Business Printing Technologies Report
July/August 1999Independent Segment of the Forms Industry
FORMTRAC 1999 Executive SummaryNote: A complete report with industry numbers is available from DMIA for a nominal fee.
General Outlook To 2003
Current indications are that the economy will remain relatively strong though the year 2000. Most types of printing, along with the general economy, can be expected to benefit from millennium-change business promotions in year 2000. The current forecast anticipates an economic slowdown in 2001, which probably will not be severe enough to be classified as a major recession. Forecasts for 2002 and 2003 are based on a gradual recovery in the US economy with continued moderate inflation.
Figure 3
Projected Growth of Independent Segment1999 +1.9% 2000 +3.9% 2001 -.8% 2002 +1.5% 2003 +2.4% The FORMTRAC model for calculating industry shipments is based on total retail value of all products distributed by forms industry participants. The model includes non-forms products (such as advertising specialties and commercial printing) sold by independent forms distributors and manufacturers. It also includes the retail value of forms plant shipments through "non-traditional" distributors such as quick printers, commercial printers, office supply distributors, software companies and others.
With the exception of 2001, the Independent Segment can be expected to experience overall moderate annual growth in the 1.5% to 2.4% range. The forecast indicates that growth will peak at approximately 3.9% in year 2000, followed by a modest .8% decline in 2001, if the US economy does not experience a full-scale recession during the forecast period. Projected growth of the Independent Segment as a percent is shown in Figure 3.
Figure 4
Conventional Forms & Other Products
Percentage of the Independent SegmentYear Conventional Forms Other Products 1999 57.3% 42.7% 2000 54.7% 45.3% 2001 52.9% 47.1% 2002 50.9% 49.1% 2003 48.8% 51.2% Underlying the overall apparent stability of the Independent Segment of the Forms Industry are dramatic shifts in product mix. Total dollar shipments of conventional forms will decline very slowly. At the same time, the Independent Segment will continue to be successful in expanding sales of other products at a relatively rapid pace. As a result, conventional forms will represent a shrinking proportion of total product value flowing through the Independent Segment (Figure 4).
Conventional Forms
The gradual shift by medium-size businesses from impact to laser printers is starting to affect custom continuous form and check sales in the Independent Segment. This trend follows what the major directs have already experienced for several years in some of their large accounts. The intense promotion of laser printer benefits by Xerox, Hewlett Packard and other manufacturers of these machines is gradually overwhelming the relatively weak efforts of the forms industry to promote benefits of multiple-part forms.The copier industry is transitioning from light-lens to digital copiers, which can also be configured to function as sheetfed computer printers. The result will be an even faster increase in the population of machines that can eliminate the need for continuous forms. The threat that sheetfed and pinless web-fed non-impact printers pose to demand for continuous forms has been evident at the annual Xplor shows. The coming Xplor '99 show in November will again confirm that the printer technology threat to continuous forms is serious and will begin to affect the market segment served by independent forms distributors.
The survey of 100 forms industry manufacturers published in the June, 1999 issue of FORM magazine indicated that a significant number of firms, known to have a high proportion of continuous forms in their product mix, are experiencing low growth or even a decline in sales from 1997 to 1998. The FORMTRAC '99 forecast shows a similar weakening in demand for custom continuous forms. The projected pattern changes to a relatively steep sales drop during the overall economical slowdown expected in 2001. The large installed population of laser printers and digital copiers in 2001 will prompt more medium-size businesses to reduce perceived costs by replacing continuous forms with plain or pre-printed cut sheets. During the next three years the transition from impact to laser printers for general business computer output will occur most frequently in the upper size range of businesses served by independent forms distributors.
Demand for continuous stock forms and other types of stock papers in the Independent Segment started to decline in 1996. Shipments can be expected to decrease from 3.6% to 4.7% per year during the forecast period, with a steeper 8.2% drop in 2001. Continuous stock paper demand has been affected negatively by the proliferation of laser printers. During the early 1990's, growing sales of thermal fax paper provided a partial positive offset to the weakening demand for continuous stock forms. During the second half of the 1990's, a widespread shift to plain paper fax machines has gradually reduced thermal fax paper sales. In many geographic areas, office supply superstores and contract stationers have driven down prices and stock papers are no longer an attractive product line for distributors in some accounts. However, distributors are still able to sell a wide range of stock POS rolls, plain cut sheet papers, jumbo rolls of processed papers and other items that moderate the overall decline of stock paper volume.
Projections for the unit set market indicate relatively stable demand through 2001 and then a moderate rate of decline for the balance of the forecast period. Many high volume applications of unit sets, such as credit card receipts and car rental contracts, have already been converted to other types of documents. Major directs and long run trade manufacturers have felt the greatest impact from systems changes by large past users of unit sets.
Some of the major directs have closed unit set production facilities, and independent manufacturers may experience an increase in unit set orders from the directs for several years. In the forms market segment dominated by independent distributors, most orders fall in the short to medium run size categories. This means that a high proportion of end users served by distributors may not have compelling short term economic reasons for seeking alternatives to unit sets and the established systems that use these forms. Therefore, FORMTRAC '99 projections for the Independent Segment show relatively small annual dips in unit set demand.
Many manufacturers in the Independent Segment have added or expanded cut sheet and commercial printing capabilities. The cut sheet volume that could be separated from the normal forms plant mix of continuous, unit set and specialty forms is included in the Formtrac '99 Commercial and Quick printing product category. A high proportion of cut sheet printing in forms plants is indistinguishable from general commercial printing. The Formtrac '99 forecast for custom unit sets and continuous forms includes cut sheet check, mailer and OCR/OMR forms volume that cannot be isolated from other conventional forms. These cut sheet products are approximately 3.0% to 5.0% of projected unit set and custom forms volume.
