Print
Solutions April 2006
Manufacturing
IN
BRIEF:
An ever-changing print market
has modified channels of distribution
and created new selling opportunities.
Channel
Changing
Author’s
note: For an in-depth look at
the channel options available
to manufacturers today, DMIA is
organizing a channel presentation
on Thursday, May 18, at the upcoming
Manufacturer Supplier Print Conference
in Philadelphia. Please look on
www.PSDA.org
for more information.
Conventional
forms producers have always relied
on three primary channels to reach
end users: direct sales, professional
forms distributors and casual
forms distributors. The gradual
introduction of new products and
product-related services from
distributors and forms suppliers
has created new segments in each
of the three primary channels
and new methods of marketing and
selling.
The
direct-selling forms manufacturers
(and what is left of them) have
played with indirect channels
of distribution for years. For
the trade manufacturers, the distributors’
shift away from traditional forms
products are forcing them to consider
alternative routes to market,
while at the same time keeping
their distributor customers happy.
In addition, the industry harbors
a large population of resellers
with conventional forms as a minor
part of their business. These
casual resellers of forms include
commercial printers, quick printers,
copy shops, office supply retailers,
software developers, and business
service providers to name a few.
The volume of forms sold by each
casual distributor can range from
a few orders to millions of dollars.
The number of casual forms resellers
has increased steadily and now
exceeds 30,000. To complicate
matters, a sizeable number of
these distributors also produce
cut sheet forms and other business
documents. Several trade manufacturers
of conventional unit set and continuous
forms have developed a particularly
strong focus on casual distributors,
which often require special marketing
and sales techniques.
The
channels of distribution in the
forms industry started to change
at a faster pace during the late
1990s as the web introduced new
sales models, new products and
new distribution opportunities.
The direct-selling manufacturers
increased their purchases from
trade suppliers within and outside
the forms industry to expand their
product lines and improve customer
service. Professional distributors
of conventional forms started
to supplement their core business
with a wide range of other products,
including commercial printing,
promotional products and a variety
of print-related services.
The
forms industry has become a major
channel of distribution for many
manufacturers who in the past
were considered part of other
printing industry segments and
were not recognized as participants
in the forms industry. Now, the
internet has become a new path
to the market for many manufacturers
of forms and related products.
The internet has also aided in
restructuring how traditional
channels of forms distribution
operate. The end result will be
a more efficient distribution
network that fits the changing
product mix of forms suppliers
and can bring end users a more
valuable combination of printed
products and complimentary services.
Directs
The
few remaining direct-selling forms
manufacturers are now pursuing
practically all available direct
and indirect methods of distribution.
The bulk of their volume still
comes from the large number of
field sales representatives, but
the practices in this distribution
channel are now very different
from the early days of the industry
when the directs pursued order-by-order
sales in all segments of the forms
market.
Field
representatives of most direct-selling
manufacturers have continued to
focus predominantly on large accounts.
A major challenge to this strategy
is that the requirements of high-volume
print buyers have changed to fewer
paper solutions. They want to
deal with fewer suppliers and
buy in ways that reduce total
procurement costs. By some industry
estimates, close to 100 percent
of printed product buyers with
annual purchases over $1 million
per year have switched to program
or contract buying for some of
their requirements, especially
small orders of utility products
such as forms, stationery, manuals
and brochures.
In
response, direct-selling manufacturers
have led the industry in developing
sophisticated methods of selling
large long-term contracts or supply
agreements. Initially, these were
forms management programs, which
have now been expanded to comprehensive
print management and are often
broadened to include print-related
services, office supplies and
other products. The unique experience
gained through forms management
programs has been a major competitive
advantage against commercial printers
and others without a comparable
program sales background.
Established
program sales techniques gave
the upper hand to the direct distribution
channel, but internet tools have
allowed others to play in this
space too. One of the difficulties
created by some of these supply
programs, which frequently include
a product cost reduction guarantee,
is that after several contract
and bid cycles, some products,
particularly conventional forms,
no longer yield adequate profits
to the direct-selling manufacturers.
Forms
Distributors
A
large part of the distributor
channel still functions on the
basis of order-by-order sales.
Many distributors are most comfortable
with clearly defined products
such as forms, commercial printing,
promotional products, tags, labels,
and stationery. Sales professionals
tend to favor short selling cycles
and personal control over order
handling, follow-up and choice
of manufacturer. A large part
of the sales cost in this channel
is related to handling of repeat
orders.
Forms
trade manufacturers are facing
several challenges as this key
distribution channel for their
products changes and adapts to
technology and market trends.
One sign that manufacturers have
not kept pace with product line
expansion in their primary distribution
channel is an increase in various
types of printing facilities operated
or controlled by large and medium-size
distributorships. Another sign
of a product line gap between
forms producers and distributors
is the growing number of manufacturers
from outside the forms industry
who now supply a multitude of
products sold by distributors.
The
indirect distribution channel
is changing in other ways which
are affecting trade manufacturers.
