increased our turnover in the last three years and I’m not sure if the general economic downturn has helped or hindered us because we’re relatively new to wide-format. In terms of markets we’ve seen the luxury products sector tighten up as you would expect but we’re seeing more opportunity in POP/POS, possibly because stores are trying to move goods!

Mark Roblett, Riot of Colour

The year to March 2010 was difficult but the six months after that were better and now we’re looking at our best year ever.

Chris Stringwell, Digital Plus

This time last year I was worried. But, we’ve just completed our year end and it has delivered the best turnover and profits we’ve ever had. Going forward we have a few irons in different fires and we can only hope they will make us money. If 2011 matches 2010 I’ll be quite happy.

Andy Wilson, Press on Digital

Last year we lost a few customers and gained a few. 2009 was about survival on pricing and in 2010 we saw that plateau so now it’s about seeing where we can be more profitable. We cover a big spread of markets already and so the focus will be on adding bolton services, like installation, rather than looking for new markets and I’m happy with slow growth because I still don’t want to take big risks when a double-dip recession is still possible. I think we’ll see tentative growth in 2011.

{jathumbnail off}