The Expanding Influence of Wide-Format Printing

Marco Boer, VP, I.T. Strategies

Key industry consultant Marco Boer shares how the wide-format segment is changing.

 Wide-Format Impressions: In a general sense, how would you say wide-format technology has been growing in its influence in the broader printing industry?

Marco Boer: The objection I would have to your question is you assume it's growing. I would say that it's shifting.

There are a couple big moving trends going on all of a sudden that are quite worrisome and an opportunity all at the same time. So, I think as a result of COVID, and the after effect, we are starting to see people who buy wide-format print become more conservative with their expenditures.

In other words, they're diverting their budgets, not to electronic signage, but they're diverting toward social media, search engine optimization, and other ways to reach their customers. So, the demand for signage, frankly, is not growing a whole lot at the moment.

WFI: Do you see wide-format equipment purchases as strong? What is the current mood in that space?

MB: This has been a replacement market for equipment for a long time. People are slowing their cycles in terms of churning that machine with the next generation machine, and it's mainly because of geopolitical chaos, right?

Everybody's worried about what's going to happen next, even though the fundamental statistics are incredibly strong. Unemployment remains at really low levels. Inflation, frankly, is very manageable. The stock market remains incredibly high, and the dream of AI making our lives far more efficient and profitable looms large.

So, these are all positive factors. But the reality is it doesn't quite feel that way given that our costs seem to be going up left and right, ‘I can't get labor,’ et cetera. So, a couple of things are happening that are shifting this market.

Number one: the real little guy, the local wide-format print shop with one or two aqueous latex and eco-solvent printers. He's having a hard time and he's having a hard time because he doesn't have the economies of scale that the bigger guys have. And what we're finding is that a lot of these little guys aren't surviving.

And the local bakery that used to buy a couple signs a year. Instead of going to a bigger wide format printer, they're going online, so web-to-print for wide-format signage probably grew somewhere between 10 to 15% last year.

And it's because they have removed friction, it's easy to order a sign. They don't have to talk to anybody and waste 10 minutes talking about sports and the weather. And whatever they get is good enough because they get it within a day or two. These e-commerce providers have such an amazing amount of shipment volume that the FedEx bills are relatively low. So, at the low end, the shift is towards consolidating web-to-print.

WFI: And what are you seeing among the wide-format industry’s larger companies?

MB: We're seeing a shift to larger print providers. So, let's say five years ago, the largest dedicated wide-format graphics provider might have had $100 million in annual revenue.

Today, you have companies like Miller Zell – they’re $400 million. It's amazing how big these companies are getting, and it's because they're rolling up a lot of the smaller shops and rolling up regionally to get better geographical distribution. And, so, it is becoming a play for having a more and more efficient back-office infrastructure.

So that's what's changing and what we're seeing in our shipment data for new machines is that for the faster productivity machines, sales are doing fine. The low-end machines, meaning those things that are selling for under $30,000 are finding it more difficult, and we think it's because of the long-term shift towards consolidation among print providers and productivity.

WFI: Are there other areas where you’re seeing strong equipment purchases? Where are wide-format PSP making their moves?

MB: One of the areas that we're seeing really strong growth now is in finishing equipment for graphics. The companies that provide finishing equipment are up 15% or more in revenue, where we're not seeing that growth on the printing equipment hardware side. So, what that really tells you, is that from a print provider market, and of course the attendees at the inkjet summit, the organic demand is actually fine, right?

We're not growing 20% a year, but we're still growing 3% to 5% a year. So that's the good news. The bad news is you're only getting that growth if you're hyper-efficient. And you're investing in new, innovative equipment and finishing, and software to do accommodate incoming jobs.

There are some niche opportunities, and I love niches because they're not big, but they tend to be super profitable. A few of the great niches in this space include things that are tied to decor, right? So, coverings are a great niche and there's huge amounts of growth in that from a low base, so that's a good area to be in.

WFI: About décor, I see décor printing expanding. Will it continue, do you think, to be an opportunity for PSPs, or will it become its own sort of highly specialized space?

MB: I think it's going to become more of its own specialized space because of the application engineering issues that are tied to it.

What I mean by that is, wall coverings have one set of product requirements, right? In terms of you can't have metamerism, shifting colors and so forth. You need to have a certain substrate that it works on. You have to have a certain color profile, and that's fine. But what décor tends to be more about isn't just wall coverings.

It's about creating a finished product. And this is not going to be a big common application from wide-format providers, but the biggest use of laminates, for example, is not in flooring. It's in kitchen cabinets and fake-wood furniture. 80% of laminates are in that space. You have to have an incredibly strong understanding of earth tone colors. Most of these furnishings are based upon earth tones: It's simulating wood. And that's not easy to do, to make it look as real as possible.

And, so, that's a pretty unique skill. Then you also must have the right coatings to protect that laminate against scratching, against aggressive household cleaners, etc. So that's a unique skill, but that also means that there's an opportunity there because where I see most of the interesting success is really in finishing those goods.

And when I say finish, it could be as simple as printing an etched-looking design for windows to hide people from looking into the conference room. Popular application: It looks frosted. But what we're finding is that the print shops who do a really wonderful job printing then subcontract out the installation to somebody, the installer, who creases the bloody thing or gets bubbles in it. Then you have to reprint the job because the customer is blaming you for the poor installation, even though you outsourced it. So, you end up having to do it yourself.

One of our friends owns a nice print shop, and he has gone out himself to do the installation of these difficult things that have incredible value. It doesn't cost a whole lot to print, but the final product is worth a lot of money to that customer.

And so, he said, “I didn't want to be an installer, but I had no choice. because the contract labor just isn't qualified to do it.” But he's making a boatload of money. Not on the printing, but on the installation. So, the opportunity with decor is you can create end products, whether it’s point-of-sale display stands or something that is more of a finished product than just printing a piece of paper that is a poster.

