Assessing the Economic Fallout

At the same time that the tragic events of September 11 were unfolding, New York City-based printing industry consultant Bob Rosen was leading a Print 01 general session that focused on survival in an increasingly competitive market.

No one could have known at the time just how crucial these issues for printers would become in light of the disastrous day in American history and subsequent impact on the economy.

"For an industry that had very thin margins to begin with, the business suffering will be rather dramatic," estimates Rosen. "With a sudden big hole in print demand, companies that already had too much capacity are really going to struggle now. Printing is very similar to the airline industry: capital intensive, with high fixed costs, and many suppliers competing in a relatively fixed market. Even a small dip in aggregate demand will make printers' finances look very frightening."

Rosen concludes that the time has never been better for normal operating printing firms to join forces.

"Instead of one company having two 40" presses and another having one 40" press, why not put them together to be more effectively used or replace them with one really highly automated press?" he suggests. "There are a number of major markets where huge opportunities exist for players who realize they will do better together than apart."

Andrew Paparozzi, director of the Printing Economic Research Center for the National Association for Printing Leadership, Paramus, N.J., says that while the country already had been in a recession prior to September 11, industry indicators showed encouraging signs of stabilization in August that had not been seen by printers and vendors since October 2000.

Now, he laments, there is a prevailing sense of uncertainty and risk.

"We just don't know what's ahead," explains Paparozzi. "What's really changed is that it's not just about what the Fed or the Treasury can do anymore; now it's about what the Pentagon's going to do. An example of this effect: the Dow fell 423 points but gained back almost 280 points later that day following a report that the U.S. was sending jet fighters to the Persian Gulf. Still, given the gravity of our present situation, companies are not willing to make any significant economic commitment."

Industry consultant Steven Schnoll predicts that many large print buyers will use this period to "take a breather and figure out where they need to go or whether they should be switching gears in some sense because it's a wartime economy."

He adds, "One of the messages at Print 01 is the need to find new applications for print. The opportunities for print are changing, and while on one hand you reflect and retrench in light of events, on the other hand you've now been given a chance to look at what other opportunities are out there in which to do business."

printChannel chief executive Oliver Pflug agrees that while some print suppliers will withdraw and focus exclusively on cash-flow management, others will examine ways to gain incremental revenue as they see existing business drop by 20% or 30%. This, he figures, will spur the adoption of on-line services.

"I think the current situation will enhance the general realization that the Web is for real, and that it offers alternatives to traditional ways of doing business," he reasons. "When FedEx was grounded and phone circuits were overloaded as a result of the attacks, the Web worked fine, and people were still able to receive orders over the Internet through on-line procurement solutions."

Mark Porter, chief executive of httprint, also believes that on-line services will take off as companies in "hunker-down mode" look for business propositions that will cut unnecessary spending. He concludes, "Certain industries will be affected more than ever, and any solution that helps people stay closer to home and business will be good."