E-nabling Printers Proving No Easy Task
An unclear value proposition of dot-com services keeps printer adoption low, skepticism high.
By Lisa Leland, Associate Editor -- graphic arts online, 1/1/2001
Many within the printing industry still recollect the widely circulated letter Quad/Graphics's Harry V. Quadracci posted to his company's Web site last winter comparing printer-targeted dot-com firms to "the scene from Apocalypse Now in which attack helicopters streak over the horizon."
At the time, Quadracci counted 20 print job management sites that he reduced to "nothing more than cyberspace brokers wanting to be the middlemen between printers and their clients, getting a piece of the action for their efforts."
Today, about 200 dot-com entities pierce the printing landscape, filling the air with promises of "e-nabled collaboration," "streamlined production," and "global supply chain procurement." Still, confusion, skepticism, and even Quadracci-level disdain abounds, all of which serve to plague an already volatile marketspace.
4% use of dot-coms
According to the TrendWatch industry research group--whose graphic arts, packaging, printing, design, and publishing business was recently acquired by Cahners Business Information, publisher of Graphic Arts Monthly--a shakeout with significant consolidation, alliances, and partnerships among dot-coms is predicted for 2001.
Further, TrendWatch's recently released second annual "Printers & the Internet" report indicates that no dot-coms on its survey list had more than 4% of respondents actually using their services.
Similarly, a November-released study from Boston-based State Street Consultants, Inc., based on interviews with 201 printers of all sizes, reported that dot-com vendors remain relatively unknown, with less than 50% of printers interviewed being aware of any one dot-com and most vendors known by less than a third of survey respondents.
Printers are confused
"Printers are confused not only about the players, but what it is they have to offer: their business models, pricing structures, and what makes them different from each other," reports State Street principal John Zarwan. "They don't see a lot of risk for not going ahead, but rather for waiting. What's interesting is that they think these new e-commerce vendors are going to succeed as a group."
Further, a complementary State Street survey of print buyers revealed that despite aggressive marketing campaigns of dot-coms aimed at very large print buyers, "Print buyers/creators highly value their relationships with trusted print providers and may not make a move into e-commerce until pushed by their printer."
Meanwhile, both State Street's report and a study recently released by the Printing Industries of America (PIA), entitled "Vision 21: The Printing Industry Redefined for the 21st Century," reveal that almost all printers now have connections to the Internet and accept e-mail. Moreover, say the reports, there will be a dramatic increase over the next several years in the use of the Internet for processes ranging from selling print and buying supplies to the management of front-office operations and production workflow.
The PIA study projects that by 2003, one-fourth to one-third of all printers' sales volume will be facilitated by the Internet. This figure will jump to between two-thirds and three-quarters by 2006, according to PIA.
Group resists change
"The printing industry as rule is a defensive group that doesn't like change, and a lot of printers are afraid of the Internet in that they believe the dot-coms open them up to competition," says Cliff Hollingsworth, accounts manager for Keys Printing, a 131-year-old commercial printer in Greenville, S.C. with $16 million in annual revenue. "But I would say to them, 'The train has pulled out of the station, and you better be on board.'"
Keys Printing adopted Noosh's on-line job management solution eight months ago, becoming the first of Consolidated Graphics's 63 printers to implement a dot-com solution. It now serves as a field-test site for Noosh Direct, a printer-centric product introduced at the Graph Expo and Converting Expo 2000 show in September.
Streamlining workflow
"The Internet is not about leveling the playing field, but making firms more efficient," continues Hollingsworth. "We looked to Noosh to Web-enable and streamline our front-end, at the same time making communications with our customers a lot easier. No one can deny the Internet is changing the way people work everywhere, and you can't learn unless you dive in and start somewhere.
"We make mistakes daily in areas such as Internet transactions and how our workflow is connected. That's the point, though. Printers that hang back still have to make those mistakes."
Equipped for on-line supplies
Of all categories, commercial printers seem to be warming the fastest to the concept of buying supplies via the Internet. The State Street survey of printers' mindsets even points out that while dealers and equipment vendors still are the preferred choices, they will need to develop Internet strategies and be aggressive to fend off Web-based distributors.
According to a survey from graphic arts portal WhatTheyThink, Lexington, Ky., 33% of printers with more than $5 million in revenue say that they are buying supplies now over the Internet, while 55% indicate they would consider such services.
David J. Steinhardt, vice president of industrial relations for PrintNation, Irvine, Calif., which is recognized as the first firm to offer equipment and supplies via the Web, qualifies Internet shopping as perhaps the "necessary first step" to making printers feel more comfortable interacting with customers on line.
Steinhardt believes printers will increasingly see the customer service advantages, among other benefits, of being able to do business anytime on line. "We're looking at a window of two to three years for this to really grab hold and take off," he estimates.
[PrintNation is undergoing a major reorganization at present that, among other things, will reduce the size of its staff by roughly 50%. See page 26 for details.]