WFI: What's the other niche you see right now?

MB: There are niches in areas that you'd never think of, and they're mostly serendipity, meaning you don't necessarily focus on them, but it lands in your lap. A great example that I've mentioned at the last Wide-Format Summit are things like locker wraps, because every big Whole Foods and Staples has these pickup lockers and they all want their own unique design up and it's impossible to paint them cost effectively. So, they wrap them, and that's a big specialty.

Another big specialty, particularly in Florida, is boat wraps. Everybody wants to have a custom wrap and, rather than reglazing a fiberglass hull, you can wrap it. It's not going to last more than a couple of years because the sun degrades it, but every two years you can have a unique new look for your boat for relatively small money. It's become a fashionable thing.

And that's what people like now. The installation is not easy. You have to understand the right material to use, so it holds up against salt and sun, primarily, but also abrasion from docking. That's good news, because if some guy docks a little bit poorly, he's got to have it rewrapped, and you can rewrap it pretty quickly.

Let's say it's consumer vanity because in the boating world, it's all about bragging rights. There are all of these vanity things, and people are willing to spend money on them.

WFI: Do you see a specific mindset that will help PSPs navigate sort of the ‘salad bar’ of wide-format opportunities out there, and with all the opportunity that's available, do you see any companies spreading themselves too thin by trying to do everything? I think there's that one-stop shop thing people talk about, but in wide-format you can't do all of it.

MB: The default position of most entrepreneurial wide-format providers is, ‘I'll do everything. Oh, I want to get into direct-to-film because I know that there's a lot of money to be made printing on water bottles with direct to film,’ and so they jump into it because they can buy a machine for $10,000and be in that business tomorrow.

But what they don't often understand is that while they can buy the equipment quickly, they're not really efficient at producing that application. And what they end up with is – and I was just at a shop like this – where they’re just wall-to-wall with equipment that doesn't get a whole lot of utilization.

Because it was a fad initially, then it slacked off and some other company came into the market with a more efficient web-to-print site to do the job, and they've lost that business. And so, I would urge, to your point, to really hyper-concentrate on some very good things.

I was on the phone yesterday with somebody who only specializes in lawn signs. That's all they do. And they are hyper-efficient at taking orders online. It's all web-to-print and getting that delivered overnight at very low shipping costs. Their business really isn't about printing; it's about software to manage the workflow. That's their secret, and they've gotten better than anybody else at it.

WFI: And also, it ties in with the materials you need to buy. If you're only doing lawn signs, you don't have a hundred substrates on the shelf … you have a few.

MB: It's all about efficiency. What I would urge anybody who's tempted to get into something new is I would probably wholesale it to somebody, and see if you could scale it, because they're going to be more efficient than you. You want to get into it until you've got enough confidence and momentum to figure out how to do it on your own. It’s what we awkwardly call “coopetition:” it's cooperation and competition, and it's going to get more and more dominant as time goes on in our industry.

WFI: The last question I have is – pulling out your crystal ball, what areas do you see wide-format growing into in the next five years or so? Do you see those as opportunities for PSPs, or are they for someone else? 

MB: So, a couple of things. The technology as it exists today is relatively mature in its development lifecycle. You're not going to see huge breakthroughs in either productivity or different chemistries, etc. In terms of innovation, we're basically blocking and tackling. What you will see is concentration and consolidation.

The other thing that we're a little bit concerned about is what I would call devaluation of the market. Because as you get more and more commercial printers wanting to get into this space – because it is the most profitable print application that I can think of – they frankly weren't very interested in the past because it was just too small scale. They're all fixated on volume and economies of scale, and that's not what wide-format does.

But now, ‘Oh my God, jeez, if I can kick out a million dollars in additional profit that I didn't have. I'm getting into wide-format.’ And so, there's an opportunity for smaller shops and even medium-sized shops to sell to a commercial printer. They're buying your book of business and your core application knowledge. But if you're not on that track, then you really do have to start thinking broader about where to go next.

Also, the whole promotional products business remains very strong because it's driven by emotion. We're willing to spend anything to have our kid's name on that product, right? There's nothing better than somebody shouting out your name somewhere, so that market will remain very strong. But, again, it all becomes about efficiency: How do you get that product to market at the least amount of cost and friction?

And I'll make one last point and that's about the word friction. Today, it's still relatively difficult to get a sign or a flag made. You have to call the company. They say, ‘Oh, I can't take your PDF, or that tiff image is not good enough.’ One of the things that will change is that I think the deployment of AI will allow us to basically amp up the poor file submissions to a point where it becomes printable, right? It's not going to pass muster to an expert, but for the average consumer and local shop, it would be fantastic.

WFI: On the industrial printing side, do you think there is more opportunity for wide-format technology in that area or in industrial printing? Or do you think we're going to see more custom purpose-built systems?

MB: Industrial printing is such a broad term, right? When you think about industrial, it includes things like the keypads on your keyboard, right? That's all pad printing or screen printing – not all of that is going to go to inkjet. But what we are starting to find, and this is a big picture, decade-out kind of thing, is if we look to China, for better or worse, China, we believe, has hit a tipping point in textile printing. They are now printing more fabrics using inkjet than screen, and the reason this has happened is because the aftermarket for inkjet ink for textile printing in China is down to about, let's say $3-4 a liter. So, it is equal to the cost of screening.

But companies no longer have all the setup of these screens and don't have all the labor. So, inkjet becomes far more efficient. So, when you think about industrial printing, you know what’s going to happen in terms of driving the growth of inkjet. It's going to be tied primarily to the setup cost and where that break point is. That's where we are, at the very beginning of that.