"What Will the Full Impact (of the COVID-19 crisis) Be?”

[Richard Romano has been in the printing industry since before birth. He is currently Managing Editor of WhatTheyThink | Printing News & Wide-Format & Signage. He curates the Wide Format section on WhatTheyThink.com. He has been writing about the graphic communications industry for more years than you’ve had hot dinners. He is the author, coauthor, or ghost author of more than half a dozen books on printing technology and business. His most recent book is “Beyond Paper: An Interactive Guide to Wide-Format and Specialty Printing.” He lives in Saratoga Springs, N.Y., where he mostly shovels snow.] 

In May, Richard Romano and Elizabeth Gooding co-authored this article, which appeared in “Printing News” on May 11, 2020………

“What Will the Full Impact be?”

(Link to the article):

https://www.printingnews.com/trade-services/article/21127064/printing-pulse-aside-from-that-mrs-lincoln-how-did-you-like-the-play

After I read the article, I sent an email to Richard with my thoughts on the Impact of the COVID-19 crisis on the reprographics industry.

Hi Richard,

I’m looking forward to the “next” article you write about the impact Covid-19 is having on the Print & Graphics industry.

I’ve been a reader of your articles for many, many years.  Although I’ve been retired from “active duty” from the “reprographics” business since late 2007, I’ve continued to be involved in the industry – as a consultant – since then.  And, I’ve continued to maintain relationships with key players in the reprographics industry – most are in business in the U.S., but some are in business in Europe.  The “reprographics” industry was my career, but, after retiring from active duty, it became my hobby. 

I read the article you published on May 10^th, “What Will The Full Impact Be?”….

--“The impact of the COVID-19 crisis on the economy was so swift and intense that presenting any chart of pre-March data will be the equivalent of printing pictures of puppies—calming, consoling and heartwarming.”

--“In mid-March, we launched a quick survey to get a sense of what the expected impact will be on the printing industry, and while all precincts haven’t yet reported in, two-thirds of respondents thus far are expecting 2020 revenues to be down more than 10% from 2019, and 70% expect jobs/orders to be down more than 10%.”

And, today, I read this press release from Fujifilm….

--“Hanover Park, Ill. – FUJIFILM North America Corporation, Graphic Systems Division, announced results from qualitative interviews with more than 1,100 customers indicating an encouraging outlook for print service providers despite the recent COVID-19 impact on many commercial businesses.”

--“Encouragingly, the highest number of responses (32%) projected a return to normal business conditions in the July/August 2020 time frame and 24% projected a return to normal business conditions in September/October 2020. Overall, a combined total of 72% of the customers expressed optimism about a return to normal business conditions by October.”

Richard, since I do not follow sales trends in the broader Print & Graphics Industry, I can only comment on sales trends in the “Reprographics” Industry.  

What sets the “Reprographics” industry apart from others – firms in my industry, still today, generate most of their sales revenues from the A/E/C industry (Architects, Engineers, Construction firms, Real Estate Development firms.)  However, A/E/C reprographics is not the only segment of my industry, for, nowadays, virtually every reprographer offers “large-format display graphics color” digital print services.  [Years ago, there were several unique “sub-industries” that all fell under the broader “Print & Graphics” Industry umbrella, but, because of developments in “digital” imaging over the past 20 years, there’s now quite a bit of overlap – in terms of services offered – among the sub-industries.  For example, firms in the “reprographics” industry were (around 1991) the first to offer “large-format display graphics color” digital print services.  Nowadays, virtually every firm involved in the Print & Graphics Industry offers at least some level of “large-format display graphics color” digital print services. Back in 1995, it would have been quite rare to find an offset printing company offering large-format color digital printing services.]  Anyway, when I talk, below, about reprographer revenues, I’m talking about revenues that are a mix of A/E/C reprographics services revenues and large-format color display graphics digital print revenues.

Okay, all that said:

·      No reason to discuss anything that happened in March.

·      April began to show the full impact of the pandemic.  Larger reprographers on the East and West coasts experienced sales declines of MORE THAN 50% (compared to 2019.)

·      May also showed the full impact of the pandemic.  Larger reprographers on the East and West coasts experienced sales declines of MORE THAN 40% (compared to 2019.)

·      June looks like it might be a somewhat better than May, but it is too early to say much about June 2020 vs. June 2019.)

·      Imaging firms who deal mostly with companies and organizations tied to events, conferences, expo’s, conventions, trade shows, meetings, etc – their sales revenues fell off a cliff in April, stayed off the cliff in May, are still off the cliff in June….. and it is going to take months before their business begins to resume anywhere close to “normality.”  (One of the largest imaging firms in the US, a well-established old-line company) reported that sales were off 80% in April (vs. April of 2019.) 

·      There is only one publicly-held company in the reprographics industry – ARC Document Solutions (NYSE: ARC).  Based on actual sales numbers I’ve received from larger players in my industry for April and May and what I’m now hearing about June, I’m estimating that ARC’s Q2 2020 Sales will come in at around 40% off ARC’s Q2 2019 Sales.

·      Reprographers in more rural areas are being impacted less than reprographers in major market areas.  East coast reprographers are being impacted more than West coast reprographers.

Conclusions:

a)      When reprographics firms finish 2020, it will, in my opinion, be extremely rare to find larger reprographers who experienced 2020 sales that were only 10% or less off 2019 sales.  I think we are looking at a range of 10% to 30% off 2019 sales.

b)     As to Fuji’s conclusion, I think there’s less than a 20% chance that firms in the Print & Graphics industry will see normal business conditions return by October 2020.

I’m a firm believer in “the power of positive thinking” (I loved that book.)  But, that said, until we have a cure for Covid-19, the virus isn’t going to go away.  And, until the virus goes away, it is going to continue to negatively impact firms in the Print & Graphics Industry.  There is absolutely no way “to return to normalcy” until we are rid of Covid-19.  

Best regards,

Joel Salus

Publisher, Reprographics 101 Blog

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[and a former Managing Director of the IRgA (now APDSP)]