Buy-side, sell-side solutions
By far, the most publicity among dot-com firms has surrounded players in the workflow coordination space. Within this category are buy-side and sell-side solutions, where the buyer's model focuses on streamlining the process from the print buyer's end, and the sell-side is linked directly to the print provider, who offers it to customers.
For example, printCafe is a printer-focused collaboration site charging the printer on a transaction basis, Impresse is a buyer-focused collaboration site charging the buyer on a transaction basis, and Noosh, also buyer-focused, charges both the buyer and the printer.
Pricing contention
The biggest hindrance to printers' adoption of any of these sites has been the sticker shock of the 0.5% to 3% fee (and higher) imposed per transaction--precisely what Quadracci railed against in his letter.
"Similar to the Tea Tax in Boston, printers are looking at these pricing models and thinking, 'Why am I being taxed for just doing business with my existing customers?'" says industry consultant and 30-year printing industry veteran Steve Schnoll. "The problem is that the dot-coms have done a poor job of explaining their value propositions to printers. This is not like buying a press or folding machine.
"I have a big bugaboo with the use of the word 'solutions' to describe these products," he continues. "They've got to make the printer understand what problems he has in order to help him see that there are tools to help solve them. The dot-coms need to illustrate clearly that their tool sets, used effectively, will cut out the most hurtful profit erosion factors in printing plants--mistakes. If there's one thing that erodes a printer's profits, it's re-dos, and they can almost always be traced back to miscommunication."
Concurs on two benefits
Mike Murtaugh, president of MJM Printing & Graphics, a Rockville, Md.-based commercial printer that adopted the Collabria PrintCommerce system a year ago, agrees with Keys Printing's Hollingsworth that the two biggest benefits in the adoption of a dot-com workflow system are improved communication and workflow efficiencies, and that those advantages alone offset the "minute" transaction fee.
In Murtaugh's case, the transaction fee depends on the product, and is capped at a certain dollar amount.
"In this last year, we've proven that we've been able to save the client money, and that we've actually made more money through an expedited workflow that is electronic," Murtaugh says, who admits that he originally looked into devising his own on-line system, and even wrote a check to a software developer before realizing it wasn't necessary.
Grateful for the experience
He adds, "The other big benefit is that I understand the workflow. I'm most grateful for the experience my company has gained in the e-commerce space. To me, the price has been far outweighed by the revenue I've gained."
Murtaugh says that MJM has garnered 10 new accounts as a result of its sales people marketing the ability to manage jobs via the Internet for everything from business cards to brochures.
"We went out and sold them on it with the rationale, 'Here's how to conduct business in the New World,' demonstrating from their end how easy it was," Murtaugh states. "Once we've shown them the Promised Land so to speak, they're sold because they're not going to go back."
Oliver Pflug is the chief executive of San Francisco-based printChannel.com, a sell-side solution focused more on repeat print orders and the versioning of existing layouts and less on the requesting and bidding of first-time print jobs. Pflug reasons that with on-line ordering solutions, the salesperson's role evolves from order-by-order hand-holding to increased project management.
"Smart sales people actually see this as an opportunity to spend less time providing customer service and more time selling," says Pflug, stressing that personal contact with customers remains intact. "The on-line system handles a lot of the interrupt-driven customer interaction, like tracking down orders. The net result is increased sales activity."
One step at a time
Operating on the belief that the graphic arts community, especially printers, would rather take small steps into an e-commerce world and feel their way around slowly, printable.com promotes production-oriented tools that customers can plug into their workflows as they see fit.
A key differentiator here is that printable.com charges a flat monthly fee that increases based on the number of tools the printer incorporates, not the number of transactions.
"We're positioned to help bring printers to the next level of Internet usage without trying to get in the middle of their transactions," says Brad Giles, vice president of strategic development for the San Diego-based company. "Printers can't accept the notion of a company coming in and taking money out of their pockets for every deal just so that they can have customers do the same thing they've been doing for years, with the only difference being that it's now on line.
"Imagine if Adobe told its customers, 'Every time you use Photoshop, we want 2% of whatever you're charging for retouching services.' People would tell them to take a hike."
Homegrown alternative
Reservations heard from both buyers and printers regarding the fee structure of on-line print-buying services led the Printing Industries of Michigan (PIM) to develop its own on-line system, printwire.org, which went live last month and is said to compare with Impresse's offerings.
With this service, PIM members pay a $1,000 annual fee, out-of-state PIA members pay $1,250, and non-members pay $4,500. Buyers, who must invite printers onto the system, pay nothing.
"We conducted a forum of buyers and printers, and nobody saw in the short-term where there would be savings large enough to absorb or counterbalance the 1.5% to 2% cost of the transaction," testifies Detroit-based Inland Press president and chief executive Bradley L. Thompson, a former software analyst who was a primary architect of the PIM system.
Thompson concludes, "Buyers didn't want printers to pay it, and they knew that somehow or other it was going to come back and bite them."