Figure 8 Major Specialists Short Run Volume Gains Datagraphic +2.3% Continuous Forms and Checks -2.8% Ennis Business Forms, Inc. +.4% Very short runs are defined in the Formtrac '99 market study as order quantities of predominantly 5M or less forms, produced or imprinted mainly on pack-fed equipment. This product category will continue to grow, but at a slower rate than in the early 1990's. The survey of trade manufacturers in the June 1999 issue of FORM magazine indicates that several major very short run specialists experienced only small volume gains from 1997 to 1998 (Figure 8).
Several independent manufacturers of short runs have developed very efficient systems for custom production of software-compatible forms in small lots. The vast variety of software packages for small to medium size businesses, endless streams of updates and options that allow users to customize printout have constrained the growth of stock imprint and catalog marketing programs operated by direct-selling manufacturers. This has benefited the Independent Segment, where personal contact with end users and custom printing have contributed to growth of very short run shipments. The forms industry is also experiencing a gradual decrease in order sizes, which tends to shift some medium run volume to the very short run category.
An increasing number of custom very short run specialists now supplement their continuous forms production with unit sets, checks and other cut sheet forms. Demand for very short run continuous forms is also being affected by the expanding population of desktop laser printers. The mix of continuous versus cut sheet forms in the very short run category will change during the forecast period. In the FORMTRAC '99 market model, very short runs include the estimated proportion of cut sheet/set products shown in Figure 9.
Figure 9
Estimated Proportion of Cut Sheet/Set Products
Percentage of the Independent SegmentTotal
YearVery Short Runs
(Millions of Dollars)Estimated Percentage
of Cut Sheet Products1999 $617 15.9% 2000 $650 17.2% 2001 $665 17.7% 2002 $690 18.6% 2003 $718 19.5% Other Products
Products other than conventional forms sold by the Independent Segment of the industry include the following:
- Promotional and direct mail printed products
- Commercial and quick printing products
- Stationery, envelopes and business cards
- Labels, decals, tags, tickets and packaging materials
- Binders, indexes and presentation folders
- Printing and finishing services
- Advertising specialties and plastic cards
FORMTRAC '99 projections indicate that Independent Segment sales will increase in all of these product categories, and replace the conventional forms volume lost due to end user systems and computer output technology changes. These product categories will drive the future volume growth of distributorships and gradually change their business focus from forms to a broad range of printed business communications products. Commercial printing and labels, tags, tickets and selected packaging products printed on label presses represent the greatest future opportunities for independent distributors, but also pose challenges in terms of skills, sell cycles and new competitors.
Direct mail, commercial printing, labels and ad specialty sales can be expected to benefit from increased promotional and business activity related to the millennium change. Forms distributors continue to be very successful in gaining new ad specialty business, partly because it is relatively easy to sell these clearly defined products and distributors already have a strong presence in many accounts that buy ad specialties. Distributors are also using ad specialties as entry products to gain access to the departments that control purchases of commercial printing.
While FORMTRAC '99 projections indicate that Independent Segment sales of direct mail products will increase, only a relatively small number of distributors that specialize in this product category will benefit from the increase. At this time, many direct mail opportunities involve very large and high risk projects that require special skills and partnering arrangements between distributors and manufacturers. Most forms distributors do not participate in the direct mail market beyond occasional medium-size and low complexity order opportunities. This may change over the next 5 years as new digital printing technologies enable relatively short runs of highly personalized direct mail printing. Distributors will have a unique opportunity to bring these new capabilities to medium-size businesses which generally have lagged behind large organizations in the use of personalized direct mail.
General Trends
The product mix change in the Independent Segment is one of the factors behind the current consolidation of both distributorships and trade manufacturers. Some of the growth product categories, such as labels and commercial printing, require sizeable investments in training to develop competitive levels of sales and customer service skills. The range of products sold by most larger distributorships may require development of product or vertical market segment specialists that can assist other field representatives and pursue special account opportunities.Consolidation can be expected to continue, but the results so far have been limited mainly to greater economies of scale that make manufacturers more efficient and create "mega-distributors" who can compete with the directs for large national accounts. There have been no major attempts to dramatically improve the efficiency of the distribution channel. Most field sales representatives in the Independent Segment still handle repeat orders and standard products, shop for suppliers and keep track of inventories for forms management accounts. Availability and cost of technology apparently has not reached a point yet where drastic restructuring of distributorship practices can be easily accomplished.
Existing practices may change over the next 5 years as Internet technology matures and some innovators recognize the opportunity that it offers for greatly increasing the efficiency of the independent channel. It appears to be only a matter of time before one or more distributorship organizations automate the processing of repeat orders and customer requisitioning of warehouse stock and standard types of printed products. The innovators could gain such huge competitive advantages that the entire Independent Segment may be forced into a complete restructuring of existing practices and role of the field sales representative. The FORMTRAC '99 projections include the expectation that the independent channel will become more efficient through restructuring led by existing or new participants. The FORMTRAC '99 forecast is conservative, recognizing the current uncertainly about possible innovative uses of new technology to make the Independent Segment more competitive and achieve higher rates of growth in the full range of printed business communications products and related services.
Ivars Sarkans, a business forms and commercial printing expert with more than 30 years of industry experience, is president of Sarkans & Associates in Los Angeles, Calif. For more information, contact him at Tel: 323/221-7791; Fax: 323/221-7799; Email or Web.
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