Many people are quick to point out that transactional printing is a declining market, but then again, most printing markets are. Overall book manufacturing is shrinking; direct mail is significantly down compared to its all-time high in 2006; magazines, newspapers, you name it. The main difference with the transactional market is that it is dominated by digital printing. In most other print markets, while conventional ink on paper processes continue to dominate, digital print volume is increasing to accommodate shorter print runs and just-in-time inventory. By our estimation, in recent years, the transactional printing market in North America has declined at a rate of about two percent to three percent per year—not a disastrous decline but enough to shake things up. We recently reassessed the transactional market in North America to gauge how it fared during and in the wake of the recession. Although the recession drastically impacted direct mail and other print markets where spending is discretionary, transaction mail initially fared better. There was clearly some impact as transaction mailers consolidated mailings and, in some cases, cut back on the length and frequency of statements but nothing compared to the drop-off in direct mail. Over the last few years following the official end of the recession, however, direct mail has picked back up, but transactional mail has not. Top-line numbers for mail volume in the US are down dramatically in recent years but don't necessarily paint a very detailed picture. US domestic mail includes First-Class consumer mail (single-piece), First-Class business mail (presorted transaction mail and standalone First-Class advertising), Standard Mail (all of which is sent by businesses) and miscellaneous other mail and packages. Each of these mail categories, however, fared quite differently before, during and subsequent to the recent recession. Electronic diversion clearly impacted consumer mail much earlier and in more dramatic fashion than business mail. From 2006 to 2010, consumer (single-piece) mail lost about 35% in volume, while business mail (First-Class and Standard combined) lost about 15% in volume. From 2010 through 2012, consumer mail continued to fall precipitously at an annual rate of about -9.0%, while the rate of decline for business mail slowed to about -2.5%. First-Class business mail is dominated by transactional mailings, such as bills, statements and confirmations. Most of the advertising mail sent First-Class is in the form of ride-along inserts with transactional documents. TransPromo has made relatively little impact on insert volume since overall adoption has been modest. In addition, insert advertising has benefitted from the US Postal Service's (USPS's) extra ounce incentives. Standalone First-Class advertising, however, dropped dramatically during the recession. First-Class secondary advertising (inserts) decreased by only 0.3% between 2007 and 2009, while standalone First-Class advertising declined by 26.4%. From 2006 through 2010, First-Class business mail declined in volume at an annual rate of about -1.7%, while Standard Mail declined at an annual rate of about -5.3%. From 2010 through 2012, the rate of decline in Standard Mail improved to about -1.7. The drop-off in First-Class business mail volume, however, has shown little to no improvement and its rate of decline (-4.0% from 2010 through 2012) is more than twice that of business mail. These numbers highlight the fact that First-Class Mail volume is largely consumer-driven, and once consumers adopt paperless bills and statements, they are unlikely to return to paper, while Standard Mail volume largely reflects discretionary advertising expenditures. During the recession, advertisers quickly migrated to cheaper online media, but transaction mailers, by necessity, continued to send bills and statements. Yet, the recession did serve to reenergize the efforts of mailers to find ways to reduce the cost of transactional mail and to entice customers to accept paperless delivery. So while direct mail will probably grow as the economy improves (knock on wood), we expect the decline in transactional print volume to accelerate to a rate of four percent to five percent annually. We typically interview and survey the largest trans-actional providers for our studies, since the market is top-heavy, with a relatively few major players generating the majority of volume. For the most part, these providers have weathered the downturn in transactional volume through consolidation and by gaining volume at the expense of competitors and outsourcing. In recent years, however, we see a heightened awareness among large providers of the long-term impact of electronic displacement on print. In Canada, more than two-thirds of the transactional print providers we recently surveyed indicate they have experienced a negative impact from electronic bill presentment and payment (EBPP) on their transactional print volume—up from 60% a year earlier. In the US, only about one-third (32%) of the respondents indicate that electronic delivery has not negatively impacted their transactional print volume, 60% say there has been some impact on transactional print volume and the remainder are not sure. About 40% of the respondents indicate that the impact has been less than five percent while about 47% estimate the impact has been from five percent to 10%. Although a great deal of attention has been paid to TransPromo, or using bills and statements as delivery vehicles for promotional content, it is by no means making a significant impact. It is growing but from a small base. It is, after all, very difficult to do well, and not all providers or clients are willing or able to make the effort. Beyond TransPromo, there are many opportunities in the use of full-color inkjet printing to improve the legibility and effectiveness of documents and to eliminate pre-printed forms. Most large transactional providers are also offering a variety of other value-added services, such as EBPP and multi-channel delivery. The outlook for the transactional market is not all gloom and doom, as many would have it. Volume will continue to contract, as it will in many other print markets. It is, however, a very important market—one of the largest served by digital printing and the source of a recurring revenue stream for providers. Inkjet is making a big impact on the market, and vendors of finishing equipment continue to innovate and improve the manufacturing process. Numerous opportunities remain for both service providers and corporate in-house organizations to reduce costs, increase productivity and expand their service offerings, but they will have to do so in an increasingly competitive climate.
DAVID DAVIS is a director for INTERQUEST, a market and technology research and consulting firm in the field of digital printing and publishing. He has more than 25 years of experience in the printing industry and is the author of numerous industry reports, publications and educational programs on a variety of industry topics. Contact Mr. Davis at 434-979-9945 or visit www.inter-quest.com.
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