Business Ledger -- Overseas Printing Threatens U.S. Market
BY MARK THOMTON
The $160 billion U.S. printing industry is feeling the pressure of
overseas competition, as best-selling books and even Bibles are being printed
in Asia at a third of the cost.
The Chicago area has the worlds largest concentration of printing companies, with Elk Grove Village boasting more printers per capita than any other city in the world.
However, a growing Chinese printing industry is competing for a stake in what once was solely U.S. territory. While it hasnt been a threat to time-sensitive publications, mass-circulated books and annual catalogs are increasingly being printed overseas at a fraction of the cost because the slower turnover time allows for it.
For the first half of 2004, the surplus in printed materials trade declined by $75 million, a 38 percent decrease compared to 2003, the printing industry consulting firm Strategies for Management, Inc., reported in its study, A Critical Look at Offshore Printing.
Ten years ago, the U.S. had a 72 percent surplus in books and printed matter; today it is barely more than 16 percent, the report said.
As numbers continue to decline a few printers in the Chicago area are experiencing a loss in revenue.
Over the last two years a lot of competitors have jumped into the field, said Joe Orlandino, director of sales and marketing for Edge Publishing in Chicagos Bridgeport neighborhood. Our newest competitors send stuff overseas. I cannot compete with that.
Orlandino estimates that he has lost around 20 percent of his business to publishers who have decided to ship overseas. He claims the portion of his company that has been hit the hardest is catalogs, brochures and directories for local chambers of commerce. By aligning with a publisher who ships overseas, chambers are getting a greater return on advertising revenue than Olandinos firm can offer them.
I find it reprehensible to go to a chamber event and hear people say buy local, when really a lot of them are jobbing out services overseas, said Orlandino. When confronted about it they stick their head in the ground. They act like they dont know or dont want to know.
A simple Google search of Overseas Printing brings up numerous advertisements selling printing services for 30 percent less in China. Its no wonder why some publishers are deciding to move the process across the Pacific.
The industry is being affected and part of it is our own fault, said Steve Johnson, president of Carol Stream-based Copresco. To print something in China it takes eight to ten weeks, but to print something in the U.S. it takes four to six. We take too long of a lead time so people start to look offshore. We need to improve our environment.
Copresco has found a niche in which it does not face competition from China. While it does print books, it only handles specialty publications or advance copies that can be printed in small-volume runs in a short period of time. Essentially, says Johnson, its on-demand printing.
If you are going to print 50,000 units then you are going to go to overseas, but if you only need 500 copies by next week, then you come to me, he said.
Johnson said it has even become difficult to find book printers in the Chicago area because taxes and labor costs are too high. Downstate printers can offer printing at lower costs.
Jeffrey Johnson, CEO of Tyndale House in Carol Stream, a Christian publisher, says that even Bibles are being printed overseas now.
In my experience that is happening (overseas printing) especially with four-color products, he said. And in some cases Bibles are being printed overseas.
Johnson acknowledged that he has had Bibles and childrens books printed overseas and that the pricing was better than anything available domestically and that the quality of the product is usually just as good as what is turned out here.
However, there are certain risks that are assumed when working over seas. The printing industry is usually seen as a collaborative business, but when books are being printed in Hong Kong, it is hard for a publisher in Buffalo Grove to give his input.
Working overseas is a different animal, said Coprescos Johnson. There are certain risks.
Johnson recalled an incident in which a colleague had a shipment of 50,000 units come into Los Angeles, only to have a set of pages missing in each book. Legal remedies for this kind of thing are much murkier as there is no recourse other through Chinese courts.
You are forced to make print run decisions where you cant react quickly, said Tyndales Johnson. You give yourself more sway if you print in Crawfordsville.
Nor are Chinese printers subject to American quality standards.
The quality is fine, said Niall Power, president and CEO of The Printing Industry of Illinois-Indiana Association (PII). What we dont know is in the case of childrens books, what kind of paper or chemical or ink they are using. Children tend to put things in their mouth. They dont have as stringent of controls. That could become problematic.
Despite its drawbacks, the bottom line difference in price of 30 cents versus a dollar is usually enough to lure some publishers overseas.
Now domestic printers will have to try to reinvent themselves to compete with this new competition. Experts agree if they cant compete on price, it will have to be on service.
A lot of printers are trying to establish stronger customer relations and do more than just print, said Ron Davis, chief economist for the Printing Industries of America (PIA). They are trying to speed up the print production and delivery. They see that as a way of competing.
Tyndales Johnson has noticed this trend and found it to his advantage.
Domestics as well as Canada have gotten more competitive to the point where it can be worth doing it here to avoid long turnaround and other risk, said Tyndales Johnson. We did a four-color childrens book first overseas and the cost was great, but for other reasons we then went to Canada and it was better.
It (Canada) cant match it for price, but it can make it competitive and we were willing to pay more for better availability and turnaround.
On the whole, the American printing industry has not really felt threatened by overseas competition, because right now a certain portion of the business has been affected.
However, experts agree that trends in the book-printing sector will continue and are not likely to halt. In fact, it is still possible that other portions of the industry will be affected down the road.
For now the U.S. still exports more than it imports. PIAs Davis said that last year there was a total of $4.2 billion in imports and $4.6 billion in exports. Of the imports, $1.4 billion was in the book industry, the largest portion of it.
Still, with cost always a concern, and if time is not an issue, companies will more readily look overseas.
We asked our members, which is 8,000 companies, if their customers were beginning to look for global sourcing, and 39 percent of them said yes, Davis said.
But as the PIIs Power said, that is simply the world in which we live.
We live in a global economy, he said. Its not right to say we can export and not import. From a global standpoint its a poor argument.
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