Tuesday, March 13, 2012

The Reprographics Industry in the U.S.; Then and Now

“Officially” (meaning, according to statistics compiled by the U.S. Government), the “Great Recession” began in 2007 and was over and done with by June 2009. All “that” means is that U.S. GDP was negative for a period of approximately 18 months, and that U.S. GDP has been positive since July 2009. So much for GDP statistics.

Today, given the unemployment rate in the U.S., which stands at around 8.3% at the present time, and the lack of robust growth in the A/E/C sector of the economy, most people would, I think, say that “it still feels like we are in a recession.”

Several previous times on our blog, I’ve said that the A/E/C Industry in the U.S. and, with it, the Reprographics Industry in the U.S., experienced a depression (as opposed to a recession.) That depression has last for at least three and a half years by now, if not somewhat longer.

Thankfully, there have been recent signs that there will be growth in the A/E/C Industry in 2012 and, thusly in the Reprographics Industry (and we’ve written about these signs in recent posts on our blog). While I’d hesitate to say to my friends in the Reprographics Industry, “let’s get ready to rumble,” some growth is better than no growth (and certainly better than a continued decline.)

I’m a nostalgia buff. Occasionally, I like to look back at “then” in order to compare “then” to “now.”

Back “then” (several years ago), we had a fairly robust nationwide industry association – the IRgA – with hundreds of member-companies. Today, the IRgA has a much, much smaller member base. In the past three or four years, we’ve seen two regional reprographics associations go down for the count. And, when I attended the ERA (regional association) annual convention in October 2011, I noticed that there were only 14 member-companies registered for the convention, down significantly from more than 100 member-companies earlier in the decade. Last year, the IRgA reported that it would not hold a convention in 2012.

It is very hard to get accurate statistics regarding the size of the Reprographics Industry in the U.S. The only “publications” that talk about the size of the U.S. Reprographics Industry are publications, produced by ARC, called 10-K Annual Reports. So, here’s a look at the Reprographics Industry, THEN vs. NOW.


From ARC’s 10-K Report for the year ended December 21, 2007 (filed in February 2008)

(Reprographics) Industry Overview

According to the International Reprographics Association, or IRgA, the reprographics industry in the United States is estimated to be approximately $4.5 billion in size. The IRgA indicates that the reprographics industry is highly fragmented, consisting of approximately 3,000 firms with average annual sales of approximately $1.5 million and 20 to 25 employees. Since construction documents are the primary medium of communication for the AEC industry, demand for reprographics services in the AEC market is closely tied to the level of activity in the construction industry, which in turn is driven by macroeconomic trends such as gross domestic product, or GDP, growth, interest rates, job creation, office vacancy rates, and tax revenues. According to FMI Corporation, or FMI, a consulting firm to the construction industry, construction industry spending in the United States for 2007 was estimated at $1.13 trillion, with expenditures divided between residential construction 46.6% and commercial and public, or non-residential, construction 53.4%. The $4.5 billion reprographics industry is approximately 0.4% of the $1.13 trillion construction industry in the United States. Our AEC revenues are most closely correlated to the non-residential sectors of the construction industry, which sectors are the largest users of reprographics services. According to FMI, the non-residential sectors of the United States construction industry are projected to grow at an average of 5.3% per year over the next three years.

Market opportunities for business-to-business document management services such as ours are rapidly expanding into non-AEC industries. For example, non-AEC customers are increasingly using large and small format color imaging for point-of-purchase displays, digital publishing, presentation materials, educational materials and marketing materials as these services have become more efficient and available on a short-run, on-demand basis through digital technology. As a result, we believe that our addressable market is substantially larger than the core AEC reprographics market. We believe that the growth of non-AEC industries is generally tied to growth in the United States GDP, which is estimated to have grown 2.2% in 2007.

And, “NOW”…………

From ARC’s 10-K Report for the year ended December 21, 2011 (filed in March 2012)

The Reprographics Industry

Traditional reprographic companies have historically served the non-residential segment of the AEC industry. They provided document management and document production services such as the printing and distribution of large construction drawings (formerly known as "blueprints"), and other related documents.

There are no other reprographics companies in the U.S. with the national presence that ARC has established. Local reprographics companies are often family- owned, and locate their businesses in proximity to customer locations. All reprographers market their business through local relationships and on their ability to turnaround jobs quickly. Reprographics services are purchased by nearly every trade in the construction industry and are often passed through to project developers for reimbursement.

Demand for services is closely tied to the level of activity in the construction industry, which in turn is driven by macroeconomic trends such as GDP growth, interest rates, job creation, and office vacancy rates. Reprographics revenues are closely correlated to the private, non-residential sectors of the construction industry, which are often the largest users of reprographics services.

There is little information available to help estimate the size of the reprographics market given that there are no public companies in the industry other than ARC, and that most reprographers are small and serve only one geographical market. Acquiring accurate information about the reprographics industry has been made more difficult by the pressure the recent recession and subsequent down cycle in construction has placed upon individual businesses within the industry. Sources such as trade associations and industry surveys have diminished with the decline in construction project activity, and business failures among our local competitors have increased over the past two years.

We estimate that there are approximately 1,550 reprographers in the U.S. based on our experience operating an independent trade association within the industry. Previous data from other trade associations suggests that the average reprographer produced about $1.5 million in sales per year. Based on this information, we estimate the traditional reprographics industry to be approximately $2.3 billion in annual revenues.

We believe that reprographers who have diversified into related offerings that include facilities management, digital color printing, managed print services, and other technology-enabled services are likely to remain viable service providers in their local markets. We also believe the definition of the reprographics market is likely to change as it moves toward a more comprehensive approach to document solutions and addresses needs beyond construction project work.

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