Aggressive internal growth and
consolidation has created several
“mega-distributors”
that have strong buying leverage
and can dictate how their suppliers
must do business. The larger distributors
are also following the directs
in expanding their forms management
into print management or even
broader product and service supply
programs. The trend to program
selling and transaction automation
is spreading to medium-size distributorships
as the independent segment of
the forms industry competes more
aggressively with the directs.
Some
forms distributors have expanded
into other high-value printing
specialties, such as direct mail,
process color commercial printing,
digital printing and statement
processing. Some are combining
printing with creative services,
consulting, data management and
digital library services. Many
conventional forms manufacturers
have difficulty in identifying
and reaching enough distributors
who sell these high-value specialty
products to justify investment
in new systems and equipment.
It is also difficult to sell product
and service combinations such
as digital printing and statement
processing through forms distributors
who do not want to relinquish
the physical handling and control
of orders.
In
some cases, providers of high-value
products and services have been
able to gain direct access to
buyers and users through special
alliances or partnerships with
forms distributors. Other trade
manufacturers who want to pursue
the high-growth potential in digital
printing, direct mail and statement
processing have found it necessary
to add direct sales or other new
distribution channels. Continued
changes in the industry product
mix and adoption of technology
and practices that increase efficiency
of the distributor channel can
be expected to change how many
distributors work with their trade
suppliers.
Casual
Forms Distributors
The
number of casual forms distributors
is continually growing, and as
a group they represent a very
important indirect channel segment
for many forms manufacturers.
These distributors typically buy
conventional forms, stationery,
checks, commercial, printing,
etc.—anything that a professional
distributor would sell. These
are not your traditional distributors.
They are players in our industry
that serve part of the distributor’s
role. They are office supply superstores,
mass merchandise retailers, inplants,
commercial printer, quick printers,
etc. who may sell only a few types
of common forms, but their total
volume of these items can be very
large. Commercial and quick printers
provide a steady flow of orders
to many short run forms plants.
Because forms is a product sideline,
casual distributors require special
sales support materials, training
and order entry assistance.
The
multitude of commercial printers
and copy shops that now outsource
continuous forms also are able
to produce most orders internally
as end users continually convert
to laser cut sheet forms. As forms
producers become more aggressive
in pursuing cut sheet products
and commercial printing, some
casual distributors may view their
forms suppliers as a competitive
threat.
Casual
forms distributors have expanded
their product lines for laser
and ink jet printers and now sell
a substantial volume of special
papers and related supplies.
View
of the Future
In
the past, the forms industry viewed
and promoted itself from the perspective
of products and manufacturing
capabilities. As a result, estimates
of industry shipments frequently
understate the true size of the
market and new business opportunities
accessible to forms industry participants.
From a distribution perspective,
the forms industry as it exists
today, is one of the most powerful
channels in the entire printing
market. Direct-selling manufacturers
and independent distributorships
have thousands of field representatives
with access to practically all
significant buyers of printed
products and associated services.
The
forms industry has already become
part of a much larger graphic
business communications industry
that distributes a wide spectrum
of products and services from
a multitude of manufacturers,
including those that will continue
to produce or specialize in conventional
forms.
The
distribution channels for forms
and similar products will become
more efficient as the handling
of simple routine and repeat orders
is automated or transferred to
customer service specialists.
The forms industry will have fewer
players, but the remaining ones
are proving to be more skilled
in selling programs, managing
large print/service combination
projects and providing solutions
for customers. The most successful
forms distributors today function
as agencies, consultants, value-added
resellers or systems integrators.
Ivars
Sarkans is president of consulting
firm Sarkans & Associates
of Los Angeles, Calif. and a longtime
contributor to DMIA publications.
He can be reached by telephone
at (323) 221-7791 or by email
at isarkans@sarkans.com.
The
trend to program selling and transaction
automation is spreading to medium-size
distributorships as the independent
segment of the forms industry
competes more aggressively with
the directs.
The
forms industry has become a major
channel of distribution for many
manufacturers who in the past
were considered part of other
printing industry segments.
Forms
Industry Distribution Channel
Roundup
Direct
Sales:
•
Field sales representatives
•
Direct mail
•
Telephone marketing
•
Catalogs
•
Internet sales to consumers
•
Alliances with service providers
•
Alliances with office product
providers
•
Agreements with buying groups
•
Agreements with trade associations
•
Alliances with computer hardware
providers
Indirect
Sales:
•
Professional forms distributors
•
Direct-selling forms manufacturers
•
Printed product distributors
•
Quick printers
•
Copy shops
•
Commercial printers
•
Paper merchants
•
Office supply retailers
•
In-plant print shops
•
Mass merchandise retailers
•
Software developers and suppliers
•
Catalog marketers of paper products
•
Special types of resellers:
-Buying groups
-Trade associations
-Accountants and systems
consultants
-Systems VAR’s
-Business service providers
-Financial service institutions
•
Manufacturer representatives
•
Indirect sales over the internet
•
Service bureau operations
•
Computer hardware retailers
