Inkjet's Rapid Acceleration

These are good days for the production inkjet printing business. Both users and manufacturers are growing, everyone seems to be making money and promises of technology advancement are being delivered upon. If there is any complaint from users of inkjet equipment, it seems to be that the technology is evolving too rapidly.

Initial 2014 year-end data shows new engine sales up 22 percent globally and page volume growth up more than 35 percent. There are very few other print markets that offer this type of growth, regardless of the state of their life cycle. Yet, eight years after the introduction of the first production inkjet printer, only about 800 sites worldwide have adopted production inkjet printing systems. More vivid in contrast, less than 1 percent of pages printed worldwide last year were on production inkjet presses. What this means is that we are still early in the life and development cycle of inkjet technology and, correspondingly, can retain better profit margins than output from other printing technologies.

As part of our research business, IT Strategies continually interviews owners of production inkjet printers. Based upon production inkjet owners’ input, IT Strategies believes this strong growth will continue for the foreseeable future. In fact, the owners of plants with multiple production inkjet presses often accuse IT Strategies of being too conservative in our page volume growth projections.

Sources of Volume

To better understand the origin of these pages, we looked back at the sources of inkjet page volumes in 2013 and then projected forward to 2018:

In 2013, about half of inkjet pages could be attributed to the replacement of mostly monochrome continuous-feed, toner printed pages. The installed base of continuous-feed toner printers is aging, and few resources are being invested in the technology, which has reached its zenith in productivity and economics. Inkjet offers greater throughput productivity than toner. Because the data that is being printed exists for transaction and direct mail applications, the transition from toner to inkjet has been relatively seamless.

About one-third of pages resulted from a direct replacement of offset, mainly in book printing applications.

The remainder of page volume stems from applications that could not or would not have been printed before. Examples of this are combination personalized medical benefit and local doctor listing directories, personalized lifestyle magazines that act as a combination magazine and direct mail piece, and colorful financial statements offering personalized performance analysis and investment suggestions for mass-market customers.

The ability of production inkjet technology to offer variable printing, at productivity rates three to 10 times faster than toner—with little cost penalty for color—is what IT Strategies believes will drive the growth of these new pages that could not be printed previously without production inkjet technology. Further growth is expected to come from the recent technology advancement that enables inkjet systems to print directly onto coated and uncoated offset stock.

While no one is forecasting a wholesale replacement of other printing technologies, many are betting that inkjet will be the technology of choice, including printing equipment manufacturers. Since 2008, more than $10 billion has cumulatively been invested in inkjet R&D. In 2014 alone, more than $1 billion was invested into non-consumer inkjet applications. Currently, IT Strategies tracks 200+ inkjet system equipment integrators investing in inkjet development—not all for production inkjet—but also including the printing of textiles, ceramics, wide-format signage, and even 3D objects.

Applications produced on continuous-feed inkjet printers can be clustered into four core groups: direct mail, transaction, books and other (which includes any page not easily classifiable elsewhere, such as many of these new pages described earlier).

Direct Mail

Direct mail accounts for about one-fourth of all advertising spending in the United States. After a decline in direct mail volume as part of the overall decline in advertising communication expenditures during the economic recession, direct mail volumes are now relatively stable.

While the response rates to static direct mail are relatively low, they are still predictable. Send out 100,000 pieces and you’ll get at least 2,000 responses. E-mail response rates tend to hover around the 0.1 percent response rate, and are declining as the cat and mouse game of spam filters continues to accelerate.

The one unpredictable concern about direct mail is postage cost increases. Higher postage costs will mean fewer, but higher value, direct mail pieces. Those pieces will need to be more relevant; they will need to contain more personalized and more actionable offers. With the growing availability of “Big Data” and the increasing prevalence of production inkjet printing systems, the ability to create these highly relevant offers is now rapidly becoming within reach.

Transaction Statements

Transaction pages include any page that is personalized and typically requires a response. Examples include credit card and billing statements, but also pages that provide a record of transactions such as retirement fund statements. This application is growing for inkjet print as volumes are being consolidated among fewer, but stronger, service providers. The rate of transition to electronic statement alternatives is expected to continue, but the “easy to transition” customers have mostly now done so.

The more forward-thinking statement providers are now looking upon personalized color paper statements as a unique means to be in front of their customers once a month. This has made the real estate available on those pages valuable advertising space. It may reach a stage where affinity partner advertising payments can cover the entire cost of printing and mailing in the future.

Book Manufacturing Reinvented

All signs point to a business model conversion in the book manufacturing industry. Small orders and high order frequencies are becoming the norm. Next-day or same-day delivery is becoming a requirement to compete and survive. Book manufacturers are betting that the end-to-end profit of getting a book in the hands of a consumer within 24 hours is destined to be far greater than printing a book at the lowest cost, at the delayed expense of inventory waste.

Highly automated and decentralized inkjet (and toner) digital printing systems could drive publishers back into the printing business, or more likely create hub-and-spoke chains of book manufacturing near major logistical hubs. It is up to the publishers to seize this opportunity, and to drive the change now enabled by digital printing on a grand scale.

Newspapers Present Special Challenge

The newspaper publishing industry has been the recipient of greater business model destruction than any other printing industry segment. The output volume and delivery time pressures are such that even digital production inkjet has been challenged to meet those needs.

However, current generation habits still sustain a significant amount of demand for printed newspapers. Since the addresses of newspaper subscribers are known, the ability to print relevant offers based upon micro-zoning is becoming more appealing to publishers and advertisers alike. Several inkjet system manufacturers are enjoying significant success in Europe with variable, dynamic content advertising in European newspapers.

The Bottom Line for Print Providers

There is no other document printing market segment that is performing as well as production inkjet technology. The level of investment, innovation and confidence in the future is second to none. Perhaps the most appealing aspect of production inkjet technology is its proven track record to help printers grow in what has otherwise been anemic and often declining demand for print.

We may well be nearing an inflection point where it will not be possible to remain profitable as a professional printer unless one has production inkjet technology. It is not always a path of roses, but those who have adopted production inkjet technology have invested in a learning curve that will be steeper to overcome economically as time goes forward.