Can a "forms industry" exist without
forms? Traditional forms will drop from 62.5 percent of total product sales in
1997 to 43 percent in 2006. (See chart on right.) The 10-year view of actual and
projected industry sales by product category in Formtrac 2002 raises serious
questions about the real identity of the industry.
Formtrac 2002 includes only shipments to
distributors who traditionally have sold conventional forms. It follows the
traditional definition of what types of manufacturers constitute the forms
industry, which has been used in previous Formtrac 1997 and Formtrac 1999
studies:
* Direct-selling manufacturers that produce conventional forms as part of their product mixes;
* Trade manufacturers who produce conventional forms for all types of distributors and resellers;
* Trade manufacturers who supply products other than forms to distributors; and
* Plants owned or controlled by forms industry distributors.
Formtrac 2002 covers shipments by more than 700 manufacturers who produce or sell forms, or use the forms industry as a distribution channel. This includes approximately 500 forms manufacturers. Since 1995, mergers, acquisitions and business closures have reduced the number of forms industry participants by approximately 100 manufacturers. At the same time, the industry has experienced a sizeable increase in manufacturing participants that supply products other than conventional forms or provide services that distributors can sell. The industry also has experienced an increase in printing operations owned or controlled by forms distributors, which produce predominantly cut sheet products, commercial printing and on-demand printing.
Formtrac 2002 is the only industry study that shows shipments by direct-selling and trade manufacturers on a comparable basis: retail value of products and services. This approach recognizes the value added by distributors, which traditionally has been omitted from manufacturer shipment statistics compiled by the U.S. Department of Commerce. Since the independent segment represents more than half of the industry, the value added by distributors is a large component of total industry sales to end users. The market segment and product classifications shown in Formtrac 2002 are consistent with previous Formtrac 1997 and Formtrac 1999 studies. All shipment projections for 2002-2006 include anticipated price increases.
Industry Restructuring
Defining what constitutes the forms industry and analyzing industry shipments has become difficult due to major structural changes during the last 10 years. Lisle, Ill.-based manufacturer Wallace now produces more commercial printing than forms and is also a large supplier of labels. Dayton, Ohio-based manufacturer Standard Register has formed an alliance with Houston-based Consolidated Graphics and will become a commercial printing distributor. Bannockburn, Ill.-based Moore North America is undergoing extensive corporate restructuring and product mix shifts, including acquisition of new service and commercial printing businesses. Dayton, Ohio-based Reynolds & Reynolds executed the most radical strategy by selling nearly all of its forms plants to a new business called Relizon. Today, Reynolds & Reynolds is partly a service bureau and partly a forms distributor with selective forms production capabilities. Relizon is partly a direct-selling forms manufacturer and partly a trade supplier with Reynolds & Reynolds as its main distributor account.
Industry restructuring also has affected the independent segment, where some manufacturers use multiple channels of distribution and more distributors have acquired or started manufacturing operations. The most significant impact has been the increase in suppliers from outside the forms industry who use traditional forms industry participants as a distribution channel. These "outsiders" (including e-commerce suppliers and software vendors) provide many of the products that are driving growth among distributorships.
Product Sales Trends
The decline in demand for conventional forms shown in Formtrac 2002 is more moderate than past Formtrac projections and forecasts in many other industry publications. Continuous forms sales are affected negatively by the 5-7 percent annual shrinkage in the installed base of business and industrial application impact printers. At the same time, the population of high-speed, web-fed laser and other non-impact printers is growing and increasing demand for pre-printed or pre-processed rolls. Therefore, total sales of continuous stock and custom forms aren't declining as fast as the installed base of impact printers. Distributors have been successful in replacing lost stock TAB forms volume with a variety of other stock paper for laser and ink jet printers, point-of-sale terminals, ATM machines and other applications.
Indirect segment sales of unit sets are declining gradually, partly because the major directs have closed plants periodically and increased their purchases of unit sets and sales books from trade manufacturers. The one conventional forms category in which the directs are gaining market share is very short runs of predominantly custom printed or imprinted software-compatible forms. This is partly due to the directs' superior software-compatible forms marketing, transaction processing and manufacturing capabilities and partly due to closure of many short run pack-to-pack operations treated as a "sideline" by most conventional forms trade manufacturers.
Overall forms industry product sales (at retail value) declined 2.3 percent in 2001 because some of the non-forms growth products failed to meet previous forecasts. Promotional and direct mail product sales didn't grow as expected in 2001 and probably will experience slow growth in 2002 and 2003. Direct mail printing was affected negatively by the 2001 economic slowdown, the Sept. 11 terrorist attacks, postal-rate increases and reductions in sweepstakes promotions. Internet advertising also may reduce demand for direct mail, but this could be offset at least partly by promotional mailings to attract visitors to specific web pages.
Similar factors have decreased previously expected growth rates in distributor sales of commercial printing and envelopes. Standard Register is reducing internal production of commercial printing and closed a large plant. Wallace is restructuring commercial printing operations and selling several plants. Commercial printing still represents the largest diversification opportunity for many forms suppliers, and growth rates can be expected to improve in 2003 and beyond due to acquisitions, addition of more digital printing capabilities and an improving economy.
Labels, tags, tickets, plastic cards, advertising specialties and printing/ finishing services have been major growth vehicles for distributors, who can expect to increase sales of those products through 2006. Forms trade manufacturers, with their large investment in forms presses and collators, mainly have been unwilling or unable to keep pace with distributor sales growth in these categories. The result has been a large influx of suppliers from outside the traditional forms industry who recognize opportunities to sell through the distribution channel. In effect, the product lines and interests of distributors and their traditional trade manufacturers are diverging, adding to the challenge of defining what constitutes the forms industry.
Forms Industry Outlook
Formtrac 2002 raises important questions: How will the forms industry be defined in the future, and how long will it exist as a distinct specialty? The study points to a fragmented industry that's experiencing growing overlap between product categories and threats from new technologies and new suppliers that can shift work from conventional forms presses to alternative production systems.
The most serious industry challenge is a lack of clear industry leaders and business models. The major directs, who formed the industry leadership core in the past, are no longer effective in that role due to ownership changes, internal restructuring focus or diminished identification with forms. The industry does not have a strong broad-based trade association encompassing all participants that can fill the leadership void at this time. If the industry can't develop a new definition of itself and unite under a leadership core of major participants and a trade association, it may dissolve into a variety of product specialties that will merge into other segments of the broader printing and business communications industry.
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. For more information, call him at (323) 221-7791 or email him at isarkans@sarkans.com.
5 Conclusions From Formtrac 2002
DMIA's study of market trends points to these assessments about the future of the forms industry:
1. The forms industry is gradually dissolving as a clearly identifiable product or market specialty. Technology and market forces are transforming it into a segment of a much larger ($30+ billion) printed business document industry, which in turn is part of an even larger printed business communications industry.
2. The industry is not likely to experience a sudden steep drop in conventional forms sales during the next five years. This is true despite document processing and printing technology advances that gradually are reducing demand for conventional forms.
3. Traditional forms industry participants have succeeded in replacing losses of conventional forms volume with a multitude of products that can complement forms and utilize existing sales skills and distribution practices.
4. Distributor product mix and growth strategies are diverging from the capabilities of their traditional forms suppliers.
5. Manufacturing, with huge excess capacity, has shifted from a dominant to a supporting role in the industry. The greatest strength of the traditional forms industry is its role as a large distribution network for products and services needed to operate and promote businesses and other types of organizations.
